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EXHIBIT 10.12     HAZARDOUS SUBSTANCES CERTIFICATE AND INDEMNITY AGREEMENT   THIS HAZARDOUS SUBSTANCES CERTIFICATE AND INDEMNITY AGREEMENT dated as of August 1, 1995, is made by and between Burlington Coat Factory Warehouse of New Jersey, Inc., a New Jersey corporation with an office located at 1830 Route 130, Burlington, New Jersey, 08016 (referred to as the "Company," and FIRST FIDELITY BANK, NATIONAL ASSOCIATION, a national banking association with an address at 123 S. Broad Street, Philadelphia, PA 19109 (referred to as the "Bank"). DEFINITIONS. The following words shall have the following meaning when used in this Agreement. All references to dollar amounts shall mean amounts in lawful money of the United States of America. Agreement. The word "Agreement" means this Hazardous Substances Certificate and Indemnity Agreement, as this Hazardous Substances Certificate and Indemnity Agreement may be modified from time to time, together with all exhibits and schedules attached to this Hazardous Substances Certificate and Indemnity Agreement. Bank. The word "Bank" means First Fidelity Bank, National Association, its successors and assigns. Company. The word "Company" means Burlington Coat Factory Warehouse of New Jersey, Inc., a New Jersey corporation, its successors and assigns. Environmental Laws. The words "Environmental Laws" mean (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601, et seq. ("CERCLA"); (ii) the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. 6901, et seq. ("RCRA"); (iii) the New Jersey Industrial Site Recovery Act, as amended, P.L. 1995, C. 139 ("ISRA"); (iv) the New Jersey Spill Compensation and Control Act, as amended, N.J.S.A. 58:10-23.11b, et seq. ("Spill Act"); (v) the New Jersey Underground Storage Tank Act, as amended, N.J.S.A. 58:10A-21, et seq. ("UST"); (vi) the New Jersey Solid Waste Management Act, as amended, N.J.S.A. 13:1E-1, et seq.; (vii) the New Jersey Toxic Catastrophe Prevention Act, as amended, N.J.S.A. 13:1K-19, et seq.; (viii) the New Jersey Water Pollution Control Act, as amended, N.J.S.A. 58:10A-1, et seq.; (ix) the Clean Air Act, as amended, 42 U.S.C. 7401, et seq.; (x) the New Jersey Air Pollution Control Act, as amended, N.J.S.A. 26:2C-1, et seq.; and (xi) any and all laws, regulations, and executive orders, both Federal, State and local, pertaining to pollution or protection of the environment (including laws, regulations and other requirements relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, or hazardous or toxic materials or wastes into ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, or hazardous or toxic material or wastes), as the same may be amended or supplemented from time to time. Any capitalized terms which are defined in any Applicable Environmental Law shall have the meanings ascribed to such terms in said laws; provided, however, that if any of such laws are amended so as to broaden any term defined therein, such broader meaning shall apply subsequent to the effective date of such amendment. Hazardous Substance. The words "Hazardous Substance" are used in their very broadest sense and refer to materials that, because of their quantity, concentration or physical chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. "Hazardous Substances" include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. "Hazardous Substances" also include without limitation petroleum and petroleum by-products or any fraction thereof and asbestos. LC Indebtedness. The words "LC Indebtedness" mean the liability of the Company to pay to the Bank (a) the sums due to the Bank pursuant to Article 2 of that certain Letter of Credit and Reimbursement Agreement dated as of August 1, 1995, by and between the Company and the Bank (the "Reimbursement Agreement"), together with the contingent liability of the Company with respect to reimbursement of draws on the Letter of Credit, and any and all other advances made pursuant to this Agreement and all other payment obligations of the Company hereunder, (b) all liabilities and obligations of the Company to the Bank under the other Loan Documents (as defined in the Reimbursement Agreement), and (c) any and all reasonable expenses and out-of-pocket costs incurred by the Bank in connection with the enforcement of this Agreement or any other Loan Document or the protection of the Bank's rights hereunder or thereunder; Occupant. The word "Occupant" means individually and collectively all persons or entities occupying or utilizing the Real Property, whether as owner, tenant, operator or other occupant. Real Property. The word "Real Property" means the Real Property, and all improvements thereon located on Lots 7, 6.01 and a small part of Lots 6 of Block 147 in the tax map of Burlington, Township, County of Burlington, State of New Jersey, as more particularly described on Schedule "A" attached hereto. REPRESENTATIONS. The following representations based are made to the Bank, subject to disclosures made pursuant to that certain Environmental Questionnaire delivered to and accepted by the Bank in writing: Use of Real Property. After due inquiry and investigation, the Company has no knowledge, or reason to believe, that there has been any use, generation, manufacture, storage, treatment, refinement, transportation, disposal, release, or threatened release of any Hazardous Substance by any person on, under, or about the Real Property. Hazardous Substances. After due inquiry and investigation, the Company has no knowledge, or reason to believe, that the Real Property, whenever and whether owned by previous Occupants, has ever contained asbestos, PCB or other Hazardous Substances, whether used in construction or stored on the Real Property. No Notices. The Company has received no summons, citation, directive, letter or other communication, written or oral, from any agency or department of any county or state or the United States Government concerning any intentional or unintentional action or omission on, under, or about the Real Property which has resulted in the releasing, spilling, leaking, pumping, pouring, emitting, emptying or dumping of Hazardous Substances into any waters or onto any lands or where damage may have resulted to the lands, waters, fish, shellfish, wildlife, biota, air or other natural resources. AFFIRMATIVE COVENANTS. Subject to disclosures made and accepted by the Bank in writing, the Company hereby covenants with the Bank as follows: Use of Real Property. The Company will not use and does not intend to use the Real Property to generate, manufacture, refine, transport, treat, store, handle or dispose of any Hazardous Substances in violation of applicable Environmental Laws other than de minimis, lawful use in connection with construction activities. Compliance with Environmental Laws. The Company shall cause the Real Property and the operations conducted thereon to comply with all Environmental Laws and orders of any governmental authorities having jurisdiction under any Environmental Laws and shall obtain, keep in effect and comply with all governmental permits and authorization required by Environmental Laws with respect to such Real Property or operations. The Company shall furnish the Bank with copies of all such permits and authorizations and any amendments or renewals thereof and shall notify the Bank of any expiration or revocation of such permits or authorizations. Preventive, Investigatory and Remedial Action. The Company shall exercise extreme care in handling Hazardous Substances if the Company uses or encounters any. The Company, at the Company's expense, shall undertake any and all preventive, investigatory or remedial action (including emergency response, removal, containment and other remedial action) (a) required by any applicable Environmental Laws or orders by any governmental authority having jurisdiction under Environmental Laws, or (b) necessary to prevent or minimize property damage (including damage to Occupant's own property), personal injury or damage to the environment, or the threat of any such damage or injury, by releases of or exposure to Hazardous Substances in connection with the Real Property or operations of any Occupant on the Real Property. In the event the Company fails to perform any of the Company's obligations under this section of the Agreement, the Bank may (but shall not be required to), after written notice to the Company and a reasonable opportunity to cure such performance, perform such obligations at the Company's expense. All such costs and expenses incurred by the Bank under this section and otherwise under this Agreement shall be reimbursed by the Company to the Bank upon demand with interest at the default rate set forth in the Reimbursement Agreement, or in the absence of a default rate, at the interest rate set forth therein. The Bank and the Company intend that the Bank shall have full recourse to the Company for any sum at any time due to the Bank under this Agreement. In performing any such obligations of the Company, the Bank shall at all times be deemed to be the agent of the Company and shall not by reason of such performance be deemed to be assuming any responsibility of the Company under any Environmental Law or to any third party. The Company hereby irrevocably appoints the Bank as the Company's attorney-in-fact with full power to perform such of the Company's obligations under this section of the Agreement as the Bank deems necessary and appropriate. Notices. The Company shall immediately notify the Bank upon becoming aware of any of the following: (a) Any spill, release or disposal of a Hazardous Substance on any of the Real Property, all in connection with any of its operations if such spill, release or disposal must be reported to any governmental authority under applicable Environmental Laws. (b) Any contamination or imminent threat of contaminations, of the Real Property by Hazardous Substances, or any violation of Environmental Laws in connection with the Real Property or the operations conducted on the Real Property. (c) Any order, notice of violation, fine or penalty or other similar action by any governmental authority relating to Hazardous Substances or Environmental Laws and the Real Property or the operations conducted on the Real Property. (d) Any judicial or administrative investigation or proceeding relating to Hazardous Substances or Environmental Laws and to the Real Property or the operations conducted on the Real Property. (e) Any matters relating to Hazardous Substances or Environmental Laws that would give a reasonably prudent the Bank cause to be concerned that the value of the Bank's security interest in the Real Property may be reduced or threatened or that may impair, or threaten to impair, the Company's ability to perform any of its obligations under this Agreement when such performance is due. Access to Records. The Company shall deliver to the Bank, at the Bank's request, copies of any and all documents in the Company's possession or to which it has access relating to Hazardous Substances or Environmental Laws and the Real Property and the operations conducted on the Real Property, including without limitation results of laboratory analysis, site assessments or studies, environmental audit reports and other consultants' studies and reports. Inspections. The Bank reserves the right to inspect and investigate the Real Property and operations thereon at any time and from time to time, and the Company shall cooperate fully with the Bank in such inspection and investigations. If the Bank at any time has reason to believe that the Company or any Occupants of the Real Property are not complying with all applicable Environmental Laws or with the requirement of this Agreement or that a material spill, release or disposal of Hazardous Substances has occurred on or under the Real Property, the Bank may require the Company to furnish the Bank at the Company's expense an environmental audit or a site assessment with respect to the matters of concern to the Bank. Such audit or assessment shall be performed by a qualified consultant approved by the Bank. Any inspections or tests made by the Bank shall be for the Bank's purposes only and shall not be construed to create any responsibility or liability on the part of the Bank to the Company or to any other person. COMPANY'S WAIVER AND INDEMNIFICATION. The Company hereby indemnifies and holds harmless the Bank and the Bank's officers, directors, employees and agents, and the Bank's successors and assigns and their officers, directors, employees and agents against any and all claims, demands, losses, liabilities, costs and expenses (including without limitation attorneys' fees at trial and on any appeal or petition for review) incurred by such person (a) arising out of or relating to any investigatory or remedial action involving the Real Property, the operations conducted on the Real Property or any other operations of the Company or any Occupant and required by Environmental Laws or by orders of any governmental authority having jurisdiction under any Environmental Laws, or (b) on account of injury to any person whatsoever or damage to any property arising out of, in connection with, or in any way relating to (i) the breach of any covenant contained in this Agreement, (ii) the violation of any Environmental Laws, (iii) the use, treatment, storage, generation, manufacture, transport, release, spill, disposal or other handling of Hazardous Substances on the Real Property, (iv) the contamination of any of the Real Property by Hazardous Substances by any means whatsoever (including without limitation any presently existing contamination of the Real Property) or (v) any costs incurred by the Bank pursuant to this Agreement. In addition to this indemnity, the Company hereby releases and waives all present and future claims against the Bank for indemnity or contribution in the event the Company becomes liable for cleanup or other costs under any Environmental Laws, other than claims arising as a direct result of acts of the Bank or its authorized agents and representatives following the Bank's taking possession of the Real Property. PAYMENT: FULL RECOURSE TO THE COMPANY. The Bank and the Company intend that the Bank shall have full recourse to the Company for the Company's obligations hereunder as they become due to the Bank under this Agreement. Such liabilities, losses, claims, damages and expenses shall be reimbursable to the Bank as the Bank's obligations to make payments with respect thereto are incurred, and the Company shall pay such liabilities, losses, claims, damages and expenses to the Bank as so incurred, without any requirement to wait for the ultimate outcome of any litigation, claim or proceeding, within thirty (30) days after written notice from the Bank. The Bank's notice shall contain a brief itemization of the amounts incurred to the date of such notice. In addition to any remedy available for failure to pay periodically such amounts, such amounts shall thereafter bear interest at the default rate set forth in the Reimbursement Agreement, or in the absence of a default rate, at the interest rate set forth in the Reimbursement Agreement. SURVIVAL. The covenants contained in this Agreement shall survive (a) the repayment of the LC Indebtedness, (b) any foreclosure, whether judicial or nonjudicial, of the Real Property, and (c) any delivery of a deed in lieu of foreclosure to the Bank or any successor of the Bank. The covenants contained in this Agreement shall be for the benefit of the Bank and any successor to the Bank, as holder of any security interest in the Real Property or the indebtedness secured thereby, or as owner of the Real Property following foreclosure or the delivery of a deed in lieu of foreclosure. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, and to the extent applicable, with the federal laws of the United States Government. Attorneys' Fees; Expenses. The Company agrees to pay upon demand all of the Bank's reasonable costs and expenses, including attorneys' fees and the Bank's legal expenses, incurred in connection with the enforcement of this Agreement. The Bank may pay someone else to help enforce this Agreement and the Company shall pay the costs and expenses of such enforcement. Costs and expenses include the Bank's reasonable attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (and including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. the Company also shall pay all court costs and such additional fees as may be directed by the court. Severability. If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. Waivers and Consents. The Bank shall not be deemed to have waived any rights under this Agreement unless such waiver is in writing and signed by the Bank. No delay or omission on the part of the Bank in exercising any right shall operate as a waiver of such right or any other right. A waiver by any party of a provision of this Agreement shall not constitute a waiver of or prejudice the party's right otherwise to demand strict compliance with that provision or any other provision. No prior waiver by the Bank, nor any course of dealing between Bank and the Company, shall constitute a waiver of any of the Bank's rights or any of the Company's obligations as to any future transactions. Whenever consent by the Bank is required in this Agreement, the granting of such consent by the Bank in any instance shall not constitute continuing consent to subsequent instances where such consent is required. The Company hereby waives notice of acceptance of this Agreement by the Bank. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES HAVING READ ALL OF THE PROVISIONS OF THIS AGREEMENT, AND EACH AGREES TO ITS TERMS. NO FORMAL ACCEPTANCE BY THE BANK IS NECESSARY TO MAKE THIS AGREEMENT EFFECTIVE. IN WITNESS WHEREOF, the Company has caused its duly authorized representatives to affix their hands and seals and its corporate seal as of this first day of August, 1995. ATTEST                                         Name: Robert L. LaPenta, Jr. Title: Assistant Secretary BURLINGTON COAT FACTORY WAREHOUSE OF NEW JERSEY, INC. BY:                                   Name: Mark Nesci Title: Vice President   Acknowledged and Agreed as of the first day of August, 1995 FIRST FIDELITY BANK, NATIONAL ASSOCIATION     By:_______________________________________ Name: Title: "SCHEDULE A"

-------------------------------------------------------------------------------- EXHIBIT 10.62 STOCK PURCHASE AGREEMENT      This Stock Purchase Agreement (this “Agreement”), dated as of February 7, 2001, is by and among Ultramar Diamond Shamrock Corporation a Delaware corporation (“Buyer”) and TotalFinaElf, S.A., a French corporation and Total Finance, S.A., a French corporation (collectively, the “Seller”). RECITALS:      A. Seller acquired shares of Buyer’s common stock, par value $0.01 (the “Common Stock”) in 1997 pursuant to Buyer’s acquisition by merger of Total Petroleum (North American) Ltd.      B. The Board of Directors of Buyer is expected to approve a share buyback program, under which Buyer plans to repurchase up to $850 million worth of Common Stock (the “Share Repurchase”).      C. As part of the Share Repurchase, Buyer desires to purchase from Seller and Seller desires to sell to Buyer, 7,050,109 shares (the “Shares”) of Common Stock, upon the terms and conditions set forth in this Agreement. AGREEMENT:      In consideration of the mutual agreements set forth in this Agreement, Buyer and Seller hereby agree as follows: ARTICLE I DEFINITIONS      1.1 Definitions. As used in this Agreement the following terms shall have the meanings set forth below:      “Governmental Authority” means any domestic or foreign national, state, multi-state, municipal or other local government, any subdivision, agency, instrumentality, department, board, commission or authority thereof, or any quasi-governmental or private body exercising any regulatory or taxing authority thereunder or any federal, state, local or foreign court, tribunal or arbitrator.      “Laws” means any law, statute, rule, code, regulation, ordinance or other legally enforceable requirement of any Governmental Authority. --------------------------------------------------------------------------------      “Lien” means any security interest, mortgage, pledge, encumbrance, lien, charge, Option, adverse claim or restriction of any kind, including, but not limited to, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.      “Option” means any option, warrant, call, convertible or exchangeable security, subscription, claim, unsatisfied preemptive right, commitment, other agreement or right of similar nature. ARTICLE II SALE AND PURCHASE OF SHARES      2.1 Sale and Purchase of Shares. The closing of the purchase and sale of the Shares (the “Closing”) shall take place at Buyer’s corporate offices, 6000 North Loop 1604 West, San Antonio, Texas 78249, February 13, 2001or at such other place, date and time as the parties may agree (such date being referred to as the “Closing Date”). At the Closing, (a) Seller shall sell, assign and transfer all of the Shares to Buyer, (b) Seller shall deliver or cause to be delivered to Buyer one or more stock certificates representing the Shares owned by Seller, with duly executed stock powers reasonably satisfactory to Buyer in proper form for transfer, (c) Seller shall transfer all of the Shares free and clear of all Liens, and (d) Buyer shall purchase and acquire the Shares and pay and deliver to Seller the Purchase Price (as defined in Section 2.2) and (e) Buyer shall deliver to Seller an opinion of counsel to Buyer covering in substance the matters addressed in Sections 3.2(a) and (b).      2.2 Purchase Price. In full consideration for the Shares, Buyer shall pay to Seller by bank wire transfer of immediately available funds an aggregate amount in cash equal to $32.85 per share of Common Stock multiplied by the number of Share(the “Purchase Price”). ARTICLE III REPRESENTATIONS AND WARRANTIES      3.1 Seller represents and warrants to Buyer as of the date of this Agreement as follows:      (a) Authority. Seller has all requisite power and authority to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated herein, and this Agreement has been duly executed and delivered by Seller pursuant to all necessary authorization and is the legal, valid and binding obligation of such Seller enforceable against Seller in accordance with its terms, except as limited by (i) applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally from time to time in effect and (ii) the availability of equitable remedies (regardless of whether enforceability is considered in a proceeding at law or in equity). 2 --------------------------------------------------------------------------------      (b) Title. Seller (i) is the record and beneficial owner of all of the Shares; (ii) has full power, right and authority to make and enter into this Agreement and to sell, assign, transfer and deliver the Shares to Buyer, and (iii) has good and valid title to the Shares, free and clear of all Liens and Options. Upon the consummation of the transactions contemplated by this Agreement in accordance with the terms hereof, Buyer shall acquire good and marketable title to the Shares, free and clear of all Liens. To the best knowledge of Seller, the Shares represent the only ownership interest that Seller has in Buyer, and after the Closing Date, Seller will not own any of Buyer’s Common Stock.      3.2 Buyer represents and warrants to Seller as of the date of this Agreement as follows:      (a) Authority. Buyer has all requisite authority to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated herein, and this Agreement has been duly executed and delivered by Buyer pursuant to all necessary authorization (subject only to the provisions of Section 4.1) and is the legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms, except as limited by (i) applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally from time to time in effect, and (ii) the availability of equitable remedies (regardless of whether enforceability is considered in a proceeding at law or in equity).      (b) No Conflict. No consent, authorization, approval, order or permit of or from, or declaration or filing with, any federal, state, local or other Governmental Authority or court or other tribunal is required for the execution, delivery or performance of this Agreement by Buyer. No consent of any party to any agreement to which Buyer is a party is required for the execution, delivery or performance of this Agreement by Buyer. The execution, delivery and performance of this Agreement by Buyer will not violate, result in a breach of or conflict with Buyer’s certificate incorporation or by-laws, any law, rule, regulation, order or decree binding on Buyer, or any agreement to which Buyer is a party.      (c) No Brokers. Neither Buyer nor any person acting on behalf of Buyer has incurred any obligation to any finder, broker or similar person in connection with the transactions contemplated hereby.      (d) SEC Reports. All documents filed by Buyer pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the “Exchange Act”), since September 30, 1997, (i) were prepared in accordance with the requirements of the Exchange Act, (ii) did not at the time they were filed contain any untrue statement of a material fact, (iii) did not at the time they were filed omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. From the date as of which information is given in the most recent report filed by Buyer under the Exchange Act, there has not been any material change or development relating to Buyer or its business and Buyer is not engaged in any discussions or negotiations regarding any extraordinary transaction. 3 --------------------------------------------------------------------------------      3.3 Each party shall indemnify and hold the other harmless from and against any and all damage, cost, actions, claims, expenses (including reasonable attorneys fees and expenses) and other liability arising from or relating to any breach by such party of any representation, warranty or agreement of such party contained in this Agreement. ARTICLE IV CONDITIONS TO CLOSING      4.1 Condition to Obligation of the Parties. The respective obligations of the Seller and Buyer to consummate the transactions contemplated by this Agreement shall be conditioned on the representations and warranties of the other party contained herein being true and correct as if made on the Closing Date and such other party shall have performed all of its obligations required to be performed hereunder. ARTICLE V MISCELLANEOUS AND GENERAL      5.1 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, but shall not be assignable by any party hereto without the prior written consent of the other parties hereto.      5.2 Third Party Beneficiaries . Each party hereto intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any person other than the parties hereto.      5.3 Complete Agreement . This Agreement and the schedules hereto and the other documents delivered by the parties in connection herewith contain the complete agreement between the parties hereto with respect to the transactions contemplated hereby and thereby and supersede all prior agreements and understandings between the parties hereto with respect thereto.      5.4 Captions; References. The captions contained in this Agreement are for convenience of reference only and do not form a part of this Agreement. When a reference is made in this Agreement to a Section or an Article, such reference shall be to a Section or an Article of this Agreement, unless otherwise indicated.      5.5 Amendment. This Agreement may be amended or modified only by an instrument in writing duly executed by the parties to this Agreement. 4 --------------------------------------------------------------------------------      5.6 Waiver. At any time prior to the Closing, the parties hereto may (i) extend the time for the performance of any of the obligations or other acts of the parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, or (iii) waive compliance with any of the agreements or conditions contained herein, to the extent permitted by applicable Law. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a writing signed on behalf of such party.      5.7 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its rules of conflict of laws.      5.8 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 provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.      5.9 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute but one instrument.      5.10 Other Agreement. The Stockholder Agreement between Buyer and Total Fina Elf S.A. dated as of April 15, 1997, shall be terminated and of no further force or effect as of the Closing Date and no party shall have any further obligation to the other under such agreement except in regard to the Topna Tradename License and Topna Technology License contemplated thereby. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 5 --------------------------------------------------------------------------------      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. ULTRAMAR DIAMOND SHAMROCK CORPORATION   By: /s/ Steven Blank        —————————————————— —— Name: Steven Blank Title: Vice President and Treasurer   TOTALFINAELF, S.A.   By: /s/ R. Castaigne        —————————————————— —— Name: R. Castaigne Title: CFO   TOTAL FINANCE S.A.   By: /s/ R. Castaigne        —————————————————— —— Name: R. Castaigne Title: Authorized Signatory --------------------------------------------------------------------------------

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.1     CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.P.R. §§200.80(b)4 AND 240.24b-2 COLLABORATION AND CO-DEVELOPMENT AGREEMENT     THIS COLLABORATION AND CO-DEVELOPMENT AGREEMENT ("Agreement") is made and entered into effective as of November 16, 2001 (the "Effective Date"), by and among ONCOGENEX TECHNOLOGIES INC., having offices at Suite 400, 609 - 14th Street N.W., Calgary, Alberta T2N 2A1 ("OncoGenex") and ISIS PHARMACEUTICALS, INC., having principal offices at 2292 Faraday Avenue, Carlsbad CA 92008 ("Isis"). OncoGenex and Isis each may be referred to herein individually as a "Party," or collectively as the "Parties."     WHEREAS, Isis and OncoGenex wish to establish a relationship to co-develop and commercialize an antisense compound targeted to Clusterin, on the terms set forth below;     NOW, THEREFORE, the Parties do hereby agree as follows: ARTICLE 1—DEFINITIONS     Capitalized terms used in this Agreement and not otherwise defined herein have the meanings set forth in Appendix 1. ARTICLE 2— SCOPE OF COLLABORATION; COLLABORATION ACTIVITIES     Section 2.1  Scope of Collaboration.  The Parties have entered into this collaboration (the "Collaboration") to jointly develop and commercialize the Product as set forth in this Agreement.     Section 2.2  Collaboration Activities.       2.2.1  General.  The Parties will use Commercially Reasonable Efforts to conduct their respective Collaboration Activities in accordance with this Agreement, and in accordance with the Initial Project Plan and any future Project Plans. Each Party will perform, or cause to be performed, its Collaboration Activities in good scientific manner, and in compliance in all material respects with all Applicable Law and will use best efforts to (a) research, develop, manufacture, file for Regulatory Approval and commercialize the Product, (b) perform the work of each Project Plan with the view to achieving the objectives of such Project Plan efficiently and expeditiously by allocating sufficient time, effort, equipment and skilled personnel to complete such activities successfully and promptly, and (c) cooperate fully with the other Party to achieve the goals of the Collaboration.     2.2.2  Collaboration Exclusivity.  During the Term of this Agreement, neither Party will engage, on behalf of itself or any other party, in the development or commercialization of antisense compounds targeted to Clusterin other than as provided in this Agreement.     Section 2.3  Initial Project Plan.       2.3.1  Goals of Initial Project Plan.  The Initial Project Plan will be directed to completing Trial 1 and Trial 2, as set forth in Appendix 2.3.1. The Parties' responsibilities for Collaboration Activities for the Initial Project Plan are set forth in Appendix 2.3.1. Collaboration Activities for the Initial Project Plan will be funded as set forth in Appendix 2.3.1. *CONFIDENTIAL TREATMENT REQUESTED 1 --------------------------------------------------------------------------------     2.3.2  Changes to Initial Project Plan.  Any changes to the Initial Project Plan requiring the performance of additional activities will require the prior written approval of both Parties and will be funded [***] by OncoGenex and [***] by Isis, unless otherwise agreed by the Parties. Any such changes to the Initial Project Plan will include a budget covering any additional activities.     2.3.3  Licensing of Product.  The Product will not be sublicensed to any Third Party prior to completion of the Initial Project Plan, without mutual agreement of the Parties in writing.     2.3.4  Discontinued Performance by OncoGenex.  If OncoGenex elects during performance of the Initial Project Plan to discontinue its participation in the Collaboration, Isis may continue the development and commercialization of the Product independently of OncoGenex. Upon discontinuation of performance of the Initial Project Plan by OncoGenex, Isis will retain any licenses granted in Section 4.1, including the right to sublicense as provided in that section. Isis will pay OncoGenex a royalty equal to [***] of Net Sales of the Product for the life of the Product. In addition, Isis will pay OncoGenex any applicable Third Party Payments. OncoGenex will transfer to Isis all information relating to the Product as may be necessary to enable Isis to practice the licenses granted in Section 4.1, including, but not limited to, summaries of clinical trials, rights to all foreign-equivalent INDs and NDAs filed with respect to the Product in such country and all drug dossiers and master files with respect thereto. OncoGenex will have no further expense obligations under this Agreement.     2.3.5  Discontinued Performance by Isis.  If Isis elects during performance of the Initial Project Plan to discontinue its participation in the Collaboration, OncoGenex may continue the development and commercialization of the Product independently of Isis. Upon discontinuation of performance of the Initial Project Plan by Isis, OncoGenex will retain any licenses granted in Section 4.1, including the right to sublicense as provided in that section. OncoGenex will pay Isis a royalty equal to [***] of Net Sales of the Product for the life of the Product. In addition, OncoGenex will pay Isis any applicable Third Party Payments. Isis will transfer to OncoGenex all information relating to the Product as may be necessary to enable OncoGenex to practice the licenses granted in Section 4.1, including, but not limited to, summaries of clinical trials, rights to all foreign-equivalent INDs and NDAs filed with respect to the Product in such country and all drug dossiers and master files with respect thereto. Isis will have no further expense obligations under this Agreement.     Section 2.4  Future Collaboration Activities.       2.4.1  Proportionate Share.  After completion of the Initial Project Plan, the Proportionate Share of OncoGenex and Isis will be [***] and [***] respectively.     2.4.2  Future Project Plans.  Ninety days prior to estimated completion of the Initial Project Plan, and 90 days prior to estimated completion of each subsequent Project Plan, the Operating Committee will establish a new Project Plan for the next stage of development of the Product. Upon written acceptance of a new Project Plan by each of the Parties, such Project Plan will be appended to this Agreement. Each new Project Plan will include a budget for the Collaboration Activities to complete such Project Plan, and provisions for the Parties to fund the Collaboration Activities according to their Proportionate Share.     2.4.3  Third Party or Unilateral Product Development.  If the Parties cannot agree to the terms of a new Project Plan, the Parties will negotiate in good faith for one Party to unilaterally develop the Product, or will agree to jointly sub-license the Product to a Third Party. If the Parties cannot reach agreement regarding the principal terms for unilateral development or sub-licensing of the Product within 120 days of beginning negotiations, the Parties will refer the matter to dispute resolution according to the procedures set forth in Section 12.6. 2 --------------------------------------------------------------------------------     2.4.4  Licensing of Product.       (a) No Third Party negotiations will be undertaken in respect of the Product by either Party unless agreed to by each of the Parties. The Party that introduces the Third Party to such negotiations will continue as the negotiating lead.     (b) Net Licensing Revenue received as a result of a licensing or other collaboration agreement with a Third Party will be shared by the Parties in accordance with Article 5.     2.4.5  Manufacturing of the Product.  With respect to clinical and commercial supplies of the Product for the performance of future Project Plans, the Operating Committee will use its best efforts to enter into a supply agreement with the supplier that is best able to meet the Parties' requirements, taking into consideration such factors as price, timing, quality, capacity, quantity, reliability and reputation. Such supplier may be either a Third Party or one of the Parties. ARTICLE 3— OPERATION OF THE COLLABORATION     Section 3.1  Operating Committee.       3.1.1  Formation of Operating Committee.  The Parties will establish a joint committee (the "Operating Committee"), which will oversee the Collaboration and development and commercialization activities as described hereunder. Each of OncoGenex and Isis will appoint 2 representatives with the requisite experience and seniority to enable them to fulfill the obligations of the Operating Committee with respect to the Collaboration. Additional representatives of each Party will be free to attend the Operating Committee meetings, but not to vote. From time to time, OncoGenex and Isis each may substitute any of its representatives to the Operating Committee with notice to the other Party and to the members of the Operating Committee. Each Party will ensure that each member of the Operating Committee is bound by the obligations of confidence in accordance with Article 6.     3.1.2  Operating Committee Responsibilities.  The Operating Committee will, in addition to its other responsibilities described in this Agreement: (a) periodically review the Project Plan from a strategic and scientific perspective, and present opinions to the Parties; (b) make changes to Project Plans as it deems necessary to accomplish the purpose of the Collaboration, and, recommend to the Parties allocation of responsibilities for Collaboration Activities between OncoGenex and Isis necessary to implement the Project Plans, taking into consideration the Parties' relevant expertise and available resources and relevant Project Plans and budgets; (c) prioritize for the Parties the research, development, manufacturing and commercialization activities with respect to the Product; (d) attempt to resolve any disagreements between the Parties with respect to the research conducted under the Collaboration; (e) monitor, at least on a quarterly basis, Collaboration Activities conducted and expenses incurred sufficient to insure that progress and expense contribution are in accordance with Project Plan; and (f) take such other actions as are set forth in this Agreement or as the Parties may mutually agree.     3.1.3  Procedural Rules for the Operating Committee.       (a)  Generally.  Except as explicitly set forth in this Agreement, the Operating Committee will establish its own procedural rules for its operation.     (b)  Voting.  The Operating Committee will take action by unanimous agreement of the members of the Operating Committee. In the event that unanimous agreement cannot be achieved within 20 days, the matter will be resolved according to the procedures set forth in Section 3.2.     Section 3.2  Dispute Resolution.  Any dispute that may arise relating to the terms of this Agreement or the activities of the Parties hereunder will be brought to the attention of the Operating Committee, which will attempt in good faith to achieve a resolution. Either Party may convene a 3 -------------------------------------------------------------------------------- special meeting of the Operating Committee for the purpose of resolving disputes. If the Operating Committee is unable to resolve such a dispute within 20 days of the first presentation of such dispute to the Operating Committee, such dispute will be referred to the Chief Executive Officers of each of the Parties (or their respective designees) who will use their good faith efforts to mutually agree upon the resolution of the dispute. If any dispute is not resolved by the Chief Executive Officers of the Parties (or their designees) within 30 days after such dispute is referred to them, then either Party will have the right, with respect to a Party's interpretation of, or performance under, this Agreement, to arbitrate such dispute in accordance with Section 12.6. ARTICLE 4— GRANT OF RIGHTS     Section 4.1  License Grants for Collaboration Activities.       4.1.1  Isis Grant.  Subject to the terms and conditions of this Agreement, Isis hereby grants to OncoGenex (a) a co-exclusive (with Isis), worldwide, fully-paid, royalty-free license, under the Joint Patents and Product-Specific Technology Patents, and (b) a non-exclusive, worldwide, royalty-free license under the Isis Core Technology Patents, both licenses solely to develop, make, have made, use, sell, offer for sale, have sold and import the Product. The license granted hereunder will be sublicensable only in connection with a license of the Product to a Third Party in accordance with the terms of this Agreement.     4.1.2  OncoGenex Grant.  Subject to the terms and conditions of this Agreement, including without limitation Section 4.2, OncoGenex hereby grants to Isis a co-exclusive (with OncoGenex), worldwide, fully-paid, royalty-free license, or sub-license, as the case may be, under the OncoGenex Product Patents, the Joint Patents, and the Product-Specific Technology Patents, solely to develop, make, have made, use, sell, offer for sale, have sold and import the Product. The license granted hereunder will be sublicensable only in connection with a license of the Product to a Third Party in accordance with the terms of this Agreement.     4.1.3  Isis Manufacturing Patents.  Isis will grant to OncoGenex or to a Third Party manufacturer pursuant to Section 2.4.5 a non-exclusive, worldwide, fully-paid, royalty-free license, under the Isis Manufacturing Patents to make or have made the Product only upon a determination by the Operating Committee to have OncoGenex or such Third Party manufacture the Product; or upon discontinuance of performance by Isis and unilateral development of the Product by OncoGenex under Section 2.3.5; or upon unilateral development of the Product by OncoGenex or a Third Party sublicensee under Section 2.4.3; or upon unilateral development of the Product by OncoGenex if Isis is found to be in breach of this Agreement in accordance with Article 9 hereof.     4.1.4  Improvements.  If any Improvement that is not Product-Specific Technology is made during the Collaboration, the Parties will negotiate in good faith regarding the use of any such Improvement in the Collaboration. If the Parties agree to terms under which such Improvement will be used in the Collaboration, the Party owning the Improvement will grant to the other Party a license under the Improvement solely to develop, make, have made, use, sell, offer for sale, have sold and import the Product. The license granted hereunder will be sublicensable only in connection with a license of the Product to a Third Party in accordance with the terms of this Agreement.     Section 4.2  Pre-Existing Grants.  The Parties further acknowledge and agree that pursuant to the [***] co-development letter of intent, OncoGenex has or intends to grant an exclusive license under the OncoGenex Product Patents to develop and commercialize a topical/intratumoral antisense compound designed to interact with Clusterin and the Parties acknowledge that OncoGenex is free to do so 4 -------------------------------------------------------------------------------- without breach of this Agreement. No rights to Isis Patent Rights, Joint Technology, or Product-Specific Technology may be granted, expressly or implied, by OncoGenex to [***] ARTICLE 5— FINANCIAL PROVISIONS     Section 5.1  Payment by OncoGenex.  OncoGenex will pay [***] to Isis within 30 days of the Effective Date. Such payment will be for approximately [***] of Product to support the [***]. All other expenses incurred by Isis in respect of Isis' Collaboration Activities as set forth in the Initial Project Plan shall be borne solely by Isis.     Section 5.2  Licenses from Third Parties.       5.2.1  Third Party Payments.  OncoGenex acknowledges that Isis entered into a license agreement with [***], and a license agreement with [***], under which Isis is obligated to pay royalties and milestones on the Product. Isis acknowledges that OncoGenex entered into a license agreement with University of British Columbia dated November 1, 2001, under which OncoGenex is obligated to make payments with respect to the Product. The Third Party Payments identified in this Section 5.2.1 will be determined in accordance with the terms of the referenced license agreements. In the event that either Party negotiates reduced royalties or milestones with these Third Party licensors, the royalties and milestones due under the original license agreements will still be paid to Isis or OncoGenex as the case may be.     Section 5.3  Product Licensing Revenue Allocation.  Licensing Revenue will be allocated as follows: first, each Party will receive any Third Party Payments owing to its licensors in respect of the Product, then each Party will receive its Proportionate Share of the Net Licensing Revenue. In the event that one Party receives all Licensing Revenue, then such receiving Party will distribute the Licensing Revenue to the non-receiving Party in accordance with the immediately preceding sentence within 15 days after receipt of such Licensing Revenue.     Section 5.4  Sharing of Third Party Payments.  During the Initial Project Plan, each Party will be responsible for any Third Party Payments owing to its licensors. Following completion of the Initial Project Plan, any Third Party Payments owing in respect of the Product will be shared by the Parties according to their Proportionate Share.     Section 5.5  Revenue Sharing on Direct Sales.  The Party marketing the Product will: first, subtract expenses from Revenues received from the Product; second, pay or distribute Third Party Payments; and third, distribute the remaining Revenue to the Parties according to their Proportionate Shares. The Party marketing the Product will distribute Revenue within 30 days after the end of each calendar quarter. In the event that expenses from marketing the Product are greater than Revenues received, the Parties will divide such expenses that are in excess of Revenues, according to their Proportionate Shares.     Section 5.6  Payment Method.  Any amounts due to a Party hereunder will be paid in Canadian dollars if paid to OncoGenex, and in U.S. dollars if paid to Isis, by wire transfer in immediately available funds to an account designated by the receiving Party. Any payments or portions thereof due hereunder which are not paid on the date such payments are due under this Agreement will bear interest at a rate equal to the lesser of the prime rate as published in The Wall Street Journal, Eastern Edition, on the first day of each calendar quarter in which such payments are overdue, plus two percent (2%), or the maximum rate permitted by law, whichever is lower, calculated on the number of days such payment is delinquent, compounded monthly.     Section 5.7  Currency; Foreign Payments.  If any currency conversion will be required in connection with any payment hereunder, such conversion will be made by using the exchange rate for the purchase of U.S. dollars as published in The Wall Street Journal, Eastern Edition, or for the 5 -------------------------------------------------------------------------------- purchase of Canadian dollars as published by the Royal Bank of Canada, on the last business day of the calendar quarter to which such payments relate. If at any time legal restrictions prevent the prompt remittance of any payments in any jurisdiction, the applicable Party may notify the other and make such payments by depositing the amount thereof in local currency in a bank account or other depository in such country in the name of the receiving Party or its designee, and such Party will have no further obligations under this Agreement with respect thereto.     Section 5.8  Taxes.  A Party may deduct from any amounts it is required to pay to the other Party pursuant to this Agreement an amount equal to that withheld for or due on account of any taxes (other than taxes imposed on or measured by net income) or similar governmental charge imposed on the receiving Party by a jurisdiction of the paying Party ("Withholding Taxes"). The paying Party will provide the receiving Party a certificate evidencing payment of any Withholding Taxes hereunder within 30 days of such payment and will reasonably assist the receiving Party, at the receiving Party's expense, to obtain the benefit of any applicable tax treaty.     Section 5.9  Records Retention; Audit.       5.9.1  Regulatory Records.  With respect to the subject matter of this Agreement, each Party will maintain, or cause to be maintained, records of its respective research, development, manufacturing and commercialization activities, including all Regulatory Documentation, in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, which will be complete and accurate and will fully and properly reflect all work done and results achieved in the performance of such activities. All Regulatory Documentation will be retained for a period as may be required by Applicable Law. Each Party will have the right, during normal business hours and upon reasonable notice, to inspect and copy any such records.     5.9.2  Record Retention.  Each Party will maintain (and will ensure that its sublicensees will maintain) complete and accurate books, records and accounts that fairly reflect (a) their respective costs and expenses reimbursable or otherwise shared by the Parties hereunder (collectively, the "Collaboration Expenses"), and (b) Revenue with respect to the Product, in each case in sufficient detail to confirm the accuracy of any payments required hereunder and in accordance with GAAP, which books, records and accounts will be retained by such party until the later of (i) 3 years after the end of the period to which such books, records and accounts pertain, and (ii) the expiration of the applicable tax statute of limitations (or any extensions thereof), or for such longer period as may be required by Applicable Law.     5.9.3  Audit.  Each Party will have the right to have an independent certified public accounting firm of nationally recognized standing, reasonably acceptable to the audited Party, have access during normal business hours, and upon reasonable prior written notice, to such of the records of the other Party (and its sublicensees) as may be reasonably necessary to verify the accuracy of Collaboration Expenses or Revenues, as applicable, for any calendar quarter or calendar year ending not more than 24 months prior to the date of such request; provided, however, that neither Party will have the right to conduct more than one such audit in any Calendar Year except as provided below. The requesting Party shall bear the cost of such audit unless the audit reveals a variance of more than 5% from the reported results, in which case the audited Party shall bear the cost of the audit. The requesting Party will have the right to audit previous years, if such years have not been previously audited, if the audit reveals a variance of more than 5% from the reported results. The requesting Party will bear the cost of such previous year audits unless such audits reveal a variance of more than 5%. The results of such accounting firm shall be final and binding upon the Parties, absent manifest error.     5.9.4  Payment of Additional Amounts.  If, based on the results of such audit, additional payments are owed by the audited Party under this Agreement, the audited Party will make such 6 -------------------------------------------------------------------------------- additional payments, with interest from the date originally due at the rate of 1% per month, within 60 days after the date on which such accounting firm's written report is delivered to such Party.     5.9.5  Confidentiality.  The auditing Party will treat all information subject to review under this Section 5.9 in accordance with the confidentiality provisions of Article 6 and will cause its accounting firm to enter into a reasonably acceptable confidentiality agreement with the audited Party obligating such firm to maintain all such financial information in confidence pursuant to such confidentiality agreement. ARTICLE 6— CONFIDENTIALITY     Section 6.1  Disclosure and Use Restriction.  Except as expressly provided herein, the Parties agree that, for the Term and for five (5) years thereafter, each Party will keep completely confidential and will not publish, submit for publication or otherwise disclose, and will not use for any purpose except for the purposes contemplated by this Agreement, any Confidential Information received from the other Party.     6.1.1  Authorized Disclosure.  Each Party may disclose Confidential Information of the other Party to the extent that such disclosure is:     (a) made in response to a valid order of a court of competent jurisdiction; provided, however, that such Party will first have given notice to such other Party and given such other Party a reasonable opportunity to quash such order and to obtain a protective order requiring that the Confidential Information and documents that are the subject of such order be held in confidence by such court or agency or, if disclosed, be used only for the purposes for which the order was issued; and provided further that if a disclosure order is not quashed or a protective order is not obtained, the Confidential Information disclosed in response to such court or governmental order will be limited to that information which is legally required to be disclosed in response to such court or governmental order;     (b) otherwise required by law; provided, however, that the disclosing Party will provide such other Party with notice of such disclosure in advance thereof to the extent practicable;     (c) made by such Party to the Regulatory Authorities as required in connection with any filing, application or request for Regulatory Approval; provided, however, that reasonable measures will be taken to assure confidential treatment of such information;     (d) made by such Party, in connection with the performance of this Agreement, to permitted sublicensees, licensors, directors, officers, employees, consultants, representatives or agents, each of whom prior to disclosure must be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article 6; or     (e) made by such Party to existing or potential acquirers; existing or potential pharmaceutical collaborators (to the extent contemplated hereunder); investment bankers; existing or potential investors, merger candidates, partners, venture capital firms or other financial institutions or investors for purposes of obtaining financing; or, bona fide strategic potential partners; each of whom prior to disclosure must be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article 6. 7 --------------------------------------------------------------------------------     Section 6.2  Press Releases.  Press releases or other similar public communication by either Party relating to this Agreement, will be approved in advance by the other Party, which approval will not be unreasonably withheld or delayed, except for those communications required by Applicable Law, disclosures of information for which consent has previously been obtained, and information of a similar nature to that which has been previously disclosed publicly with respect to this Agreement, each of which will not require advance approval, but will be provided to the other Party as soon as practicable after the release or communication thereof.     Section 6.3  Publications.  The Parties acknowledge that scientific lead-time is a key element of the value of the research and development activities under the Collaboration and further agree that scientific publications must be strictly monitored to prevent any adverse effect from premature publication or disclosure of results of the research or development activities hereunder. At least 45 days prior to submission of any material related to the research or development activities hereunder for publication or presentation, the submitting Party will provide to the other Party a draft of such material for its review and comment. The receiving Party will provide any comments to the submitting Party within 30 days of receipt of such materials. No publication or presentation with respect to the research or development activities hereunder will be made unless and until the other Party's comments on the proposed publication or presentation have been addressed and changes have been received and agreed upon and any information determined by the other Party to be Confidential Information has been removed. If requested in writing by the other Party, the submitting Party will withhold material from submission for publication or presentation for a reasonable time to allow for the filing of a patent application or the taking of such measures to establish and preserve proprietary rights in the information in the material being submitted for publication or presentation. The Parties recognize that it may not be practical under all circumstances to comply with the above notice requirements for review of publications and presentations. Each Party will reasonably review proposed publications and presentations submitted by the other Party as promptly as possible and will not unreasonably withhold its consent to such publications or presentations that have been submitted for review with less than the required notice period. ARTICLE 7— INTELLECTUAL PROPERTY     Section 7.1  Intellectual Property Ownership.       7.1.1  Ownership of Intellectual Property.  Ownership of inventions conceived or reduced to practice as part of the Collaboration will be determined in accordance with the rules of inventorship under United States patent laws. Isis will own all inventions conceived of and reduced to practice as part of the Collaboration solely by its employees and agents, and all Patents claiming such inventions. OncoGenex will own all inventions conceived of and reduced to practice as part of the Collaboration solely by its employees and agents, and all Patents claiming such inventions. All inventions conceived of and reduced to practice jointly by employees or agents of Isis and employees or agents of OncoGenex, and all Patents claiming such inventions, will be owned jointly by Isis and OncoGenex. During the Term of this Agreement, each Party shall promptly disclose in writing to the other Party on an ongoing basis, and prior to filing any Patent, any Joint Technology or Product-Specific Technology invented as part of the Collaboration.     7.1.2  Ownership of Regulatory Documentation.  All Regulatory Approvals with respect to the Product will be owned by OncoGenex for the duration of the Collaboration. If the Collaboration terminates, or if one Party discontinues performance according to the terms of this Agreement, all Regulatory Approvals will remain with the Party that has retained the rights to the Product. 8 --------------------------------------------------------------------------------     Section 7.2  Prosecution of Patents.       7.2.1  Isis Rights.  Isis will, subject to Section 7.2.3 and Section 7.2.5, have the sole right, at its cost and expense and at its sole discretion, to obtain, prosecute and maintain throughout the world the Isis Patent Rights. OncoGenex shall reimburse Isis for its Proportionate Share of the reasonable out-of-pocket costs incurred to obtain, prosecute and maintain throughout the world, any Product- Specific Technology Patents Controlled by Isis. Isis will keep OncoGenex informed of all Product-Specific Technology Patent applications and registrations to be filed by Isis, and OncoGenex shall have the right to comment on such applications within the timeframes of the patent filing process and deadlines. Notwithstanding the foregoing, if OncoGenex is unilaterally developing and commercializing the Product in accordance with Section 2.3.5, Section 2.4.3, or Article 9, OncoGenex will have the first right to file, prosecute and maintain any Product-Specific Technology Patents at its expense. If OncoGenex elects not to (a) pursue the filing, prosecution or maintenance of a Product-Specific Technology Patents in a particular country, (b) take any other action with respect to Product-Specific Technology in a particular country that is necessary or reasonably useful to establish or preserve rights thereto, then in each such case OncoGenex will so notify Isis promptly in writing and in good time to enable Isis to meet any deadlines by which an action must be taken to establish or preserve any rights in such Product-Specific Technology in such country, and Isis will have the right, but not the obligation, to pursue the filing or registration, or support the continued prosecution or maintenance, of such Product-Specific Technology Patents, at its expense in such country.     7.2.2  OncoGenex Rights.  OncoGenex will, subject to Section 7.2.3 and Section 7.2.5, have the sole right and at its sole discretion, to obtain, prosecute and maintain throughout the world the OncoGenex Patent Rights. Isis shall reimburse OncoGenex for its Proportionate Share of the reasonable out-of-pocket costs incurred to obtain, prosecute and maintain throughout the world, any OncoGenex Product Patents and Product-Specific Technology Patents Controlled by OncoGenex. OncoGenex will keep Isis informed of all OncoGenex Product Patent and Product-Specific Technology Patent applications and registrations to be filed by Oncogenex, and Isis shall have the right to comment on such applications within the timeframes of the patent filing process and deadlines. Notwithstanding the foregoing, if Isis is unilaterally developing and commercializing the Product in accordance with Section 2.3.4, Section 2.4.3, or Article 9, Isis will have the first right to file, prosecute and maintain any Product-Specific Technology Patents at its expense. If Isis elects not to (a) pursue the filing, prosecution or maintenance of a Product-Specific Technology Patents in a particular country, (b) take any other action with respect to Product-Specific Technology in a particular country that is necessary or reasonably useful to establish or preserve rights thereto, then in each such case Isis will so notify OncoGenex promptly in writing and in good time to enable OncoGenex to meet any deadlines by which an action must be taken to establish or preserve any rights in such Product-Specific Technology in such country, and OncoGenex will have the right, but not the obligation, to pursue the filing or registration, or support the continued prosecution or maintenance, of such Product-Specific Technology Patents, at its expense in such country. Upon unilateral development and commercialization by Isis, the Parties will negotiate for Isis to have the right to control the prosecution of the OncoGenex Product Patents. At a minimum, Isis will have the right to comment on the prosecution of the OncoGenex Product Patents, and to request countries for foreign filings related thereto. OncoGenex will keep Isis informed of all prosecution matters regarding OncoGenex Product Patents promptly to allow Isis sufficient time to comment within the timeframes of the patent prosecution process and deadlines.     7.2.3  Filing of Joint Patents.  Subject to Section 7.2.5, the Parties will cooperate with one another with respect to the filing, prosecution and maintenance of all Joint Patents. The Parties will designate one of the Parties to be responsible for, and to initially bear the expense of, the preparation, filing, prosecution, and maintenance of a Joint Patent, provided that the responsible 9 -------------------------------------------------------------------------------- Party will be entitled to reimbursement by the other Party of the responsible Party's expenses as follows: i) Proportionate Share of such expenses if the Joint Patent is a Product-Specific Technology Patent, or ii) equal sharing of such expenses if the Joint Patent is not a Product-Specific Technology Patent. The responsible Party will consult with the other Party as to the preparation, filing, prosecution, and maintenance of such Joint Patent reasonably prior to any deadline or action with the U.S. Patent & Trademark Office or any foreign patent office, and will furnish to the other party copies of all relevant documents reasonably in advance of such consultation. For the life of the Joint Patents, the Parties will mutually agree upon all Joint Patent filings. Not withstanding the foregoing, if one Party is unilaterally developing and commercializing the Product in accordance with Section 2.3.4, section 2.3.5, or Section 2.4.3, or Article 9, the Party continuing with the development and commercialization of the Product (for purposes of this Section only, the "Continuing Party") will have the first right to file, prosecute and maintain any Joint Patents to Product-Specific Technology at its expense. If the Continuing Party elects not (a) to pursue the filing, prosecution or maintenance of such a Joint Patent in a particular country, (b) to take any other action with respect to such Joint Patent in a particular country that is necessary or reasonably useful to establish or preserve rights thereto, then in each such case the Continuing Party will so notify the other Party promptly in writing and in good time to enable such Party to meet any deadlines by which an action must be taken to establish or preserve any rights in such Joint Technology in such country, and such Party will have the right, but not the obligation, to pursue the filing or registration, or support the continued prosecution or maintenance, of such Patent, at its expense in such country.     7.2.4  Cooperation.  Each Party will cooperate fully in the preparation, filing, prosecution, and maintenance of the other Party's Patents, the Product-Specific Technology Patents and the Joint Patents. Such cooperation includes (a) promptly executing all papers and instruments and requiring employees to execute such papers and instruments as reasonable and appropriate so as to enable such other Party, to file, prosecute, and maintain its Patents in any country; and (b) promptly informing such other Party of matters that may affect the preparation, filing, prosecution, or maintenance of any such Patents.     7.2.5  Patent Filings.  OncoGenex covenants not to file any patent application with respect to the Product disclosing or claiming any information disclosed or claimed in the Isis Patent Rights, without Isis's prior written consent. Isis covenants not to file any patent application disclosing or claiming any information disclosed or claimed in the OncoGenex Patent Rights without OncoGenex's prior written consent.     Section 7.3  Enforcement of Patents       7.3.1  Rights and Procedures.  If Isis or OncoGenex determines that any Technology is being infringed by a Third Party's activities and that such infringement could affect the exercise by the Parties of their respective rights and obligations under this Agreement, it will promptly notify the other Party in writing and provide such other Party with any evidence of such infringement that is reasonably available.     (a)  Joint Patents.  With respect to infringement of a Joint Patent, the Party responsible for filing, prosecution and maintenance of such Joint Patent under Section 7.2.3 will have the first right to bring and control any action or proceeding with respect to such Joint Patent, and will bear all expenses thereof, and the other Party will have the right, at its own expense, to be represented in any such action; provided, however, that if the Party with the first right to bring and control actions and proceedings with respect to such Joint Patent Right fails to bring an action or proceeding within ninety (90) days following notice of such infringement, or earlier notifies the other Party in writing of its intent not to take such steps, the other Party will have the right to do so at its expense, and the first Party will have the right, at its own expense, to be represented in any such action. Notwithstanding the foregoing, if the infringement is likely 10 -------------------------------------------------------------------------------- to have a material adverse effect on the Parties' development or commercialization of the Product, the Parties will meet to determine whether to defend against such infringement based on the Joint Patents, and if the Parties mutually agree to proceed in defending such infringement based on the Joint Patents, the Parties will share in the reasonable costs incurred relating to the removal of any such infringement on a Proportionate Share basis.     (b)  Product-Specific Technology Patents.  With respect to Product-Specific Technology Patents, the Party owning such Patents will have the first right, but not the obligation, to remove such infringement, provided, however, that the other Party will reimburse the owner of such Patent for its Proportionate Share of the reasonable costs incurred by such owner relating to the removal of any such infringement. In the event the Party owning the Product-Specific Technology Patent fails to take commercially appropriate steps to remove any infringement of any such Product-Specific Technology Patent within ninety (90) days following notice of such infringement, or earlier notifies the other Party in writing of its intent not to take such steps, and such infringement is likely to have a material adverse effect on the Product, the other Party will have the right to do so at its expense, and the Party owning the Product-Specific Technology Patent will have the right, at its own expense, to be represented in any such action.     (c)  Isis Patent Rights and OncoGenex Patent Rights.  With respect to Isis Patent Rights or OncoGenex Patent Rights, and subject to Section 7.3.1(b), the owner of such Patents will have the sole right, but not the obligation, at its own expense, to remove such infringement using commercially appropriate steps, including the filing of an infringement suit or taking other similar action, and the other Party will have the right, at its own expense, to be represented in any such action. Notwithstanding the foregoing, if the infringement is likely to have a material adverse effect on the Parties' development or commercialization of the Product, the Parties will meet to determine whether to defend against such infringement based on the Patents of one Party, and if the Parties mutually agree to proceed in defending such infringement based on the Patent rights of either Party, the Party owning the Patent will remove the infringement using commercially appropriate steps, and the Parties will share in the reasonable costs incurred relating to the removal of any such infringement on a Proportionate Share basis. Upon unilateral development and commercialization by Isis, the Parties will negotiate for Isis to have the right, at Isis's own expense, to remove infringement of the OncoGenex Product Patents. At a minimum, OncoGenex will keep Isis informed regarding infringement actions brought by OncoGenex on the OncoGenex Product Patents, and Isis will have the right to comment on such infringement actions.     (d)  Cooperation.  The Party not enforcing the applicable Patent will provide reasonable assistance to the other Party, including providing access to relevant documents and other evidence, making its employees available at reasonable business hours, and joining the action to the extent necessary to allow the enforcing Party to maintain the action.     7.3.2  Recovery.  Any amounts recovered by either or both Parties in connection with or as a result of any action contemplated by Section 7.3.1, whether by settlement or judgment, will be used to reimburse the Parties for their reasonable costs and expenses in making such recovery (which amounts will be allocated pro rata if insufficient to cover the totality of such expenses), with any remainder being divided between the Parties according to their proportionate expenditures in the litigation; provided, however, that to the extent that any award is attributable to loss of sales of the Product, the award will first be used to reimburse the Parties for their reasonable costs and expenses in making such recovery, and any remainder will be allocated according to the Parties' Proportionate Shares. 11 --------------------------------------------------------------------------------     Section 7.4  Potential Third Party Rights.       7.4.1  Third Party Licenses.  If the Parties determine that a license to a Third Party Patent is necessary to develop, manufacture, and/or commercialize the Product, the Parties will use Commercially Reasonable Efforts to obtain a license from such Third Party; provided, however, that Isis will have the first right to seek any such license necessary to practice the Isis Patent Rights and will use Commercially Reasonable Efforts to obtain such a license in its own name from such Third Party in such country, under which Isis will, to the extent permissible under such license, grant a sublicense to OncoGenex as necessary for OncoGenex to develop, make, have made, use, sell, offer for sale, have sold and import the Product. If Isis declines to seek a license for which it has the first right, OncoGenex may seek to obtain such a license, under which OncoGenex will, to the extent permissible under such license, grant a sublicense to Isis as necessary for Isis to develop, make, have made, use, sell, offer for sale, have sold and import the Product.     7.4.2  Third Party Litigation.  In the event that a Third Party institutes a patent infringement suit (including any suit alleging the invalidity or unenforceability of the Patents of a Party) against either Party or both Parties during the Term of this Agreement, alleging that any of the activities hereunder infringes one or more patent or other intellectual property rights held by such Third Party (an "Infringement Suit"), the Parties will cooperate with one another in defending such suit. Isis will have the sole right to control any defense of any such claim involving alleged infringement of Third Party rights by Isis' activities at its own expense and by counsel of its own choice, and OncoGenex will have the right, at its own expense, to be represented in any such action by counsel of its own choice. OncoGenex will have the sole right to control any defense of any such claim involving alleged infringement of Third Party rights by OncoGenex's activities at its own expense and by counsel of its own choice, and Isis will have the right, at its own expense, to be represented in any such action by counsel of its own choice; provided, however, that, where such Infringement Suit relates to the development and commercialization of the Product, the Party controlling such Infringement Suit will keep the other Party reasonably informed of developments in any such Infringement Suit.     Section 7.5  Validity and Enforceability of Parties' Technology.  The Parties agree that during the Term of this Agreement, and for [***] thereafter, neither Party will bring any action in a court of law, or otherwise challenge the validity or enforceability of the other Party's Technology. ARTICLE 8— TERM AND TERMINATION     Section 8.1  Term.  The term of this Agreement (the "Term") will commence upon the Effective Date and will continue in effect until such time as the Product is no longer being developed or commercialized hereunder, or unless terminated at an earlier date in accordance with the terms and conditions set forth in this Article 8.     Section 8.2  Termination Upon Insolvency.  Either Party may terminate this Agreement if, at any time, the other Party files in any court or agency pursuant to any statute or regulation of any state, country or jurisdiction, a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee of that Party or of its assets, or if such other Party proposes a written agreement of composition or extension of its debts, or if such other Party will be served with an involuntary petition against it, filed in any insolvency proceeding, and such petition will not be dismissed within 60 days after the filing thereof, or if such other Party will propose or be a party to any dissolution or liquidation, or if such other Party will make an assignment for the benefit of its creditors. 12 --------------------------------------------------------------------------------     Section 8.3  Rights in Bankruptcy.  All rights and licenses granted under or pursuant to this Agreement by Isis or OncoGenex are, and will otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code, licenses of rights to "intellectual property" as defined under Section 101 of the United States Bankruptcy Code. The Parties agree that the Parties, as licensees of such rights under this Agreement, will retain and may fully exercise all of their rights and elections under the United States Bankruptcy Code. The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against a Party under the United States Bankruptcy Code, the Party hereto that is not a Party to such proceeding will be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, which, if not already in the non-subject Party's possession, will be promptly delivered to it (a) upon any such commencement of a bankruptcy proceeding upon the non-subject Party's written request therefor, unless the Party subject to such proceeding elects to continue to perform all of its obligations under this Agreement or (b) if not delivered under clause (a) above, following the rejection of this Agreement by or on behalf of the Party subject to such proceeding upon written request therefor by the non-subject Party.     Section 8.4  Consequences of Expiration or Termination.       8.4.1  Licenses.  Upon expiration of the Term of this Agreement in accordance with Section 8.1 and payment of all amounts owed pursuant to this Agreement, the licenses granted by Isis to OncoGenex, and by OncoGenex to Isis, hereunder will terminate.     8.4.2  Return of Information and Materials.  Upon expiration of this Agreement pursuant to Section 8.1 or upon termination of this Agreement in its entirety by either Party pursuant to this Article 8, each Party, at the request of the other Party, will return all data, files, records and other materials in its possession or control relating to such other Party's Technology, or containing or comprising such other Party's Information and Inventions or other Confidential Information and, in each case, to which the returning Party does not retain rights hereunder (except one copy of which may be retained for archival purposes).     Section 8.5  Accrued Rights; Surviving Obligations.       8.5.1  Accrued Rights.  Termination or expiration of this Agreement for any reason will be without prejudice to any rights or financial compensation that will have accrued to the benefit of a Party prior to such termination or expiration. Such termination or expiration will not relieve a Party from obligations that are expressly indicated to survive the termination or expiration of this Agreement.     8.5.2  Survival.  Articles 5, 6, 10, 11 and 12 and Sections 7.1, 7.2.3, 7.3.1(a), 7.3.1(d), 7.2.4, 7.2.5, 7.3.2, and 7.5 of this Agreement and this Section 8.5 will survive expiration or termination of this Agreement for any reason. ARTICLE 9— MATERIAL BREACH OF THIS AGREEMENT     Section 9.1  Material Breach.  Failure by a Party to comply with any of its material obligations contained herein will entitle the Party not in default to give to the defaulting Party notice specifying the nature of the material breach, requiring the defaulting Party to make good or otherwise cure such default, and stating its intention to trigger the provisions of Section 9.2 if such default is not cured. If such default is not cured within 90 days after the receipt of such notice (or, if such default cannot be cured within such 90-day period, if the Party in default does not commence actions to cure such default within such period and thereafter diligently continue such actions or if such default is not otherwise cured within 90 days after the receipt of such notice), the Party not in default will be entitled, without prejudice to any of its other rights conferred on it by this Agreement, and in addition to any other remedies available to it under Section 12.6 as remedy for the breach, to continue to develop or 13 -------------------------------------------------------------------------------- commercialize the Product independently of the defaulting Party in accordance with Section 9.2 hereof; provided, however, that in the event of a good faith dispute with respect to the existence of a material breach, the 90-day cure period will be stayed until such time as the dispute is resolved pursuant to Section 12.6 hereof.     Section 9.2  Consequences of Material Breach.  If a Party has not remedied the material breach within the time period allowed in accordance with Section 9.1, then the Party not in default may elect, by notice to the defaulting Party, to continue to develop or commercialize the Product independently of the defaulting Party in accordance with this section.     9.2.1  Material Breach During Performance of Initial Project Plan.  If an uncured material breach has occurred on or before the completion of the Initial Project Plan, and such material breach remains uncured under the terms of Section 9.1, the defaulting Party will be deemed to have elected to discontinue its participation in the Collaboration in accordance with the terms of Section 2.3.4, in the case of OncoGenex, or Section 2.3.5, in the case of Isis, and the terms of such section will apply to the Parties.     9.2.2  Material Breach After Performance of Initial Project Plan.  If an uncured material breach has occurred at any point after the Initial Project Plan has been completed, the defaulting Party will be deemed to have elected to discontinue its participation in the Collaboration, and the Party not in default may continue development or commercialization of the Product independently of the defaulting Party. Upon such discontinuation of performance by the defaulting Party, the Party not in default shall retain any licenses granted to it in Section 4.1, including the right to sublicense. The Party not in default will pay the defaulting Party a royalty as agreed by the parties or as established by arbitrator in accordance with Section 12.6.3. The defaulting Party will transfer to the non-defaulting Party all information relating to the Product as may be necessary to enable the non-defaulting Party to practice the licenses granted in Section 4.1, including, but not limited to, summaries of clinical trials, rights to all foreign-equivalent INDs and NDAs filed with respect to the Product in such country and all drug dossiers and master files with respect thereto. The defaulting Party will have no future expense obligations under this Agreement. ARTICLE 10— INDEMNIFICATION AND INSURANCE     Section 10.1  Indemnification of Isis.  OncoGenex will indemnify Isis, and their respective directors, officers, employees and agents, and defend and hold each of them harmless, from and against any and all losses, damages, liabilities, costs and expenses (including reasonable attorneys' fees and expenses) but only to the extent arising from or occuring as a result of any and all liability suits, investigations, claims or demands by a Third Party (collectively, "Losses") arising from or occurring as a result of or in connection with (a) any material breach by OncoGenex of this Agreement, or (b) the gross negligence or willful misconduct on the part of OncoGenex or its licensees or sublicensees in performing any activity contemplated by this Agreement, except for those Losses for which Isis has an obligation to indemnify OncoGenex pursuant to Section 10.2, as to which Losses each Party will indemnify the other to the extent of their respective liability for the Losses.     Section 10.2  Indemnification of OncoGenex.  Isis will indemnify OncoGenex, and their respective directors, officers, employees and agents, and defend and save each of them harmless, from and against any and all Losses arising from or occurring as a result of or in connection with (a) any material breach by Isis of this Agreement, or (b) the gross negligence or willful misconduct on the part of Isis or its licensees or sublicensees in performing any activity contemplated by this Agreement, except for those Losses for which OncoGenex has an obligation to indemnify Isis pursuant to Section 10.1, as to which Losses each Party will indemnify the other to the extent of their respective liability for the Losses. 14 --------------------------------------------------------------------------------     Section 10.3  Indemnification Procedure.       10.3.1  Notice of Claim.  The indemnified Party will give the indemnifying Party prompt written notice (an "Indemnification Claim Notice") of any claim upon which such indemnified Party intends to base a request for indemnification under Section 10.1 or Section 10.2, but in no event will the indemnifying Party be liable for any losses that result from any delay in providing such notice. Each Indemnification Claim Notice must contain a description of the claim and the nature and amount of such loss (to the extent that the nature and amount of such loss are known at such time). The indemnified Party will furnish promptly to the indemnifying Party copies of all papers and official documents received in respect of any claim or losses. All indemnification claims in respect of a Party, its Affiliates or their respective directors, officers, employees and agents (collectively, the "Indemnitees" and each an "Indemnitee") will be made solely by such Party to this Agreement (the "Indemnified Party").     10.3.2  Third Party Claims.  The obligations of an indemnifying Party under this Article 10 with respect to losses arising from claims of any Third Party that are subject to indemnification as provided for in Section 10.1 or 10.2 (a "Third Party Claim") will be governed by and be contingent upon the following additional terms and conditions:     (a)  Control of Defense.  At its option, the indemnifying Party may assume the defense of any Third Party Claim by giving written notice to the Indemnified Party within 30 days after the indemnifying Party's receipt of an Indemnification Claim Notice. The assumption of the defense of a Third Party Claim by the indemnifying Party will not be construed as an acknowledgment that the indemnifying Party is liable to indemnify any Indemnitee in respect of the Third Party Claim, nor will it constitute a waiver by the indemnifying Party of any defenses it may assert against any Indemnitee's claim for indemnification. Upon assuming the defense of a Third Party Claim, the indemnifying Party may appoint as lead counsel in the defense of the Third Party Claim any legal counsel selected by the indemnifying Party. In the event the indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party will immediately deliver to the indemnifying Party all original notices and documents (including court papers) received by any Indemnitee in connection with the Third Party Claim. Should the indemnifying Party assume the defense of a Third Party Claim, the indemnifying Party will not be liable to the Indemnified Party or any other Indemnitee for any legal expenses subsequently incurred by such Indemnified Party or other Indemnitee in connection with the analysis, defense or settlement of the Third Party Claim. In the event that it is ultimately determined that the indemnifying Party is not obligated to indemnify, defend or hold harmless an Indemnitee from and against the Third Party Claim, the Indemnified Party will reimburse the indemnifying Party for any and all costs and expenses (including attorneys' fees and costs of suit) and any Losses incurred by the indemnifying Party in its defense of the Third Party Claim with respect to such Indemnitee.     (b)  Right to Participate in Defense.  Without limiting Section 10.3.2(a), any Indemnitee will be entitled to participate in, but not control, the defense of such Third Party Claim and to employ counsel of its choice for such purpose; provided, however, that such employment will be at the Indemnitee's own expense unless (i) the employment thereof has been specifically authorized by the indemnifying Party in writing, or (ii) the indemnifying Party has failed to assume the defense and employ counsel in accordance with Section 10.3.2(a) (in which case the Indemnified Party will control the defense).     (c)  Settlement.  With respect to any Losses relating solely to the payment of money damages in connection with a Third Party Claim and that will not result in the Indemnitee's becoming subject to injunctive or other relief or otherwise adversely affect the business of the Indemnitee in any manner, and as to which the indemnifying Party will have acknowledged in writing the obligation to indemnify the Indemnitee hereunder, the indemnifying Party will have the sole right to consent to the entry of any judgment, enter into any settlement or 15 -------------------------------------------------------------------------------- otherwise dispose of such loss, on such terms as the indemnifying Party, in its sole discretion, will deem appropriate. With respect to all other losses in connection with Third Party Claims, where the indemnifying Party has assumed the defense of the Third Party Claim in accordance with Section 10.3.2(a), the indemnifying Party will have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such loss provided it obtains the prior written consent of the Indemnified Party (which consent will not be unreasonably withheld or delayed). The indemnifying Party will not be liable for any settlement or other disposition of a loss by an Indemnitee that is reached without the written consent of the indemnifying Party. Regardless of whether the indemnifying Party chooses to defend or prosecute any Third Party Claim, no Indemnitee will admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the prior written consent of the indemnifying Party.     (d)  Cooperation.  Regardless of whether the indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party will, and will cause each other Indemnitee to, cooperate in the defense or prosecution thereof and will furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith. Such cooperation will include access during normal business hours afforded to the indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making Indemnitees and other employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, and the indemnifying Party will reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith.     (e)  Expenses.  Except as provided above, the reasonable and verifiable costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection with any claim will be reimbursed on a calendar quarter basis by the indemnifying Party, without prejudice to the indemnifying Party's right to contest the Indemnified Party's right to indemnification and subject to refund in the event the indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party.     Section 10.4  Insurance.  Each Party will have and maintain such types and amounts of liability insurance as is normal and customary in the industry generally for parties similarly situated, and will upon request provide the other Party with a certificate of insurance. Each party will promptly notify the other Party of any material change in insurance coverage or lapse in coverage in that regard. ARTICLE 11— REPRESENTATIONS AND WARRANTIES     Section 11.1  Representations, Warranties and Covenants.  Each Party hereby represents, warrants and covenants to the other Party as of the Effective Date as follows:     11.1.1  Corporate Authority.  Such Party (a) has the power and authority and the legal right to enter into this Agreement and perform its obligations hereunder, and (b) has taken all necessary action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on behalf of such Party and constitutes a legal, valid and binding obligation of such Party and is enforceable against it in accordance with its terms subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity, whether enforceability is considered a proceeding at law or equity. 16 --------------------------------------------------------------------------------     11.1.2  Litigation.  Such Party is not aware of any pending or threatened litigation (and has not received any communication) that alleges that such Party's activities related to this Agreement have violated, or that by conducting the activities as contemplated herein such Party would violate, any of the intellectual property rights of any other party.     11.1.3  Consents, Approvals, etc.  All necessary consents, approvals and authorizations of all Regulatory Authorities and other parties required to be obtained by such Party in connection with the execution and delivery of this Agreement and the performance of its obligations hereunder have been obtained.     11.1.4  Conflicts.  The execution and delivery of this Agreement and the performance of such Party's obligations hereunder (a) do not conflict with or violate any requirement of Applicable Law or any provision of the articles of incorporation, bylaws or any similar instrument of such Party, as applicable, in any material way, and (b) do not conflict with, violate, or breach or constitute a default or require any consent under, any contractual obligation or court or administrative order by which such Party is bound.     11.1.5  Debarment.  No such Party nor any of its Affiliates has been debarred or is subject to debarment and neither such Party nor any of its Affiliates will use in any capacity, in connection with the services to be performed under this Agreement, any party who has been debarred pursuant to Section 306 of the Federal Food, Drug, and Cosmetic Act, as amended, or who is the subject of a conviction described in such section. Each Party will inform the other Party in writing immediately if it or any party who is performing services hereunder is debarred or is the subject of a conviction described in Section 306, or if any action, suit, claim, investigation or legal or administrative proceeding is pending or, to such Party's knowledge, is threatened, relating to the debarment or conviction of such Party or any party performing services hereunder.     Section 11.2  Additional Representations and Warranties of Isis.  Isis represents and warrants to OncoGenex that Isis is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has full corporate power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and as it is contemplated to be conducted by this Agreement. Isis further represents and warrants to OncoGenex that any Product Isis provides to OncoGenex for pre-clinical and clinical use will be in compliance with FDA regulatory requirements for use in humans.     Section 11.3  Additional Representations and Warranties of OncoGenex.  OncoGenex represents and warrants to Isis that OncoGenex is a corporation duly organized, validly existing and in good standing under the laws of Canada, and has full corporate power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and as it is contemplated to be conducted by this Agreement.     Section 11.4  DISCLAIMER OF WARRANTY.  EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTIONS 11.1, 11.2 AND 11.3, ONCOGENEX AND ISIS MAKE NO REPRESENTATIONS AND GRANT NO WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND ONCOGENEX AND ISIS EACH SPECIFICALLY DISCLAIM ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES. 17 -------------------------------------------------------------------------------- ARTICLE 12— MISCELLANEOUS     Section 12.1  Force Majeure.  Neither Party will be held liable or responsible to the other Party or be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when such failure or delay is caused by or results from events beyond the reasonable control of the non-performing Party, including fires, floods, embargoes, shortages, epidemics, quarantines, war, acts of war (whether war be declared or not), insurrections, riots, civil commotion, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority. The non-performing Party will notify the other Party of such force majeure within ten (10) days after such occurrence by giving written notice to the other Party stating the nature of the event, its anticipated duration, and any action being taken to avoid or minimize its effect. The suspension of performance will be of no greater scope and no longer duration than is necessary and the non-performing Party will use Commercially Reasonable Efforts to remedy its inability to perform; provided, however, that in the event the suspension of performance continues for one-hundred and eighty (180) days after the date of the occurrence, the Parties will meet to discuss in good faith how to proceed in order to accomplish the goals of the Collaboration outlined in this Agreement.     Section 12.2  Subcontractors.  Each Party will have the right, subject to the prior written consent of the Operating Committee, such consent not to be unreasonably withheld or delayed, to subcontract any of its research, development, manufacture and/or commercialization activities to a Third Party, provided that it furnishes the other Party with advanced written notice thereof, which notice will specify the work to be subcontracted, and obtains a written undertaking from the subcontractor that it will be subject to the applicable terms and conditions of this Agreement, including the provisions of Article 6. If a Party wishes to subcontract any of its research, development, manufacturing or commercialization activities to a Third Party and the Operating Committee consents, the other Party may submit a bid to the subcontracting Party to perform such work. The subcontracting Party will use Commercially Reasonable Efforts to enter into an agreement with the bidder that is best able to meet the Collaboration's requirements, taking into consideration such factors as price, timing, quality, capacity, quantity, reliability and reputation, provided that such bidder is reasonably acceptable to the Operating Committee. Unless the Parties agree otherwise, the subcontracting Party will remain solely liable for the performance of its research, development, manufacture or commercialization activities by its subcontractor; and further, the subcontracting Party will remain solely responsible for all costs and expenses associated with its use of subcontractor(s).     Section 12.3  Assignment.  Without the prior written consent of the other Party hereto, neither Party will sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties hereunder; provided, however, that either Party hereto may assign or transfer this Agreement or any of its rights or obligations hereunder without the consent of the other Party to any Third Party with which it has merged or consolidated, or to which it has transfered all or substantially all of its assets to which this Agreement relates if in any such event the Third Party assignee or surviving entity assumes in writing all of the assigning Party's obligations under this Agreement. Any purported assignment or transfer in violation of this Section will be void ab initio and of no force or effect.     Section 12.4  Severability.  If any provision of this Agreement is held to be illegal, invalid or unenforceable by a court of competent jurisdiction, such adjudication shall not affect or impair, in whole or in part, the validity, enforceability, or legality of any remaining portions of this Agreement. All remaining portions shall remain in full force and effect as if the original Agreement had been executed without the invalidated, unenforceable or illegal part. 18 --------------------------------------------------------------------------------     Section 12.5  Governing Law.  This Agreement will be governed by and construed in accordance with the laws of the Province of British Columbia without reference to any rules of conflicts of laws.     Section 12.6  Dispute Resolution.       12.6.1  General.  The Parties will negotiate in good faith and use reasonable efforts to settle any dispute, controversy or claim arising from or related to this Agreement or the breach thereof in accordance with Section 3.2 hereof. If the Parties do not fully settle, and a Party wishes to pursue the matter, each such dispute, controversy or claim will be finally resolved by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA"), and judgment on the arbitration award may be entered in any court having jurisdiction thereof. The arbitration will be conducted by a panel of three persons experienced in the pharmaceutical business: within 30 days after initiation of arbitration, each party will select one person to act as arbitrator and the two party-selected arbitrators will select a third arbitrator within 30 days of their appointment. If the arbitrators selected by the parties are unable or fail to agree upon the third arbitrator, the third arbitrator will be appointed by the AAA. No individual shall be appointed to arbitrate a dispute pursuant to this Agreement unless he or she agrees in writing to be bound by the provisions of this Section 12.6. The place of arbitration will be Seattle, Washington. Either Party may apply to the arbitrators for interim injunctive relief until the arbitration award is rendered or the controversy is otherwise resolved.     12.6.2  Disputes Regarding Unilateral Development or Sublicensing Terms.  If the Parties cannot agree on the terms under which one Party unilaterally, or a Third Party sublicensee, can develop and commercialize the Product in accordance with Section 2.4.3, the arbitrators will set a fair value for any disputed terms, taking into consideration valuation factors including but not limited to: the Proportionate Share of the Parties; stage of development of the Product including the clinical trials which have been completed and which would need to be completed before approval by the Regulatory Authority; the requirement for additional Third Party licenses for the commercialization of the Product; market potential for the Product including the size of the target market(s), the availability, effectiveness and cost of alternative treatments, and the life of the Patents relating to the Product; likelihood of the Product receiving Regulatory Approval; and, the time and resources required to receive Regulatory Approval and begin marketing of the Product.     12.6.3  Disputes Regarding Material Breach.  If the Parties are in dispute as to whether one party is in material breach of this Agreement, then the arbitrators will first determine if material breach has in fact occurred, and if so, will as part of the same arbitration, determine a royalty to be paid by the non-defaulting Party to the defaulting Party if the non-defaulting Party elects to unilaterally develop and commercialize the Product, taking into consideration the factors set forth in Section 12.6.2, and will award damages to the non-defaulting Party, in the form of off-set royalties or otherwise, to account for the damages to the non-defaulting Party from the breach, and to account for the defaulting Party's contribution to the Product in view of the breach.     12.6.4  Costs and Expenses.  Except as expressly provided herein, each Party will bear its own costs and expenses and attorneys' fees and an equal share of the arbitrators' and any administrative fees of arbitration. Notwithstanding the foregoing, if a Party has been found to be in material breach of this Agreement, the defaulting Party will be responsible for both Parties' costs and expenses (including the costs of the arbitrators and any administrative fees of arbitration) and the reasonable attorneys' fees of the non-defaulting Party.     12.6.5  Procedure.  Except to the extent necessary to confirm an award or as may be required by law, neither a Party nor an arbitrator may disclose the existence, content, or results of an arbitration without the prior written consent of both Parties. In no event will an arbitration be initiated after the date when commencement of a legal or equitable proceeding based on the 19 -------------------------------------------------------------------------------- dispute, controversy or claim would be barred by the applicable Province of British Columbia statute of limitations.     12.6.6  Speedy Resolution.  The Parties intend, and shall take all reasonable action as is necessary or desirable to ensure, that there be a speedy resolution to any dispute which becomes the subject of arbitration, and the arbitrators shall conduct the arbitration so as to resolve the dispute as expeditiously as possible.     12.6.7  Awards.  All awards shall be in writing and shall state reasons. Executed copies of all awards shall be delivered by the arbitrators to the Parties as soon as is reasonably possible. All awards of the arbitrators shall be final and binding on the Parties, and there shall be no appeal of any such award whatsoever. The Parties undertake to satisfy any award without delay.     Section 12.7  Notices.  All notices or other communications that are required or permitted hereunder will be in writing and delivered personally with acknowledgement of receipt, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier as provided herein), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:     If to OncoGenex, to: OncoGenex Technologies Inc. Suite 400, 609 - 14th Street N.W. Calgary, Alberta T2N 2A1 Attention: Scott D. Cormack, President Facsimile: 403-283-6753 with a copy to: [***]     If to Isis, to: Isis Pharmaceuticals, Inc. 2292 Faraday Avenue Carlsbad, California 92008 Attention: Executive Vice President Facsimile: (760) 603-4650 with a copy to: Attention: General Counsel Facsimile: (760) 603-2707 or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such communication will be deemed to have been given (i) when delivered, if personally delivered or sent by facsimile on a Business Day, (ii) on the Business Day after dispatch, if sent by nationally-recognized overnight courier, and (iii) on the third business day following the date of mailing, if sent by mail. It is understood and agreed that this Section 12.7 is not intended to govern the day-to-day business communications necessary between the Parties in performing their duties, in due course, under the terms of this Agreement.     Section 12.8  Entire Agreement; Modifications.  This Agreement sets forth and constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof and all prior agreements, understanding, promises and representations, whether written or oral, with respect thereto are superseded hereby. Each Party confirms that it is not relying on any representations or warranties of the other Party except as specifically set forth herein. No amendment, modification, 20 -------------------------------------------------------------------------------- release or discharge will be binding upon the Parties unless in writing and duly executed by authorized representatives of both Parties.     Section 12.9  Relationship of the Parties.  It is expressly agreed that the Parties will be independent contractors of one another and that the relationship between the Parties will not constitute a partnership, joint venture or agency. Neither Party nor the Operating Committee will have the authority to make any statements, representations or commitments of any kind, or to take any action, which will be binding on the other, without the prior written consent of the other to do so. All persons employed by a Party will be employees of such Party and not of the other Party and all costs and obligations incurred by reason of any such employment will be for the account and expense of such Party.     Section 12.10  Waiver.  Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver will be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. The waiver by either Party hereto of any right hereunder or of the failure to perform or of a breach by the other Party will not be deemed a waiver of any other right hereunder or of any other breach or failure by said other Party whether of a similar nature or otherwise.     Section 12.11  Counterparts.  This Agreement may be executed in two (2) or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.     Section 12.12  No Benefit to Third Parties.  The representations, warranties, covenants and agreements set forth in this Agreement are for the sole benefit of the Parties hereto and their successors and permitted assigns, and they will not be construed as conferring any rights on any other parties.     Section 12.13  Further Assurance.  Each Party will duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including the filing of such assignments, agreements, documents and instruments, as may be necessary or as the other Party may reasonably request in connection with this Agreement or to carry out more effectively the provisions and purposes, or to better assure and confirm unto such other Party its rights and remedies under this Agreement.     Section 12.14  References.  Unless otherwise specified, (a) references in this Agreement to any Article, Section, Schedule or Exhibit will mean references to such Article, Section, Schedule or Exhibit of this Agreement, (b) references in any section to any clause are references to such clause of such section, and (c) references to any agreement, instrument or other document in this Agreement refer to such agreement, instrument or other document as originally executed or, if subsequently varied, replaced or supplemented from time to time, as so varied, replaced or supplemented and in effect at the relevant time of reference thereto.     Section 12.15  Construction.  Except where the context otherwise requires, wherever used, the singular will include the plural, the plural the singular, the use of any gender will be applicable to all genders and the word "or" is used in the inclusive sense (and/or). The captions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement. The term "including" as used herein will mean including, without limiting the generality of any description preceding such term. The language of this Agreement will be deemed to be the language mutually chosen by the Parties and no rule of strict construction will be applied against either Party hereto. Appendices to this Agreement, or added hereto according to the terms of this Agreement, are made part of this Agreement. The remainder of this page intentionally left blank. 21 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first above written. ONCOGENEX TECHNOLOGIES INC.   ISIS PHARMACEUTICALS, INC. Per:   /s/ Scott D. Cormack --------------------------------------------------------------------------------   Per:   /s/ B. Lynne Parshall -------------------------------------------------------------------------------- Scott D. Cormack, President & CEO   B. Lynne Parshall Executive Vice President and CFO 22 -------------------------------------------------------------------------------- APPENDIX A Definitions     "Affiliate" of a party means any other party that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such first party. For purposes of this definition only, "control" and, with correlative meanings, the terms "controlled by" and "under common control with" will mean (a) the possession, directly or indirectly, of the power to direct the management or policies of a party, whether through the ownership of voting securities or by contract relating to voting rights or corporate governance, and (b) the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities or other ownership interest of a party; provided that, if local law restricts foreign ownership, control will be established by direct or indirect ownership of the maximum ownership percentage that may, under such local law, be owned by foreign interests.     "Applicable Law" means the applicable laws, rules, and regulations, including any rules, regulations, guidelines, or other requirements of the Regulatory Authorities, that may be in effect from time to time.     "Business Day" means any day, other than Saturday, Sunday or any statutory holiday in the Province of British Columbia or the United States.     "Calendar Year" means each successive period of 12 months commencing on January 1 and ending on December 31.     "Clusterin" means the gene target which is also referred to as Testosterone Repressed Prostatic Message -2 (TRPM-2), and Sulphated Glycoprotein-2 (SGP-2).     "Collaboration Activities" means the responsibilities of the Parties under this Agreement to research, develop, manufacture, and commercialize the Product.     "Commercially Reasonable Efforts" means, with respect to the research, development, manufacture or commercialization of the Product, efforts and resources commonly used in the biotechnology industry for products of similar commercial potential at a similar stage in its lifecycle, taking into consideration their safety and efficacy, cost to develop, priority in relation to other products under development by the other Party, the competitiveness of alternative products, proprietary position, the likelihood of regulatory approval, profitability, and all other relevant factors.     "Confidential Information" means all information and know-how and any tangible embodiments thereof provided by or on behalf of one Party to the other Party either in connection with the discussions and negotiations pertaining to this Agreement or in the course of performing this Agreement, including data; knowledge; practices; processes; ideas; research plans; engineering designs and drawings; research data; manufacturing processes and techniques; scientific, manufacturing, marketing and business plans; and financial and personnel matters relating to the disclosing Party or to its present or future products, sales, suppliers, customers, employees, investors or business. For purposes of this Agreement, notwithstanding the Party that disclosed such information or know-how, all information or know-how of OncoGenex shall be Confidential Information of OncoGenex, and all information and know-how of Isis shall be Confidential Information of Isis. Notwithstanding the foregoing, information or know-how of a Party shall not be deemed Confidential Information for purposes of this Agreement if such information or know-how:     (a) was already known to the receiving Party, other than under an obligation of confidentiality or non-use, at the time of disclosure to such receiving Party;     (b) was generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or was otherwise part of the public domain, at the time of its disclosure to, or, with respect to know-how, discovery or development by, such receiving Party; --------------------------------------------------------------------------------     (c) became generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or otherwise became part of the public domain, after its disclosure to such receiving Party through no fault of the recieving Party;     (d) was disclosed to such receiving Party, other than under an obligation of confidentiality or non-use, by a Third Party who had no obligation to the Party that Controls such information and know-how not to disclose such information or know-how to others; or     (e) was independently discovered or developed prior to disclosure by such receiving Party, as evidenced by their written records, without the use of Confidential Information belonging to the Party that Controls such information and know-how.     Specific aspects or details of Confidential Information shall not be deemed to be within the public domain or in the possession of a Party merely because the Confidential Information is embraced by more general information in the public domain or in the possession of such Party. Further, any combination of Confidential Information shall not be considered to be in the public domain or in the possession of a Party merely because individual elements of such Confidential Information are in the public domain or in the possession of such Party unless the combination and its principles are in the public domain or in the possession of such Party.     "Control" means, with respect to any Patent or other intellectual property right, possession of the right (whether by ownership, license or otherwise), to assign, or grant a license, sublicense or other right to or under, such Patent or right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party.     "FDA" means the United States Food and Drug Administration and any successor agency thereto.     "FTE" means the equivalent of the work of one employee full time for one year (consisting of at least a total of [***] hours per year (excluding vacations and holidays) of work on or directly related to the Collaboration), carried out by an Isis employee or Third Party mutually agreed upon by the Parties. For the purposes of Appendix 2.3.1, the FTE rate will be (i) [***] (U.S.) per FTE for any of the following activities: drug substance manufacturing; analytical chemistry; process chemistry; formulation; raw material ordering and handling; quality control; or manufacturing technology transfer; and (ii) [***] (U.S.) per FTE for any of the following activities: toxicology; pharmacokinetics/metabolism; regulatory; clinical development; or data management. These FTE rates will be adjusted upward on a Calendar Year basis commencing January 1, 2002 (and on January 1 of each year thereafter during the Term of this Agreement) by a factor which reflects changes in the Consumer Price Index for San Diego, California as reported on that date in each applicable year during the Term of the Agreement when compared to the comparable statistic for that date in the preceding year.     "GAAP" means generally accepted accounting principles of the United States consistently applied.     "Improvement" means any enhancement or improvement (whether or not patentable) to the Isis Core Technology Patents, Isis Manufacturing Patents, or the OncoGenex Product Patents, that is made by either party during the Term of this Agreement.     "IND" means an investigational new drug application filed with the FDA or TPD for authorization to commence human clinical trials, and its equivalent in other countries or regulatory jurisdictions.     "Initial Project Plan" means the first Project Plan of the Collaboration, as set forth in Section 2.3.     "Isis Core Technology Patents" means Patents Controlled by Isis on the Effective Date that are necessary for the development and commercialization of the Product, but not including the Isis Manufacturing Patents.     "Isis Manufacturing Patents" means Patents Controlled by Isis on the Effective Date that claim the practice of the Isis Standard Chemistry Manufacturing Process. A–2 --------------------------------------------------------------------------------     "Isis Patent Rights" means any Patents owned or Controlled by Isis.     "Isis Standard Chemistry" means "2'MOE Gapmers" or an antisense phosphorothioate oligonucleotide of 15-30 nucleotides wherein all of the backbone linkages are modified by adding a sulfur at the non-bridging oxygen (phosphorothioate) and a stretch of at least 10 consecutive nucleotides remain unmodified (deoxy sugars) and the remaining nucleotides contain an O'-methyl O'-ethyl substitution at the 2' position (MOE).     "Isis Standard Chemistry Manufacturing Process" means the manufacturing process used by Isis as of the Effective Date to manufacture products comprising Isis Standard Chemistry, represented by the batch record for [***]. Manufacturing for this purpose includes synthesis, purification and analysis.     "Joint Patents" means all Patents that claim or disclose Joint Technology.     "Joint Technology" means any and all (a) inventions conceived, discovered, developed or otherwise made (as determined in accordance with the rules of inventorship under United States patent laws to establish authorship, inventorship or ownership), jointly by employees or agents of Isis and employees or agents of OncoGenex or, to the extent permitted, by one Party and a sublicensee of the other Party or both Parties (as the case may be), in connection with the work conducted under this Agreement, whether or not patented or patentable.     "Licensing Revenue" means all revenues, receipts, monies, and the fair market value of all other consideration directly or indirectly collected or received whether by way of cash, or credit or any barter, benefit, advantage, or concession received by a Party pursuant to each sublicense agreement relating to the Product including, without limitation, license fees, royalties, milestone payments and the fair market value of equities received, as determined on the date of receipt thereof.     "Net Sales" means the gross invoice price of the Product sold by either Party and sublicensees to a Third Party which is not a sublicensee of the selling party (unless such sublicensee is the end user of the Product, in which case the amount billed therefor shall be deemed to be the amount that would be billed to a Third Party in an arm's-length transaction) for sales of such Product to such end users less the following items, as allocable to such Product (if not previously deducted from the amount invoiced): (i) trade discounts, credits or allowances, (ii) credits or allowances additionally granted upon returns, rejections or recalls (except where any such recall arises out of the Party or its sublicensee's gross negligence, willful misconduct or fraud), (iii) freight, shipping and insurance charges, (iv) taxes, duties or other governmental tariffs (other than income taxes) and (v) government mandated rebates.     "Net Licensing Revenue" means the amount equal to any Licensing Revenue less Third Party Payments.     "OncoGenex Patent Rights" means any Patents owned or Controlled by OncoGenex.     "OncoGenex Product Patents" means Patents Controlled by OncoGenex on the Effective Date that claim an antisense inhibitor of Clusterin or a method of using an antisense inhibitor of Clusterin.     "OGX-011" means an antisense inhibitor of Clusterin having the sequence [***] with phosphorothioate linkages throughout and in which bases [***] and [***] contain 2'-O-methoxyethyl sugar modifications, also referred to as ISIS 112989.     "Patents" shall include (x) all U.S. patents and patent applications, (y) any substitutions, divisions, continuations, continuations-in-part, reissues, renewals, registrations, confirmations, re-examinations, extensions, supplementary protection certificates and the like, and any provisional applications, of any such patents or patent applications, and (z) any foreign or international equivalent of any of the foregoing.     "Product" means an intravenous or subcutaneous pharmaceutical preparation, excluding encapsulation technology controlled by Isis, containing as the sole active pharmaceutical ingredient A–3 -------------------------------------------------------------------------------- OGX-011. For clarity, the product may be used in association with other products such as chemotherapy, hormone ablation therapy and radiation therapy and the immediately preceding sentence does not limit such intended use.     "Product-Specific Technology" means any discovery, device, process, formulation, or Improvement, whether or not patented or patentable, which is made solely by Isis or OncoGenex, or jointly by Isis and OncoGenex, during the Term of this Agreement, and the application of which has utility only with respect to the Product.     "Product-Specific Technology Patents" means all Patents that disclose or claim Product-Specific Technology.     "Project Plan" means any development plan for Collaboration Activities subsequent to the Initial Project Plan, including the costs associated with such development plan and the proposed distribution of such costs between the Parties.     "Proportionate Share" means the relative ownership of the Product and relative sharing of expenses and revenue with respect to the Product between the Parties in relation to each other.     "Regulatory Approval" means any and all approvals (including pricing and reimbursement approvals), licenses, registrations or authorizations of any Regulatory Authority, necessary for the development and commercialization of the Product in a country, including any (a) approval for the Product (including any INDs, and supplements and amendments thereto); (b) pre- and post-approval marketing authorizations (including any prerequisite manufacturing approval or authorization related thereto); (c) labeling approval; and (d) technical, medical and scientific licenses.     "Regulatory Authority" means any applicable government entities regulating or otherwise exercising authority with respect to the development and commercialization of the Product.     "Regulatory Documentation" means all applications, registrations, licenses, authorizations and approvals (including all Regulatory Approvals), all correspondence submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority), all supporting documents and all clinical studies and tests, including the manufacturing batch records, relating to the Product, and all data contained in any of the foregoing, including all regulatory drug lists, advertising and promotion documents, adverse event files and complaint files.     "Revenue" means all revenues, receipts, monies, and the fair market value of all other consideration directly or indirectly collected or received whether by way of cash or credit or any barter, benefit, advantage, or concession received by any Party relating to the sale or any other exploitation of the Product.     "Technology" means Isis Patent Rights, the OncoGenex Patent Rights, the Product-Specific Technology Patents, Joint Patents and/or the Joint Technology, as applicable.     "Third Party" means any party other than Isis or OncoGenex.     "Third Party Payments" means royalties, milestones, and other payments owing to Third Parties, including payments as set forth in Section 5.2.1.     "TPD" means the Therapeutics Products Directorate, Health Products and Food Branch, Health Canada, and any successor agency thereto. A–4 -------------------------------------------------------------------------------- APPENDIX 2.3.1 INITIAL PROJECT PLAN     [***]     CONFIDENTIAL TREATMENT REQUESTED -------------------------------------------------------------------------------- QuickLinks Exhibit 10.1 COLLABORATION AND CO-DEVELOPMENT AGREEMENT ARTICLE 1—DEFINITIONS ARTICLE 2— SCOPE OF COLLABORATION; COLLABORATION ACTIVITIES ARTICLE 3— OPERATION OF THE COLLABORATION ARTICLE 4— GRANT OF RIGHTS ARTICLE 5— FINANCIAL PROVISIONS ARTICLE 6— CONFIDENTIALITY ARTICLE 7— INTELLECTUAL PROPERTY ARTICLE 8— TERM AND TERMINATION ARTICLE 9— MATERIAL BREACH OF THIS AGREEMENT ARTICLE 10— INDEMNIFICATION AND INSURANCE ARTICLE 11— REPRESENTATIONS AND WARRANTIES ARTICLE 12— MISCELLANEOUS APPENDIX A Definitions APPENDIX 2.3.1 INITIAL PROJECT PLAN

EXECUTION COPY CREDIT AGREEMENT     AMONG     ASTEC INDUSTRIES, INC. and ASTEC FINANCIAL SERVICES, INC.     as Borrowers,       THE LENDERS NAMED HEREIN, and BANK ONE, NA     as Agent     DATED AS OF     September 10, 2001 SUNTRUST BANK, as Syndication Agent AMSOUTH BANK, as Co-Agent TABLE OF CONTENTS Page ARTICLE I DEFINITIONS ARTICLE II THE CREDITS 2 2.1. Revolving Commitment. 19 2.1.1 Tranche A Commitment 19 2.1.2 Tranche B Commitment 19 2.1.3 Limitations on Obligations 19 2.2. Loans. 20 2.2.1 Ratable Loans; Types of Advances 20 2.2.2 Minimum Amount of Each Advance 20 2.2.3 Method of Selecting Types and Interest Periods for New Advances 20 2.2.4 Conversion and Continuation of Outstanding Advances 20 2.2.5 Changes in Interest Rate, etc 21 2.2.6 Interest Payment Dates; Interest and Fee Basis 21 2.2.7 Notification of Advances, Interest Rates, Prepayments and Commitment Reductions 22 2.2.8 Rates Applicable After Default 22 2.3. Swing Line Loans. 22 2.3.1 Making of Swing Line Loans. 22 2.3.2 Conversions of and Participations in Swing Line Loans. 23 2.4. Fees; Reductions and Increases in Aggregate Commitment. 24 2.4.1 Fees. 2425 2.4.2 Voluntary Reductions; Prepayments; Increases. 26 2.4.3 Mandatory Reductions in Aggregate Commitment. 27 2.4.4 Mandatory Reduction of Tranche B Loans 27 2.5. Method of Payment 27 2.6. Notes; Telephonic Notices   2.7. Lending Installations   2.8. Non-Receipt of Funds by the Agent   2.9. [Intentionally Omitted].   2.10. Application of Payments   2.11. Facility Letters of Credit.   2.11.1 Obligation to Issue   2.11.2 Conditions for Issuance   2.11.3 Procedure for Issuance of Facility Letters of Credit.   2.11.4 Reimbursement Obligations.   2.11.5 Participation.   2.11.6 Compensation for Facility Letters of Credit   2.11.7 Letter of Credit Collateral Account   2.11.8 Nature of Obligations.   2.11.9 Existing Letters of Credit   ARTICLE III TAXES; YIELD PROTECTION   3.1. Taxes   3.2. Yield Protection   3.3. Changes in Capital Adequacy Regulations   3.4. Availability of Types of Advances   3.5. Funding Indemnification   3.6. Lender Statements; Survival of Indemnity   ARTICLE IV CONDITIONS PRECEDENT   4.1. Initial Credit Extension   4.2. Each Credit Extension   ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BORROWERS   5.1. Corporate Existence and Standing   5.2. Authorization and Validity   5.3. No Conflict; Government Consent   5.4. Financial Statements   5.5. Material Adverse Change   5.6. Taxes   5.7. Litigation and Contingent Obligations   5.8. Subsidiaries and Affiliates   5.9. ERISA   5.10. Accuracy of Information   5.11. Regulation U   5.12. Material Agreements   5.13. Compliance With Laws   5.14. Environmental Warranties   5.15. Ownership of Properties   5.16. Investment Company Act   5.17. Public Utility Holding Company Act   5.18. Plan Assets; Prohibited Transactions   5.19. Intellectual Property   5.20. Solvency   5.21. Licenses   5.22. Pledge Agreement   5.23. Insurance   ARTICLE VI COVENANTS   6.1. Financial Reporting   6.2. Use of Proceeds   6.3. Notice of Default   6.4. Conduct of Business   6.5. Taxes   6.6. Insurance   6.7. Compliance with Laws   6.8. Maintenance of Properties   6.9. Inspection   6.10. Dividends   6.11. Indebtedness   6.12. Merger   6.13. Sale of Assets   6.14. Sale of Accounts   6.15. Sale and Leaseback   6.16. Investments and Acquisitions   6.17. Contingent Obligations   6.18. Liens   6.19. Transactions with Affiliates   6.20. Amendments to Certain Agreements   6.21. Financial Covenants.   6.21.1 Leverage Ratio   6.21.2 Consolidated Tangible Net Worth   6.21.3 Rentals   6.21.4 Fixed Charge Coverage Ratio   6.21.5 AFS Leases   6.22. Fixed Asset Expenditures   6.23. Subordinated Indebtedness   6.24. Accounting Method   6.25. Environmental Covenant   6.26. Litigation and Other Notices   6.27. Pledge of Stock of Foreign Subsidiaries   6.28. Material Subsidiaries   ARTICLE VII DEFAULTS   ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES   8.1. Acceleration.   8.2. Amendments   8.3. Preservation of Rights   ARTICLE IX GENERAL PROVISIONS   9.1. Survival of Representations   9.2. Governmental Regulation   9.3. Taxes   9.4. Headings   9.5. Entire Agreement   9.6. Several Obligations; Benefits of this Agreement   9.7. Expenses; Indemnification   9.8. Numbers of Documents   9.9. Accounting   9.10. Severability of Provisions   9.11. Nonliability of Lenders   9.12. Confidentiality   9.13. Interest Limitation   9.14. Loan Documents   9.15. Interpretation   9.16. Nonreliance   9.17. Disclosure   ARTICLE X THE AGENT   10.1. Appointment; Nature of Relationship   10.2. Powers   10.3. General Immunity   10.4. No Responsibility for Loans, Recitals, etc   10.5. Action on Instructions of Lenders   10.6. Employment of Agents and Counsel   10.7. Reliance on Documents; Counsel   10.8. Agent's Reimbursement and Indemnification   10.9. Rights as a Lender   10.10. Lender Credit Decision   10.11. Successor Agent   10.12. Notice of Default   10.13. Delegation to Affiliates   10.14. Execution of Collateral Documents   10.15. Collateral Releases   ARTICLE XI SETOFF; RATABLE PAYMENTS   11.1. Setoff   11.2. Ratable Payments   ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS   12.1. Successors and Assigns   12.2. Participations.   12.2.1 Permitted Participants; Effect   12.2.2 Voting Rights   12.2.3 Benefit of Setoff   12.3. Assignments.   12.3.1 Permitted Assignments   12.3.2 Effect; Effective Date   12.4. Dissemination of Information   12.5. Tax Treatment   ARTICLE XIII NOTICES   13.1. Giving Notice   13.2. Change of Address   ARTICLE XIV COUNTERPARTS   ARTICLE XV CHOICE OF LAW, CONSENT TO JURISDICTION, WAIVER OF JURY TRIAL   15.1. CHOICE OF LAW   15.2. CONSENT TO JURISDICTION   15.3. WAIVER OF JURY TRIAL   ARTICLE XVI ASTEC GUARANTY   16.1. Guaranty of Payment and Performance of Obligations of AFS   16.2. Additional Amounts   16.3. Waivers by Astec: Agent's and Lenders' Freedom to Act   16.4. Unenforceability of AFS Obligations Against AFS   16.5. Subrogation; Subordination   16.6. Termination   16.7. Effect of Bankruptcy   16.8. Setoff   16.9. Further Assurances   EXHIBITS  EXHIBIT A Compliance Certificate EXHIBIT B-1 Tranche A Note EXHIBIT B-2 Tranche B Note EXHIBIT B-3 Swing Line Note EXHIBIT C-1 Form of Opinion of Counsel to Astec EXHIBIT C-2 Form of Opinion of Special Canadian Counsel EXHIBIT D Pledge Agreement EXHIBIT E Assignment Agreement EXHIBIT F Borrowing Base Certificate SCHEDULES Schedule 1 Revolving Commitments/Percentages Schedule 2.11.9 Existing Letters of Credit Schedule 5.7 Litigation Schedule 5.8 Subsidiaries and Affiliates Schedule 5.14 Environmental Matters Schedule 5.15 Properties and Liens Schedule 5.19 Intellectual Property Schedule 6.11 Indebtedness CREDIT AGREEMENT This Credit Agreement (the "Agreement"), dated as of September 10, 2001, is among Astec Industries, Inc., a Tennessee corporation, Astec Financial Services, Inc., a Tennessee corporation, the financial institutions from time to time parties hereto as Lenders and Bank One, NA, a national banking association having its principal office in Chicago, Illinois, as Agent. The parties hereto agree as follows: DEFINITIONS As used in this Agreement: "Acquisition" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which any Credit Party (a) acquires any going business or all or substantially all of the assets of any firm, corporation or division thereof, whether through purchase of assets, merger or otherwise or (b) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company. "Adjusted EBITDA" means for any period EBITDA for such period calculated on a proforma basis assuming that any Acquisition occurring during such period and permitted under this Agreement occurred on and as of the first day of such period. "Advance" means a borrowing hereunder, (i) made by the Lenders on the same Borrowing Date, or (ii) converted or continued by the Lenders on the same date of conversion or continuation, consisting, in either case of the several Loans of the same Type and, in the case of Eurodollar Loans, for the same Interest Period. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "AFS" means Astec Financial Services, Inc., a Tennessee corporation and a Borrower hereunder, its successors and assigns. "Agent" means Bank One in its capacity as contractual representative of the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to Article X. "Aggregate Commitment" means $125,000,000 as such amount may be increased or reduced from time to time pursuant to the terms hereof. "Agreement" means this Credit Agreement, as it may be amended or modified and in effect from time to time. "Aggregate Tranche A Sublimit" means $125,000,000, as such amount may be increased pursuant to Section 2.4.2(b) or reduced from time to time pursuant to the terms hereof. "Aggregate Tranche B Sublimit" means $50,000,000, as such amount may be reduced from time to time pursuant to the terms hereof. "Agreement Accounting Principles" means generally accepted accounting principles as in effect from time to time, applied in a manner consistent with that used in preparing the financial statements referred to in Section 5.4. "Alternate Base Rate" means, for any day, a rate of interest per annum equal to the higher of (a) the Prime Rate for such day and (b) the sum of Federal Funds Effective Rate for such day plus 1/2% per annum. "Applicable Margin" means, with respect to the Commitment Fee, Letter of Credit Fee and each Type of Loan described below, the rate of interest per annum shown below for the range of Leverage Ratios specified below: Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Leverage Ratio < 1.5:1.0 1.5:1.0<X<2.0:1.0 2.0:1.0<X<2.25:1.0 2.25:1.0<X<2.5:1.0 2.5:1.0<X<3.0:1.0 >3.0:1.0 Eurodollar Advances 1.00% 1.125% 1.25% 1.375% 1.625% 1.875% Floating Rate Advances 0.00% 0.125% 0.25% 0.375% 0.625% 0.875% Letter of Credit Fee 1.00% 1.125% 1.25% 1.375% 1.625% 1.875% Commitment Fee 0.25% 0.25% 0.25% 0.375% 0.375% 0.50% The Leverage Ratio shall be calculated as of the end of each fiscal quarter, and shall be reported to the Agent pursuant to a Compliance Certificate executed by an Authorized Officer of Astec and delivered in accordance with Section 6.1(d) hereof. Not later than five (5) Business Days after receipt by the Agent of each Compliance Certificate delivered by Astec in accordance with Section 6.1(d) for each fiscal quarter or fiscal year, as applicable, Astec, subject to the approval of the Agent, shall determine the Leverage Ratio for the applicable period and shall promptly notify the Agent, who shall in turn promptly notify the Lenders of such determination and of any change in each Applicable Margin resulting therefrom. Each Applicable Margin shall be adjusted (upwards or downwards, as appropriate), if necessary, based on the Leverage Ratio as of the end of the fiscal quarter immediately preceding the date of determination. The adjustment, if any, to the Applicable Margin shall be effective as to all Advances and Commitment Fees commencing on the fifth (5th) Business Day after the delivery of such quarterly or annual financial statements delivered in accordance with Sections 6.1(a) and 6.1(b) and such related Compliance Certificate of an Authorized Officer of Astec delivered in accordance with Section 6.1(d) and shall be effective from and including the fifth (5th) Business Day after the date the Agent receives such Compliance Certificate to but excluding the fifth (5th) Business Day after the date on which the next Compliance Certificate is required to be delivered pursuant to Section 6.1(d); provided, however, that, in the event that Astec shall fail at any time to furnish to the Lenders such financial statements and any such Compliance Certificate required to be delivered pursuant to Sections 6.1(a), 6.1(b) and 6.1(d), the Applicable Margin set forth in Level 6 above shall apply until the fifth (5th) Business Day after such time as all such financial statements and each such Compliance Certificate are so delivered to the Agent and the Lenders. Each determination of the Leverage Ratio by Astec (subject to approval by the Agent) and each determination of the Applicable Margin by the Agent in accordance with this definition shall be conclusive and binding on the parties absent manifest error. Until delivery of the Compliance Certificate for the fiscal quarter ending September 30, 2001, the Applicable Margin shall be that applicable to "Level 5" on the preceding table. "Arranger" means Banc One Capital Markets, Inc., a Delaware corporation, and its successors, in its capacity as Lead Arranger and Sole Book Runner. "Article" means an article of this Agreement unless another document is specifically referenced. "Asset Disposition" means any sale, lease or other disposition of any asset of any Credit Party in a single transaction or in a series of related transactions, other than (a) the sale of inventory in the ordinary course of business, (b) sales, leases or other dispositions by any Credit Party to Astec or any Wholly-Owned Subsidiary of Astec, (c) sales, leases or other dispositions of used, worn-out or surplus equipment in the ordinary course of business, (d) other sales, leases and dispositions of any Property in a single transaction or series of related transactions to the extent that (x) the fair market value of the Property transferred in any such single transaction or series of related transactions does not exceed $1,000,000 and (y) the aggregate fair market value of all such Property transferred after the date hereof does not exceed $5,000,000, (e) Permitted Recourse Lease Sales, (f) sales by AFS of financing or operating leases (including Qualifying Financing Leases and Qualifying Operating Leases) and other chattel paper (including Qualifying Chattel Paper), on a non-recourse basis provided that the Tranche B Revolving Loans at no time exceed the Tranche B Borrowing Base and (g) sales of assets pursuant to a Permitted Securitization. "Astec" means Astec Industries, Inc., a Tennessee corporation and a Borrower hereunder, its successors and assigns. "Authorized Officer" means any of the President, Vice President and Corporate Counsel, or Vice President and Corporate Controller of a Borrower acting singly, or other employee of a Borrower designated in writing to the Lenders. "Bank One" means Bank One, NA, a national banking association having its principal office in Chicago, Illinois, in its individual capacity, and its successors. "Bond Transactions" means (a) the issuance of the Trencor Letter of Credit and (b) the issuance of Variable Rate Demand Industrial Revenue Bonds Series 1994 in the approximate value of $6,000,000 to finance the expansion of Telsmith, Inc.'s Mequon, Wisconsin facility and the acquisition of equipment to be used in the operating of Telsmith, Inc.'s business. "Borrowers" means collectively Astec and AFS. Reference to a Borrower hereunder shall mean each of Astec and AFS unless the context specifically refers to one of them. Reference to Borrowers hereunder shall mean both of Astec and AFS jointly and severally. "Borrowing Base Certificate" means a Borrowing Base Certificate in substantially the form of Exhibit F hereto. "Borrowing Date" means a date on which an Advance is made hereunder. "Borrowing Notice" is defined in Section 2.2.3. "Business Day" means (a) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago, Illinois and New York, New York for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in United States dollars are carried on in the London interbank market and (b) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago, Illinois for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system. "Capitalized Lease" of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Capitalized Lease Obligations" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time. "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List, as amended from time to time. "Change in Control" means the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of twenty-five percent (25%) or more of the outstanding shares of voting stock of Astec. "Closing Date" is defined in Section 4.1. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Collateral" has the meaning attributed to such term in the Pledge Agreement. "Collateral Agent" means Bank One, in its capacity as Collateral Agent under the Pledge Agreement, for the ratable benefit of the Agent, the Lenders and the holders of the Senior Notes. "Collateral Shortfall Amount" is defined in Section 8.1(a). "Commitment Fee" is defined in Section 2.4.1. "Compliance Certificate" means a compliance certificate, in substantially the form of Exhibit A hereto, with appropriate insertions, signed by Astec's Chief Financial Officer, showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, describing the nature and status thereof and any action the Borrowers are taking or propose to take with respect thereto. "Condemnation" is defined in Section 7.8. "Conduit Securitization" means a Permitted Securitization effected through the issuance of commercial paper through a commercial paper conduit. "Consolidated Funded Debt" means for the Credit Parties on a consolidated basis at any time the sum of (w) items (a) through (e) of the definition of Indebtedness, plus (x) Contingent Obligations (other than Contingent Obligations for notes and accounts receivable sold of up to $5,000,000 and Contingent Obligations relating to Conduit Securitizations) plus (y) unreimbursed drawings on Subsidiary Letters of Credit (but excluding other Letters of Credit) plus (z) outstanding principal balances of commercial paper issued pursuant to Conduit Securitizations, whether or not any such amount in clauses (w) through (z) is due or payable at such time. "Consolidated Net Income" means, for any period, the consolidated net income of the Credit Parties determined on a consolidated basis in accordance with Agreement Accounting Principles, provided that any cumulative effect adjustment resulting from adoption of an accounting principle shall be excluded from such calculation. "Consolidated Net Revenue" means the consolidated net revenue of the Credit Parties for the most recently completed fiscal year determined on a consolidated basis in accordance with Agreement Accounting Principles. "Consolidated Tangible Net Worth" means at any date the consolidated stockholders' equity of the Credit Parties determined in accordance with Agreement Accounting Principles, less their consolidated Intangible Assets, all determined as of such date, provided that any cumulative effect adjustment resulting from adoption of an accounting principle shall be excluded from such calculation. For purposes of this definition, "Intangible Assets" means the amount (to the extent reflected in determining such consolidated stockholders' equity) of all unamortized debt discount and expense, unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, organizational or developmental expenses and other intangible items, all determined in accordance with Agreement Accounting Principles. "Contingent Obligation" of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, guaranty of payment in connection with a Permitted Securitization, take-or-pay contract, application for a Letter of Credit or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership. "Controlled Group" means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with any Credit Party, are treated as a single employer under Section 414 of the Code. "Conversion/Continuation Notice" is defined in Section 2.2.4. "Credit Extension" means the making of any Advance or the issuance of any Facility Letter of Credit or Swing Line Loan pursuant to this Agreement. "Credit Extension Date" means the date on which any Credit Extension is made hereunder. "Credit Parties" means Astec, AFS and each Subsidiary of Astec and AFS. "Default" means an event described in Article VII. "Discount" means as of any day and with respect to any commercial paper or term note issued pursuant to a Permitted Securitization, the Interest Component which has accrued up to and including such day. For purposes of this definition, the portion of the Interest Component which has accrued shall be computed by multiplying the total Interest Component for such commercial paper by a fraction, the numerator of which is the number of days elapsed that such commercial paper has been outstanding up to and including such day, and the denominator of which is the number of days such commercial paper or term note is scheduled to be outstanding. "Domestic Subsidiary" means each Subsidiary of Astec that is organized under the laws of the United States or any state thereof. "EBITDA" means for any period Consolidated Net Income plus (a) current and deferred income taxes, plus (b) the amount of all amortization of intangibles and depreciation that was deducted in arriving at Consolidated Net Income, plus (c) Interest Expense (including Interest Expense associated with Capitalized Lease Obligations and Interest Expense in connection with Permitted Securitizations even though not directly incurred by a Credit Party), plus (d) unusual non-cash charges, minus (e) equity in net income of Affiliates, and minus (f) interest income (except for interest income of AFS), in each case on a consolidated basis for the Credit Parties. "Eligible Leased Equipment Amount" means the book value of equipment subject to Qualifying Operating Leases. "Eligible Equipment Receivable Amount" means the receivable amount reflected on the financial statements of AFS from time to time due from lessees/purchasers under Qualifying Financing Leases or Qualifying Chattel Paper. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder. "Eurodollar Advance" means an Advance which, except as otherwise provided in Section 2.2.8, bears interest at the Eurodollar Rate. "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, (i) if Reuters Screen FRBD is not available to the Agent for any reason, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, and (ii) if no such British Bankers' Association Interest Settlement Rate is available to the Agent, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the rate determined by the Agent to be the rate at which Bank One or one of its Affiliate banks offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of Bank One's relevant Eurodollar Loan and having a maturity equal to such Interest Period. "Eurodollar Loan" means a Loan which, except as otherwise provided in Section 2.2.8, bears interest at the Eurodollar Rate. "Eurodollar Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the sum of (a) the quotient of (i) the Eurodollar Base Rate applicable to such Interest Period, divided by (ii) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (b) the Applicable Margin. "Excluded Taxes" means, in the case of each Lender or applicable Lending Installation and the Agent, taxes imposed on its overall net income, and franchise taxes imposed on it, by (i) the jurisdiction under the laws of which such Lender or the Agent is incorporated or organized or (ii) the jurisdiction in which the Agent's or such Lender's principal executive office or such Lender's applicable Lending Installation is located. "Facility Letter of Credit" means a Letter of Credit issued by the Issuer pursuant to Section 2.11. "Facility Letter of Credit Limit" means the lesser of (i) $25,000,000, and (ii) the Aggregate Tranche A Sublimit at any time, as the same may be reduced pursuant to the terms of this Agreement. "Facility Letter of Credit Obligations" means, as at the time of determination thereof, all liabilities, whether actual or contingent, of Astec with respect to the Facility Letters of Credit, including the sum of (a) Reimbursement Obligations and (b) the aggregate undrawn face amount of the outstanding Facility Letters of Credit. "Facility Termination Date" means September 10, 2004. "Federal Funds Effective Rate" means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10 a.m. (Chicago time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "Floating Rate" means, for any day, a rate per annum equal to the sum of (a) the Alternate Base Rate for such day, plus (b) the Applicable Margin, in each case changing when and as the Alternate Base Rate changes. "Floating Rate Advance" means an Advance which, except as otherwise provided in Section 2.2.8, bears interest at the Floating Rate. "Floating Rate Loan" means a Loan which, except as otherwise provided in Section 2.2.8, bears interest at the Floating Rate. "Foreign Plan" is defined in Section 5.9. "Foreign Subsidiary" means each Subsidiary of Astec that is not a Domestic Subsidiary. "Governmental Agency" means any government (foreign or domestic) or any state or other political subdivision thereof or any governmental body, agency, authority, department or commission (including, without limitation, any taxing authority or political subdivision) or any instrumentality or officer thereof (including, without limitation, any court or tribunal) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation, partnership or other entity directly or indirectly owned or controlled by or subject to the control of any of the foregoing. "Hazardous Materials" means (a) any chemical, material or substance defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous waste," "restricted hazardous waste," "toxic pollutants," "contaminants," "pollutants," "toxic substances" or words of similar import under any applicable local, state or federal law or under the regulations adopted or publications promulgated pursuant thereto, including Environmental Laws, (b) any oil, petroleum or petroleum derived substances, any drilling fluids, produced waters or other wastes associated with the exploration, development or production of crude oil, any flammable substances or explosives, any radioactive materials, any hazardous wastes or substances, any toxic wastes or substances or any other materials or pollutants which (i) pose a hazard to any Property of any Credit Party or to Persons on or about such Properties, or (ii) cause such properties to be in violation of any Environmental Laws, (c) asbestos in any form which is or could become friable, radon gas, urea, formaldehyde, foam insulation, or polychlorinated biphenyls, and (d) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority. "Indebtedness" of a Person means, without duplication, such Person's (a) obligations for borrowed money, (b) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (c) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (d) obligations which are evidenced by notes, acceptances, or other instruments, (e) Capitalized Lease Obligations, (f) Contingent Obligations, (g) obligations for which such Person is obligated pursuant to or in connection with a Letter of Credit or Reimbursement Agreement, (h) obligations of such Person under conditional sale or other title retention agreement relating to Property purchased by such Person, (i) Rate Hedging Obligations and (j) obligations arising out of Permitted Securitizations. "Interest Component" means the portion of the face amount of commercial paper issued on a discount basis representing the discount incurred in respect thereof. "Interest Expense" means, for any period, the aggregate amount paid as interest or Discount by Astec and its consolidated Subsidiaries during such period as determined in accordance with Agreement Accounting Principles together with, without duplication, the aggregate amount paid as interest or Discount during such period by any conduit or special purpose entity with respect to any commercial paper issued in connection with all outstanding Permitted Securitizations. "Interest Period" means, with respect to a Eurodollar Advance, a period of one, two, three or six months commencing on a Business Day selected by a Borrower pursuant to this Agreement. Such Interest Period shall end on (but exclude) the day which corresponds numerically to such date one, two, three or six months thereafter; provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day. "Investment" of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person to any other Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities owned by such Person; any deposit account and certificate of deposit owned by such Person; and structured notes, derivative financial instruments and other similar instruments or contracts owned by such Person. "Issuer" means Bank One, in its capacity as issuer of Facility Letters of Credit under Section 2.11. "KPI Letter of Credit" means that certain Irrevocable Transferable Letter of Credit, or its successor, issued by Bank One in connection with the issuance of Industrial Development Revenue Bonds in the approximate amount of $9,200,000 to finance certain manufacturing facilities to be used in the operation of Kolberg-Pioneer, Inc.'s business, all pursuant to the Prior Credit Agreement. "LC Issuance Request" is defined in Section 2.11.3. "Lease Rentals" means, with respect to any period, the sum of the rentals and other obligations required to be paid during such period by Astec or any Subsidiary as lessee under all leases of real or personal property (other than Capitalized Leases), excluding any amount required to be paid by the lessee on account of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges, provided, that, if at the date of determination, any such rental or other obligations are contingent or not otherwise definitely determinable by the terms of the related lease, the amount of such obligations (i) shall be assumed to be equal to the amount of such obligations for the period of twelve (12) consecutive calendar months immediately preceding the date of determination or (ii) if the related lease was not in effect during such preceding twelve (12) month period, shall be the amount estimated by the Chief Financial Officer of Astec on a reasonable basis and in good faith. "Lenders" means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns. "Lending Installation" means, with respect to a Lender or the Agent, any office, branch, Subsidiary or Affiliate of such Lender or the Agent listed on the signatures pages hereof or on a Schedule or otherwise selected by such Lender or the Agent pursuant to Section 2.7. "Letter of Credit" of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable. "Letter of Credit Collateral Account" is defined in Section 2.11.7. "Leverage Ratio" means, as at any date of determination thereof, the ratio of (a) Consolidated Funded Debt of the Credit Parties minus the amount of any cash collateral held by the Collateral Agent to (b) Adjusted EBITDA of the Credit Parties for the four (4) most recently ended fiscal quarters, all calculated on a consolidated basis in accordance with Agreement Accounting Principles. "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "Loan" means, with respect to a Lender, such Lender's portion of any Advance. "Loan Documents" means this Agreement, the Notes, the Pledge Agreement, the Reimbursement Agreements, the documents relating to the Subsidiary Letters of Credit (including the Trencor LC Agreement) and the other documents and agreements contemplated hereby and executed by any Credit Party in favor of the Agent or any Lender or otherwise in connection with any Loan, Facility Letter of Credit or Swing Line Loan, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Margin Stock" is defined in Section 5.11. "Material Adverse Effect" means a material adverse effect on (a) the business, Property, condition (financial or otherwise), results of operations, or prospects of the Credit Parties taken as a whole, (b) the ability of any Credit Party to perform its obligations under any Loan Document to which it is a party, or (c) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent or the Lenders thereunder. "Material Subsidiary" means any Subsidiary of Astec with either (a) assets having a book value equal to or in excess of $1,000,000 or (b) annual EBITDA equal to or in excess of $500,000. "Multiemployer Plan" means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which any Credit Party or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions. "Net Available Proceeds" means, with respect to an Asset Disposition, the sum of cash or readily marketable cash equivalents received (including by way of a cash generating sale or discounting of a note or receivable, but excluding any other consideration received in the form of assumption by the acquiring Person of debt or other obligations relating to the properties or assets so disposed of or received in any other non-cash form) therefrom, whether at the time of such disposition or subsequent thereto, net of all legal, title and recording tax expenses, commissions and other fees and all costs and expenses incurred and all federal, state, local and other taxes required to be accrued as a liability as a consequence of such transactions and of all payments made by any Credit Party on any Indebtedness which is secured by such assets pursuant to a permitted Lien upon or with respect to such assets or which must by the terms of such Lien, or in order to obtain a necessary consent to such Asset Disposition or by applicable law, be repaid out of the proceeds from such Asset Disposition. "Note Purchase Agreements" means those certain Note Purchase Agreements, dated as of September 10, 2001, by and among the Borrowers and the various purchasers named therein, as such agreements may be amended, restated or refinanced from time to time, pursuant to which Senior Notes are issued in an original aggregate principal amount of $80,000,000. "Notes" means the Revolving Notes and the Swing Line Notes. "Notice of Swing Line Loan" is defined in Section 2.3.1(d). "Obligations" means all unpaid principal of and accrued and unpaid interest on the Notes (including all interest accruing after the commencement of any proceeding against or with respect to any Borrower under the United States Bankruptcy Code, Title 11 of the United States Code, or any other federal or state bankruptcy, insolvency, receivership or similar law, at the rates specified in this Agreement), all accrued and unpaid fees, all Facility Letter of Credit Obligations and all expenses, reimbursements, indemnities and other obligations of any Credit Party to the Lenders or to any Lender, the Agent, the Collateral Agent or any indemnified party hereunder arising under the Loan Documents. "Other Taxes" is defined in Section 3.1(ii). "Participants" is defined in Section 12.2.1. "Payment Date" means the first day of each March, June, September and December. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Percentage" means, for each Lender the percentage set forth opposite its name on Schedule 1 attached hereto, as such percentage (and such schedule) may be modified from time to time pursuant to the terms hereof, including but not limited to the provisions of Section 12.3.2. "Permitted Acquisition" means an Acquisition of the capital stock or equity interests in a Person or the assets of a Person engaged in the production of aggregate processing or mining equipment, hot mix asphalt production equipment, thermal heating or storage equipment, mobile road construction equipment, trenching, underground construction, utility or related equipment or pavement analyzing equipment, that has been approved or consented to by the board of directors or equivalent governing body of such Person. "Permitted Securitization" means any financing program providing for the sale of lease receivables (including rights in respect of true leases and financing leases) and related rights by AFS to a Securitization Subsidiary in transactions purporting to be true sales (and treated as true sales for GAAP purposes), which Securitization Subsidiary shall finance the purchase of such assets by the sale, transfer, conveyance, lien or pledge of such assets to one or more limited purpose financing companies, special purpose entities and/or other financial institutions, in each case pursuant to documentation in form and substance reasonably satisfactory to the Collateral Agent; provided that at the time of the execution of the documentation establishing such Permitted Securitization and immediately after giving effect thereto, no Default or Unmatured Default would exist. "Permitted Recourse Lease Sales" means recourse sales of leases or accounts or notes receivable relating to leases by AFS. "Person" means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which any Credit Party or any member of the Controlled Group may have any liability. "Pledge Agreement" means that certain Pledge Agreement, in substantially the form of Exhibit D hereto, executed and delivered by Astec in favor of the Collateral Agent, for the ratable benefit of the Collateral Agent, the Agent, the Lenders and the holders of the Senior Notes, as the same may be amended, restated, supplemented or otherwise modified from time to time, together with any supplemental pledge agreement entered into pursuant to Section 6.28. "Prime Rate" means a rate per annum equal to the prime rate of interest announced from time to time by Bank One or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes. "Prior Credit Agreement" means that Third Amended and Restated Credit Agreement, dated as of April 7, 2000, by and among the Borrowers, the several lenders named therein and the Agent, as amended from time to time. "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. "Purchasers" is defined in Section 12.3.1. "Qualifying Chattel Paper" means valid and enforceable written installment notes financing the purchase of products manufactured or distributed by the Subsidiaries or other third parties together with any accessories, attachments or equipment relating thereto, secured by written security agreements, which are payable to the order of AFS, payments under which are not more than ninety (90) days past due. "Qualifying Operating Leases" means valid and enforceable written operating leases of equipment legally and beneficially owned by AFS and leased to third parties not Affiliates of AFS, payments under which are not more than ninety (90) days past due. "Qualifying Financing Leases" means valid and enforceable written financing leases of equipment between AFS and third parties not Affiliates of AFS, payments under which are not more than ninety (90) days past due. Qualifying Financing Leases shall not include any leases or related obligations sold in a Permitted Recourse Lease Sale or otherwise. "Rate Hedging Obligations" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any and all Rate Hedging Transactions and (b) any and all cancellations, buy backs, reversals, terminations or assignments of any Rate Hedging Transactions. "Rate Hedging Transactions" means any transaction (including an agreement with respect thereto) now existing or hereafter entered into between any Credit Party and any Lender or Affiliate thereof which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. "Reimbursement Agreement" means a reimbursement agreement, substantially in such form as the Issuer may employ in the ordinary course of business, with such modifications thereto as may be agreed upon by the Issuer and Astec; provided, however, that in the event of any conflict between the terms of any Reimbursement Agreement and this Agreement, the terms of this Agreement shall control. "Reimbursement Obligations" means, at any time, the aggregate of the obligations of Astec to the Lenders and the Issuer in respect of all unreimbursed payments or disbursements made by the Issuer and the Lenders under or in respect of the Facility Letters of Credit (including, without limitation, Astec's obligation to reimburse the Issuer for draws on Facility Letters of Credit pursuant to Section 2.11.4(b)). "Release" means a "release", as such term is defined in CERCLA. "Rentals" of a Person means the aggregate fixed amounts payable by such Person under any lease of Property having an original term (including any required renewals or any renewals at the option of the lessor or lessee) of one year or more. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event; provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "Required Lenders" means Lenders in the aggregate having at least 67% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding at least 67% of the Revolving Loan Obligations. "Reserve Requirement" means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities. "Revolving Advance" means a borrowing under Section 2.1.1 or 2.1.2 consisting of the aggregate amount of the several Revolving Loans (including Tranche A Revolving Loans and Tranche B Revolving Loans) made by the Lenders to a Borrower of the same Type and, in the case of Eurodollar Advances, for the same Interest Period. "Revolving Commitment" means, for each Lender, the obligation of such Lender to make Loans (including Tranche A Revolving Loans and Tranche B Revolving Loans) and participate in Facility Letters of Credit and Swing Line Loans not exceeding an amount equal to the product of (a) the then existing Aggregate Commitment and (b) the Percentage applicable to such Lender. "Revolving Loans" is defined in Section 2.1.2. "Revolving Notes" means the Tranche A Notes and the Tranche B Notes. "Revolving Loan Obligations" means, at any particular time, the sum of (a) the outstanding principal amount of the Advances under Section 2.1.1 and Section 2.1.2 at any time, plus (b) the outstanding principal amount of the Swing Line Loans at such time, plus (c) the Facility Letter of Credit Obligations at such time. "Schedule" refers to a specific schedule to this Agreement, unless another document is specifically referenced. "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "Securitization Subsidiary" means a special purpose, bankruptcy remote, Wholly-Owned Domestic Subsidiary of Astec formed for the sole and exclusive purpose of engaging in activities in connection with the purchase, sale and financing of lease receivables (including rights in respect of true leases and financing leases) and related rights in connection with and pursuant to a Permitted Securitization. "Senior Note Documents" means the Note Purchase Agreements and the Pledge Agreement. "Senior Notes" means the 7.56% notes of the Borrowers, due September 10, 2011, issued in an aggregate principal amount of $80,000,000 pursuant to the Note Purchase Agreements. "Single Employer Plan" means a Plan maintained by any Credit Party or any member of the Controlled Group for employees of any Credit Party or any member of the Controlled Group. "Subordinated Indebtedness" of a Person means any Indebtedness of such Person the payment of which is subordinated to payment of the Obligations to the written satisfaction of the Lenders. "Subsidiary" of a Person means (a) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (b) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of Astec. At all times during the term of this Agreement all references to Subsidiaries of Astec shall include AFS. "Subsidiary Letters of Credit" means (a) the Trencor Letter of Credit, (b) the KPI Letter of Credit, and (c) that certain letter of credit issued by M&I Marshall and Ilsley Bank for the account of Telsmith, Inc. in connection with the issuance of Variable Rate Demand Industrial Revenue Bonds Series 1994 in the approximate value of $6,000,000 to finance the construction and acquisition of a facility and equipment to be used in the operation of Telsmith, Inc.'s business. "Substantial Portion" means, with respect to the Property of any Credit Party, Property which (a) represents more than 10% of the consolidated assets of the Credit Parties as would be shown in the consolidated financial statements of the Credit Parties as at the beginning of the twelve-month period ending immediately prior to the month in which such determination is made, or (b) is responsible for more than ten percent (10%) of the consolidated net sales or of the consolidated net income of the Credit Parties as reflected in the consolidated financial statements referred to in clause (a) above. "Swing Line Lender" means Bank One in its capacity as Swing Line Lender under Section 2.3.1. "Swing Line Limit" means the lesser of (a) $10,000,000, and (b) the Aggregate Tranche A Sublimit at any time, as the same may be reduced pursuant to the terms of this Agreement. "Swing Line Loan" is defined in Section 2.3.1. "Swing Line Note" means a promissory note, in substantially the form of Exhibit B-3 hereto, duly executed by Astec and payable to the order of the Swing Line Lender in the amount of the Swing Line Limit, including any amendment, restatement, modification, renewal or replacement of such Swing Line Note. "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes. "Tranche A Commitment" means, for each Lender, the obligation of such Lender to make Loans and participate in Facility Letters of Credit and Swing Line Loans not exceeding an amount equal to the product of (a) the then existing Aggregate Tranche A Sublimit and (b) the Percentage applicable to such Lender. "Tranche A Loan Obligations" means, at any particular time, the sum of (a) the outstanding principal amount of Advances under Section 2.1.1, plus (b) the outstanding principal amount of the Swing Line Loans at such time, plus (c) the Facility Letter of Credit Obligations at such time. "Tranche A Notes" means a promissory note, in substantially the form of Exhibit B-1 hereto, duly executed by Astec and payable to the order of a Lender in the amount of its Tranche A Commitment, including any amendment, modification, renewal or replacement of such promissory note. "Tranche A Revolving Loan" is defined in Section 2.1.1. "Tranche B Borrowing Base" means 85% of the sum of (a) the Eligible Leased Equipment Amount and (b) the Eligible Equipment Receivable Amount. "Tranche B Commitment" means, for each Lender, the obligation of such Lender to make Loans not exceeding an amount equal to the product of (a) the then existing Aggregate Tranche B Sublimit and (b) the Percentage applicable to such Lender. "Tranche B Notes" means a promissory note, in substantially the form of Exhibit B-2 hereto, duly executed by AFS and payable to the order of a Lender in the amount of its Tranche B Commitment, including any amendment, modification, renewal or replacement of such promissory note. "Tranche B Revolving Loan" is defined in Section 2.1.2. "Transferee" is defined in Section 12.4. "Trencor LC Agreement" means the Letter of Credit Agreement between Bank One and Trencor Jetco, Inc. (now known as Trencor, Inc.), dated as of April 1, 1994, as amended from time to time, pursuant to which the Trencor Letter of Credit was issued. "Trencor Letter of Credit" means that certain Irrevocable Transferable Letter of Credit No. 00315672, or its successor, issued by Bank One for the account of Astec in connection with the issuance of Industrial Development Revenue Bonds in the approximate amount of $8,000,000 to finance the construction and acquisition of a facility and equipment to be used in the operation of Trencor, Inc.'s business, all pursuant to the Trencor LC Agreement. "Type" means, with respect to any Advance, its nature as a Floating Rate Advance or a Eurodollar Advance. "Unfunded Liabilities" means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans using PBGC actuarial assumptions for single employer plan terminations. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Wholly-Owned Subsidiary" of a Person means (a) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (b) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. THE CREDITS Revolving Commitment. Tranche A Commitment. From and including the Closing Date to (but excluding) the Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to (a) make Loans (each, a "Tranche A Revolving Loan") to Astec, (b) to participate in Facility Letters of Credit for the account of Astec up to but not exceeding the Facility Letter of Credit Limit, (c) to participate in Swing Line Loans for the account of Astec up to but not exceeding the Swing Line Limit, each from time to time in amounts not to exceed in the aggregate at any one time outstanding the lesser of (x) such Lender's Tranche A Commitment, and (y) such Lender's Revolving Commitment (less such Lender's Percentage of any Revolving Loan Obligations at such time). Subject to the terms of this Agreement, Astec may borrow, repay and reborrow, and Astec may request the issuance of Facility Letters of Credit, at any time prior to the Facility Termination Date. The Tranche A Commitment shall expire on the Facility Termination Date. Tranche B Commitment. From and including the Closing Date to (but excluding) the Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Loans (each, a "Tranche B Revolving Loan" and collectively with Tranche A Revolving Loans, the "Revolving Loans") to AFS from time to time in amounts not to exceed in the aggregate at any one time outstanding the least of (a) such Lender's Percentage of the Tranche B Borrowing Base, (b) such Lender's Tranche B Commitment and (c) such Lender's Revolving Commitment (less such Lender's Percentage of any Revolving Loan Obligations at such time). Subject to the terms of this Agreement, AFS may borrow, repay and reborrow, at any time prior to the Facility Termination Date. The Tranche B Commitment shall expire on the Facility Termination Date. Limitations on Obligations. Notwithstanding anything to the contrary contained in this Agreement or in any other Loan Document, (a) the Revolving Loan Obligations shall at no time exceed the Aggregate Commitment, (b) Tranche A Loan Obligations shall at no time exceed the Aggregate Tranche A Sublimit and (c) Tranche B Revolving Loans shall at no time exceed the Aggregate Tranche B Sublimit. The Borrowers agree that if at any time any such excess shall arise, the applicable Borrower(s) shall immediately pay to the Agent (or deposit into the Letter of Credit Collateral Account, to the extent that all Loans have been fully repaid) the amount necessary to eliminate such excess, without presentment, demand, protest or notice of any kind from the Agent or any Lender, all of which the Borrowers each hereby expressly waive. The Borrowers acknowledge that the Aggregate Commitment is less than the sum of the Aggregate Tranche A Sublimit and the Aggregate Tranche B Sublimit and that consequently the Borrowers may be in violation of clause (a) without being in violation of clauses (b) and (c), in which case, Astec shall immediately pay to the Agent (or deposit into the Letter of Credit Collateral Account, to the extent that all Loans have been fully repaid) the amount necessary to eliminate such excess, but have the option to designate the application of payment of such excess and in absence of such designation, the payment thereof shall be applied to the Tranche A Loan Obligations. Loans. Ratable Loans; Types of Advances. Each Advance hereunder shall consist of Loans made from the several Lenders each ratably in proportion to its respective Percentage. Any reduction in the Aggregate Commitment shall reduce ratably each of the Tranche A Commitment and the Tranche B Commitment of each Lender. The Advances may be Floating Rate Advances or Eurodollar Advances, or a combination thereof, selected by the applicable Borrower in accordance with Sections 2.2.3 and 2.2.4. Minimum Amount of Each Advance. Each Eurodollar Advance shall be in the minimum amount of $100,000 (and in multiples of $100,000 if in excess thereof), and each Floating Rate Advance shall be in the minimum amount of $100,000 (and in multiples of $100,000 if in excess thereof); provided, however, that any Floating Rate Advance may be in the amount of the unused Aggregate Commitment, subject to the limitations set forth in Section 2.1. Method of Selecting Types and Interest Periods for New Advances. The applicable Borrower shall select the Type of Advance and, in the case of each Eurodollar Advance, the Interest Period applicable to each Advance from time to time. The applicable Borrower shall give the Agent irrevocable notice (a "Borrowing Notice") not later than 11:00 a.m. (Chicago time) on the same Business Day as the Borrowing Date of each Floating Rate Advance and three (3) Business Days before the Borrowing Date for each Eurodollar Advance, specifying: (a) the Borrowing Date, which shall be a Business Day, of such Advance, (b) the aggregate amount of such Advance, (c) the Type of Advance selected, (d) the Borrower and commitment to which such Advance applies, and (e) in the case of each Eurodollar Advance, the Interest Period applicable thereto. Not later than noon (Chicago time) on each Borrowing Date, each Lender shall make available its Loan or Loans, in funds immediately available in Chicago to the Agent at its address specified pursuant to Article XIII. The Agent will make the funds so received from the Lenders available to the applicable Borrower at the Agent's aforesaid address. Conversion and Continuation of Outstanding Advances. Floating Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Advances. Each Eurodollar Advance shall continue as a Eurodollar Advance until the end of the then applicable Interest Period therefor, at which time such Eurodollar Advance shall be automatically converted into a Floating Rate Advance unless the applicable Borrower shall have given the Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurodollar Advance continue as a Eurodollar Advance for the same or another Interest Period. Subject to the terms of Section 2.2.2 and except as limited by Section 2.3.1(b), the applicable Borrower may elect from time to time to convert all or any part of an Advance of any Type into any other Type or Types of Advances; provided, however, that any conversion of any Eurodollar Advance shall be made on, and only on, the last day of the Interest Period applicable thereto. The applicable Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of an Advance or continuation of a Eurodollar Advance not later than 11:00 a.m. (Chicago time) at least three (3) Business Days prior to the date of the requested conversion or continuation, specifying: (a) the requested date, which shall be a Business Day, of such conversion or continuation; (b) the aggregate amount and Type of the Advance which is to be converted or continued; and (c) the amount and Type(s) of Advance(s) into which such Advance is to be converted or continued and, in the case of a conversion into or continuation of a Eurodollar Advance, the duration of the Interest Period applicable thereto. Changes in Interest Rate, etc. Each Floating Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is converted from a Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.2.4 to but excluding the date it becomes due or is converted into a Eurodollar Advance pursuant to Section 2.2.4, at a rate per annum equal to the Floating Rate for such day. Changes in the rate of interest on any Floating Rate Advance will take effect simultaneously with each change in the Alternate Base Rate. Each Eurodollar Advance shall bear interest from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Eurodollar Advance. No Interest Period may end after the Facility Termination Date or, with respect to any Advance required to be repaid to satisfy the mandatory reduction requirements of Section 2.4.3, the date of such mandatory reduction. Interest Payment Dates; Interest and Fee Basis. Interest accrued on each Floating Rate Advance shall be payable in arrears (a) on each Payment Date, commencing with the first such date to occur after the date hereof, on (b) any date the Floating Rate Advance is prepaid due to acceleration and (c) at maturity. Interest accrued on that portion of the outstanding principal amount of any Floating Rate Advance converted into a Eurodollar Advance on a day other than a Payment Date shall be payable on the date of conversion. Interest accrued on each Eurodollar Advance shall be payable in arrears (x) on the last day of its applicable Interest Period, (y) on any date on which the Eurodollar Advance is prepaid, whether by acceleration or otherwise, and (z) at maturity. Interest accrued on each Eurodollar Advance having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest for Advances and fees shall be calculated for actual days elapsed on the basis of a 360-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (Chicago time) at the place of payment. If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions. Promptly after receipt thereof, the Agent will notify each Lender of the contents of each Aggregate Commitment reduction notice, Borrowing Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder. The Agent will notify each Lender of the interest rate applicable to each Eurodollar Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate. Rates Applicable After Default. Notwithstanding anything to the contrary contained in Section 2.2.3 or 2.2.4, during the continuance of a Default or Unmatured Default the Required Lenders may, at their option, by notice to Astec (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that no Advance may be made as, converted into or continued as a Eurodollar Advance. During the continuance of a Default, the Required Lenders may, at their option, by notice to Astec (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (a) each Eurodollar Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2% per annum and (b) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate otherwise applicable to the Floating Rate Advance plus 2% per annum. Swing Line Loans. Making of Swing Line Loans. Subject to the terms and conditions of this Agreement, the Swing Line Lender agrees, at any time and from time to time on and after the Closing Date and prior to the Facility Termination Date, to make a loan or loans on a revolving basis (each, a "Swing Line Loan") to Astec, which Swing Line Loans in the aggregate shall not at any time exceed the Swing Line Limit; provided that no Swing Line Loan shall be made hereunder if, after giving effect to any Swing Line Loan and the use of proceeds thereof, (i) the aggregate outstanding balance of the Tranche A Loan Obligations would exceed the Aggregate Tranche A Sublimit or (ii) the Revolving Loan Obligations would exceed the Aggregate Commitment. Notwithstanding the foregoing, no Swing Line Loans shall be made hereunder if, after giving effect to any Swing Line Loan and the use of proceeds thereof, the aggregate outstanding principal amount of Swing Line Loans would exceed the Swing Line Limit, or to the extent that the Swing Line Limit of the Swing Line Lender would exceed the Tranche A Commitment of such Lender at such time. The Swing Line Limit shall terminate on the Facility Termination Date without further action being required on the part of the Agent or the Swing Line Lender. No more than five (5) Swing Line Loans shall be outstanding at any time. Swing Line Loans may, subject to the terms of this Agreement, be repaid and reborrowed. All Swing Line Loans shall be made as Floating Rate Loans and shall not be entitled to be converted into Eurodollar Loans. Swing Line Loans made on any date shall be in an aggregate minimum amount of $10,000 and integral multiples of $10,000 in excess of that amount. If, after giving effect to any assignment pursuant to Section 12.3 or reduction in Tranche A Commitments pursuant to the terms of this Agreement, the remaining Tranche A Commitment of the Swing Line Lender is less than the Swing Line Limit, the Swing Line Limit shall be permanently reduced by an amount equal to such difference. Interest accrued on each Swing Line Loan shall be payable in arrears (a) on the last Business Day of each calendar quarter, (b) on any date when a Swing Line Loan is prepaid due to acceleration and (c) on the Facility Termination Date. Whenever Astec desires to make a borrowing of Swing Line Loans under this Section 2.3.1, Astec shall give the Agent and the Swing Line Lender (no later than 3:30 p.m. (Chicago time) on the proposed date for such Advance) notice by telephone (confirmed promptly in writing) or notice in writing of such Advance (a "Notice of Swing Line Loan"), which shall be irrevocable and shall specify (i) the aggregate principal amount of the Swing Line Loans to be made pursuant to such Advance, (ii) the date of such Advance (which shall be a Business Day), (iii) the maturity date for such Swing Line Loan (which shall be on demand and in any event no later than seven days after the making thereof or, if earlier, the Facility Termination Date), (iv) the account to which such Advance is to be funded and (v) confirming that such Swing Line Loan shall be a Floating Rate Loan. Conversions of and Participations in Swing Line Loans. The Swing Line Lender shall, in its sole and absolute discretion, be entitled to require an Advance of Tranche A Revolving Loans hereunder, the proceeds of which shall be applied to the pro rata prepayment of all Swing Line Loans then outstanding by giving notice (by telephone promptly confirmed in writing or in writing) to the Agent, Astec and the Lenders to such effect, which notice shall set forth the aggregate outstanding principal amount of such Swing Line Loans. Upon the giving of such notice, Astec shall be deemed to have timely given a Borrowing Notice to the Agent requesting Tranche A Revolving Loans which are Floating Rate Loans on the Business Day following such notice, and the Lenders shall, on such date, make Tranche A Revolving Loans which are Floating Rate Loans in the amount of such Swing Line Loans, the proceeds of which shall be applied by the Agent to the prepayment of such Swing Line Loans; provided, however, that for the purposes solely of such Advance the conditions precedent set forth in Section 4.2 shall not be applicable. Unless Astec shall have notified the Agent and the Swing Line Lender prior to 11:00 a.m. (Chicago time) on the date which is six days following the date on which any Swing Line Loan has been made by the Swing Line Lender that Astec intends to reimburse the Swing Line Lender with funds other than the proceeds of Tranche A Revolving Loans, the Agent shall give such notice on behalf of the Swing Line Lender. Upon the giving of notice to the Agent and each Lender by the Swing Line Lender in its sole and absolute discretion, any deemed Borrowing Notice given under this Section 2.3.2 pursuant to which no Advance has been made shall be deemed cancelled and each Lender shall be deemed to, and hereby agrees to, have irrevocably purchased from the Swing Line Lender a participation in Swing Line Loans made by the Swing Line Lender in an aggregate outstanding principal amount equal to such Lender's Percentage of such Swing Line Loans, and shall make available to the Swing Line Lender an amount equal to its respective participation in the Swing Line Lender's Swing Line Loans in immediately available funds, at the office of the Swing Line Lender specified by notice to the Agent and each Lender in such notice, not later than 1:00 p.m. (Chicago time) on the second Business Day after the giving of such notice. In the event that any Lender fails to make available to the Swing Line Lender the amount of such Lender's participation as provided in this Section 2.3.2(b), the Swing Line Lender shall be entitled to recover such amount on demand from such Lender together with interest at the Federal Funds Effective Rate for three (3) Business Days and thereafter at the Floating Rate, and the Swing Line Lender shall, until such time as all such amounts have been paid, be deemed to have outstanding a Swing Line Loan in the amount of such unpaid participation for all purposes of this Agreement other than those provisions requiring Lenders to purchase an interest therein. The Swing Line Lender shall distribute to each other Lender which has paid all amounts payable by it under this Section 2.3.2(b) with respect to Swing Line Loans made by the Swing Line Lender such other Lender's Percentage of all payments received by the Swing Line Lender in respect of such Swing Line Loans when such payments are received. The obligations of the Lenders under Section 2.3.2(b) above shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including, without limitation, the fact that a Default or Unmatured Default shall have occurred and be continuing or any other circumstance or happening whatsoever. Fees; Reductions and Increases in Aggregate Commitment. Fees. Commitment Fees . The Borrowers agree to pay to the Agent for the account of each Lender in accordance with their Percentage a commitment fee (the "Commitment Fee") for each day accruing at a rate per annum equal to the Applicable Margin (determined for the Commitment Fee in accordance with the definition of Applicable Margin) on the daily unused portion of such Lender's Revolving Commitment from the Closing Date to and including the Facility Termination Date, payable in arrears on each Payment Date hereafter and on the Facility Termination Date. For the purpose of calculating the Commitment Fee, Swing Line Loans shall be considered usage of the Swing Line Lender's Tranche A Commitment. All accrued Commitment Fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Credit Extensions hereunder. Agent's Fees . The Borrower agrees to pay to the Agent, for its own account, the fees agreed to by the Borrower in that certain letter agreement dated July 31, 2001, or as otherwise agreed from time to time. Voluntary Reductions; Prepayments; Increases. The Borrowers may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in a minimum amount of $5,000,000 and in integral multiples of $1,000,000 in excess thereof, upon at least one (1) Business Day's written notice to the Agent, which notice shall specify the amount of any such reduction; provided, however, that (a) the amount of the Aggregate Commitment may not be reduced below the Revolving Loan Obligations at such time, (b) the Tranche A Commitment may not be reduced below the Tranche A Loan Obligations at such time and (c) the Tranche B Commitment may not be reduced below the Tranche B Revolving Loans at such time. Any reduction of the Aggregate Commitment shall automatically reduce, at the option of the Borrowers, either the Aggregate Tranche A Sublimit or the Aggregate Tranche B Sublimit (or a combination thereof) as designated by Astec, or in absence of such designation, such reduction shall reduce ratably the Aggregate Tranche A Sublimit and the Aggregate Tranche B Sublimit. The Borrowers may from time to time prepay, without penalty or premium, all of its outstanding Floating Rate Advances, or, in a minimum aggregate amount of $100,000, any portion of its outstanding Floating Rate Advances upon notice to the Agent prior to 10:00 a.m. (Chicago time) on the proposed date for such prepayment. A Eurodollar Advance may not be paid prior to the last day of the applicable Interest Period, unless, at the time of such payment, (a) the applicable Borrower has given the Agent three (3) Business Days' prior written notice of such prepayment, (b) such prepayment is in a minimum amount of $1,000,000 or in integral multiples of $500,000 in excess thereof and (c) the applicable Borrower pays to the Agent pursuant to Section 3.5 below all losses and costs incurred by the Lenders as the result of such payment. Any outstanding Advances and all other unpaid Obligations shall be paid in full by the Borrowers on the Facility Termination Date. The Borrowers may, with the consent of each Lender, on up to two occasions, seek to increase the Aggregate Commitment by up to an aggregate amount of $50,000,000 (resulting in a maximum Aggregate Commitment of $175,000,000) upon at least three (3) Business Days' written notice to the Agent, which notice shall specify the amount of any such increase and shall be delivered at a time when no Default or Unmatured Default has occurred and is continuing. Any increase in the Aggregate Commitment shall be allocated to the Aggregate Tranche A Sublimit. The Borrowers may, after giving such notice, offer the increase (which may be declined by any Lender in its sole discretion) in the Aggregate Commitment on either a ratable basis to the Lenders or on a non pro-rata basis to one or more Lenders and/or to other banks or entities reasonably acceptable to the Agent. No increase in the Aggregate Commitment shall become effective until the existing or new Lenders extending such incremental Commitment amount and the Borrowers shall have delivered to the Agent a document in form reasonably satisfactory to the Agent pursuant to which any such existing Lender states the amount of its Commitment increase, any such new Lender states its Commitment amount and agrees to assume and accept the obligations and rights of a Lender hereunder and the Borrowers accept such incremental Commitments. The Lenders (new or existing) shall accept an assignment from the existing Lenders, and the existing Lenders shall make an assignment to the new or existing Lender accepting a new or increased Revolving Commitment, of an interest in each then outstanding Advance such that, after giving effect thereto, all Advances are held ratably by the Lenders in proportion to their respective Revolving Commitments. Assignments pursuant to the preceding sentence shall be made in exchange for the principal amount assigned plus accrued and unpaid interest and Commitment Fees. The Borrowers shall make any payments under Section 3.5 resulting from such assignments. Mandatory Reductions in Aggregate Commitment. Sale of Assets . On each date after the Closing Date on which any Credit Party receives any Net Available Proceeds in respect of any Asset Disposition, the Aggregate Commitment shall automatically be permanently reduced in an amount equal to one hundred percent (100%) of the Net Available Proceeds of such Asset Disposition; provided , that with respect to no more than $20,000,000 in the aggregate of such Net Sale Proceeds in any fiscal year of Astec, the Net Available Proceeds therefrom shall not be required to be so applied on such date to the extent that no Default or Unmatured Default then exists at the time of receipt of such proceeds and Borrowers deliver a certificate to Agent stating that such Net Available Proceeds shall be used or contractually committed to be used to purchase fixed assets used or to be used in the Borrower's business within 365 days following the date of such Asset Disposition (which certificate shall set forth the estimates of the proceeds to be so expended), provided , further , that (1) if all or any portion of such Net Sale Proceeds not so applied to the repayment of Loans are not so used (or contractually committed to be used) within such 365 day period, the Aggregate Commitment shall be permanently reduced in an amount equal to such remaining portion on the last day of such 365 day period as provided above in this Section 2.4.3(a) and (2) if all or any portion of such Net Available Proceeds are not required to be applied on the 365th day referred to above because such amount is contractually committed to be used and subsequent to such date such contract is terminated or expires without such portion being so used, then the Aggregate Commitment shall be permanently reduced in an amount equal to such remaining portion on the date of such termination or expiration as provided in this Section 2.4.3(a) . Issuance of Debt . On each date after the Closing Date on which any Credit Party incurs, or issues any instruments relating to, any Indebtedness (other than Indebtedness borrowed by the Borrowers under this Agreement or permitted to be borrowed by any Credit Party pursuant to Section 6.11 of this Agreement), the Aggregate Commitment shall be automatically and permanently reduced in an amount equal to one hundred percent (100%) of the cash proceeds realized therefrom, in each case net of underwriting discounts, commissions and other reasonable costs and expenses directly attributable to such incurrence or issuance. Issuance of Equity . On each date after the Closing Date on which any Credit Party issues and sells any common stock, preferred stock, warrant or other equity securities of any Credit Party to any Person other than another Credit Party, the Aggregate Commitment shall be automatically and permanently reduced in an amount equal to fifty percent (50%) of the cash proceeds (other than up to $10,000,000 of cash proceeds in any fiscal year from the exercise of employee and director stock options of a Credit Party issued in the ordinary course of business in favor of employees, officers or directors) realized therefrom ("Equity Proceeds"), in each case net of any brokerage commissions and any other reasonable costs or expenses directly attributable to such issuance. Application of Mandatory Prepayments . The Aggregate Commitment shall be reduced by the full amount required in Sections 2.4.3(a) , (b) and (c) even if there are not sufficient Loans outstanding for such amount to be applied as a prepayment. All proceeds to be applied to reduce the outstanding Loans and the Aggregate Commitment under Sections 2.4.3(a), (b) and (c) above shall be applied (i) to Tranche A Revolving Loans (and reduction of the Aggregate Tranche A Sublimit) in the case of sales of assets, issuance of debt or issuance of equity by any Credit Party (other than AFS), and (ii) to Tranche B Revolving Loans (and the reduction of Aggregate Tranche B Sublimit) in the case of sales of assets, issuance of debt or issuance of equity by AFS. Any reduction of the Aggregate Tranche A Sublimit or the Aggregate Tranche B Sublimit shall automatically reduce the Aggregate Commitment by the same amount. Permitted Transactions . Nothing in this Section 2.4 shall be construed to constitute the Required Lenders' consent to any transaction referred to in Section 2.4 above which is not expressly permitted by the terms of this Agreement. Mandatory Reduction of Tranche B Loans. If at anytime the Tranche B Revolving Loans exceed the Tranche B Borrowing Base, AFS shall immediately pay to the Agent the amount necessary to eliminate such excess, which amount shall be applied to the outstanding Tranche B Revolving Loans. Method of Payment. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Agent at the Agent's address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to Astec, by noon (Chicago time) on the date when due and shall be applied ratably by the Agent among the Lenders. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender. The Agent is hereby authorized to charge any account of the Borrowers maintained with Bank One for each payment of principal, interest and fees as it becomes due hereunder. Notes; Telephonic Notices. Each Lender is hereby authorized to record the principal amount of each of its Loans and each repayment on the schedule attached to its Notes; provided, however, that the failure to so record (or any error in such recording) shall not affect the Borrowers' obligations under each such Note. The Borrowers hereby authorize the Lenders and the Agent to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be acting on behalf of the Borrowers. Each Borrower agrees to deliver promptly to the Agent a written confirmation, if such confirmation is requested by the Agent or any Lender, of each telephonic notice signed by one of its Authorized Officers. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error. Lending Installations. Each Lender may book its Loans and participations in Facility Letters of Credit and Swing Line Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Notes shall be deemed held by each Lender for the benefit of such Lending Installation. Each Lender may, by written or telex notice to the Agent and Astec, designate a Lending Installation through which Loans will be made and participations in Facility Letters of Credit and Swing Line Loans purchased by it and for whose account Loan payments are to be made. Non-Receipt of Funds by the Agent. Unless a Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (a) in the case of a Lender, the proceeds of a Loan or a payment under Section 2.11.5(b) or (b) in the case of a Borrower, a payment of principal, interest, fees or Reimbursement Obligations to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or Borrower, as the case may be, has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (x) in the case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three (3) days and, thereafter, the interest rate applicable to the relevant Loan or (y) in the case of payment by a Borrower, the interest rate applicable to the relevant Loan or Reimbursement Obligation or if no such interest rate is specified, at the Floating Rate. [Intentionally Omitted]. Application of Payments. The Borrowers irrevocably waive the right to direct the application of payments and collections received by the Agent for the account of any of the Lenders from or on behalf of the Borrowers, and the Borrowers agree that the Agent and the Lenders shall have the continuing exclusive right to apply and reapply any and all such payments and collections against the Obligations in such manner as the Agent and the Lenders may deem appropriate, notwithstanding any entry by the Agent or any of the Lenders upon any of its respective books and records; provided, however, that so long as the Borrowers are not delinquent in the payment to the Agent or any Lender of any amounts (including principal, interest and fees) owing under the Loans, this Agreement and any of the other Loan Documents, nothing contained herein shall limit a Borrower's rights under Section 2.2.4 above. To the extent that a Borrower makes a payment or payments to the Agent for the account of any of the Lenders, which payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then, to the extent of such payment received, the Obligations or part thereof intended to be satisfied shall be revived and shall continue in full force and effect, as if such payments had not been received by the Agent for the account of any of the Lenders. Facility Letters of Credit. Obligation to Issue. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Borrowers herein set forth, the Issuer hereby agrees to issue upon the request of and for the account of Astec, through such of the Issuer's Lending Installations or Affiliates as the Issuer and Astec may jointly agree, one or more Facility Letters of Credit in accordance with this Section 2.11, from time to time during the period, commencing on the Closing Date and ending on the fifth Business Day prior to the Facility Termination Date. Conditions for Issuance. In addition to being subject to the satisfaction of the conditions contained in Section 4.2, the obligation of the Issuer to issue any Facility Letter of Credit is subject to the satisfaction in full of the following conditions: (a) the aggregate maximum amount then available for drawing under Facility Letters of Credit issued by the Issuer, after giving effect to the Facility Letter of Credit requested hereunder, shall not exceed (i) any limit imposed by law or regulation upon the Issuer or (ii) the Facility Letter of Credit Limit; (b) after giving effect to the requested issuance of any Facility Letter of Credit, (i) the Tranche A Loan Obligations shall not exceed the Aggregate Tranche A Sublimit and (ii) the Revolving Loan Obligations shall not exceed the Aggregate Commitment; (c) the requested Facility Letter of Credit has an expiration date not later than each of (i) one year after the date of issuance and (ii) the fifth Business Day prior to the Facility Termination Date; provided that any Facility Letter of Credit that expires on the day one year after the date of issuance may provide for the renewal thereof for additional one year periods which shall in no event extend beyond the date referred to in clause (ii) above; (d) if required by the Issuer, Astec shall have delivered to the Issuer, at such times and in such manner as the Issuer may reasonably prescribe, a Reimbursement Agreement and such other documents and materials as may be required by the Issuer pursuant to the terms of the proposed Facility Letter of Credit and the proposed Facility Letter of Credit shall be satisfactory to the Issuer as to form and content and shall be consistent with the Issuer's ordinary practice with respect to terms of its letters of credit; and (e) as of the date of issuance, no order, judgment or decree of any court, arbitrator or governmental authority shall purport by its terms to enjoin or restrain the Issuer from issuing the Facility Letter of Credit and no law, rule or regulation applicable to the Issuer and no request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over the Issuer shall prohibit or request that the Issuer refrain from the issuance of Letters of Credit generally or the issuance of that Facility Letter of Credit. Procedure for Issuance of Facility Letters of Credit. (a) Astec shall give the Issuer three (3) Business Days' prior written notice of any requested issuance of a Facility Letter of Credit under this Agreement. Such notice (the "LC Issuance Request") shall be on such standard form as may be prescribed by the Issuer, shall be irrevocable and shall specify (i) the stated amount of the Facility Letter of Credit requested, (ii) the effective date (which day shall be a Business Day) of issuance of such requested Facility Letter of Credit, (iii) the date on which such requested Facility Letter of Credit is to expire (which date shall be a Business Day and shall in no event be later than the date described in Section 2.11.2(c)), (iv) the purpose for which such Facility Letter of Credit is to be issued, (v) the Person for whose benefit the requested Facility Letter of Credit is to be issued, (vi) the amount of Facility Letter of Credit Obligations and Obligations then outstanding, (vii) the then unused portions of the Aggregate Commitment and the Aggregate Tranche A Sublimit and (viii) the terms on which the Facility Letter of Credit is to be issued. At the time such LC Issuance Request is delivered, Astec shall also provide the Issuer with a copy of the form of the Facility Letter of Credit it is requesting be issued. The Issuer shall promptly forward to the Agent and the Lenders a copy of the LC Issuance Request. (b) Subject to the terms and conditions of this Section 2.11.3 and provided that the applicable conditions set forth in Sections 4.2 and 2.11.2 hereof have been satisfied, the Issuer shall, on the requested date, issue a Facility Letter of Credit on behalf of Astec in accordance with the Issuer's usual and customary business practices. (c) The Issuer shall not extend or amend any Facility Letter of Credit unless the requirements of this Section 2.11.3 are met as though a new Facility Letter of Credit was being requested and issued. Reimbursement Obligations. (a) Notwithstanding any provisions to the contrary in any Reimbursement Agreement: (i) Astec shall reimburse the Issuer for drawings under a Facility Letter of Credit issued by it no later than the earlier of (1) the time specified in such Reimbursement Agreement and (2) three (3) Business Days after the payment by the Issuer of such drawing; and (ii) any Reimbursement Obligation with respect to any Facility Letter of Credit shall bear interest from the date of the relevant drawing under the pertinent Facility Letter of Credit at the higher of the interest rate (1) specified in the applicable Reimbursement Agreement with respect to such amount, and (2) for past due Floating Rate Loans calculated in accordance with Section 2.2.8 above. (b) Astec agrees to pay to the Agent the amount of all Reimbursement Obligations, interest and other amounts payable to the Agent under or in connection with such Facility Letter of Credit immediately when due, irrespective of any claim, set-off, defense or other right which Astec or any Subsidiary or Affiliate of Astec may have at any time against the Issuer or any other Person, under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Loan Documents; (ii) the existence of any claim, setoff, defense or other right which Astec or any Subsidiary or Affiliate of Astec may have at any time against a beneficiary named in a Facility Letter of Credit or any transferee of any Facility Letter of Credit (or any Person for whom any such transferee may be acting), the Issuer, any Lender, or any other Person, whether in connection with this Agreement, any Facility Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transactions between Astec, or any Subsidiary or Affiliate of Astec and the beneficiary named in any Facility Letter of Credit); (iii) any draft, certificate or any other document presented under the Facility 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 (except to the extent any such invalidity or insufficiency is found in a final judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Agent); (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; and (v) the occurrence of any Default or Unmatured Default. Participation. (a) Immediately upon issuance by the Issuer of any Facility Letter of Credit in accordance with the procedures set forth in Section 2.11.3, each Lender shall be deemed to have irrevocably and unconditionally purchased and received from the Issuer, without recourse or warranty, an undivided interest and participation equal to its Percentage of such Facility Letter of Credit (including, without limitation, all obligations of Astec with respect thereto) and any security therefor or guaranty pertaining thereto. (b) In the event that the Issuer makes any payment under any Facility Letter of Credit and Astec shall not have repaid such amount to the Issuer pursuant to Section 2.11.4, the Issuer shall promptly notify each Lender of such failure, and each Lender shall promptly and unconditionally pay to the Agent for the account of the Issuer the amount of such Lender's Percentage of the unreimbursed amount of any such payment. If any Lender fails to make available to the Issuer any amounts due to the Issuer pursuant to this Section 2.11.5(b), the Issuer shall be entitled to recover such amount, together with interest thereon at the Federal Funds Effective Rate, for the first three (3) Business Days after such Lender receives such notice and thereafter, at the Floating Rate, payable (i) on demand, (ii) by setoff against any payments made to the Issuer for the account of such Lender or (iii) by payment to the Issuer by the Agent of amounts otherwise payable to such Lender under this Agreement. The failure of any Lender to make available to the Agent its Percentage of the unreimbursed amount of any such payment shall not relieve any other Lender of its obligation hereunder to make available to the Agent its Percentage of the unreimbursed amount of any payment on the date such payment is to be made, but no Lender shall be responsible for the failure of any other Lender to make available to the Agent its Percentage of the unreimbursed amount of any payment on the date such payment is to be made. (c) Whenever the Issuer or the Agent receives a payment on account of a Reimbursement Obligation, including any interest thereon, it shall promptly pay to each Lender which has funded its participating interest therein, in immediately available funds, an amount equal to such Lender's Percentage thereof. (d) The obligations of a Lender to make payments to the Agent with respect to a Facility Letter of Credit shall be absolute, unconditional and irrevocable, not subject to any counterclaim, set-off, qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances. (e) In the event any payment by Astec or any Subsidiary or Affiliate of Astec received by the Issuer or the Agent with respect to a Facility Letter of Credit and distributed by the Issuer or the Agent to the Lenders on account of their participations is thereafter set aside, avoided or recovered from the Issuer or the Agent in connection with any receivership, liquidation, reorganization or bankruptcy proceeding, each Lender which received such distribution shall, upon demand by the Issuer or the Agent, contribute such Lender's Percentage of the amount set aside, avoided or recovered together with interest at the rate required to be paid by the Issuer or the Agent upon the amount required to be repaid by it. Compensation for Facility Letters of Credit. Astec shall pay letter of credit fees with respect to each Facility Letter of Credit equal to (a) a rate per annum equal to 0.125% of the face amount of such Facility Letter of Credit, payable to the Issuer on the date when such Facility Letter of Credit is issued (the "Issuer Fronting Fee"), and (b) (i) the applicable rate per annum set forth in the "Letter of Credit Fee" row in the grid found in the definition of Applicable Margin, times (ii) the face amount of such Facility Letter of Credit, payable to the Agent for the account of the Lenders (including the Issuer), in each case payable in arrears on each Payment Date. In addition to the foregoing, Astec shall pay to the Issuer any other processing, issuance, amendment and other similar fees customarily charged by it in respect of Facility Letters of Credit issued by it, including, without limitation, customary fees charged by it in connection with commercial Facility Letters of Credit, together with the Issuer's out-of-pocket costs of issuing and servicing Facility Letters of Credit. Notwithstanding anything to the contrary contained in Section 2.4(b) of the Trencor LC Agreement, the Letter of Credit Fees described therein shall be calculated as described in this Section 2.11.6. All other fees described in Section 2.4 of the Trencor LC Agreement shall remain unchanged. Letter of Credit Collateral Account. Astec agrees that it will, until the final expiration date of any Facility Letter of Credit and thereafter as long as any amount is payable to the Lenders in respect of any Facility Letter of Credit, maintain a special collateral account (the "Letter of Credit Collateral Account") at the Agent's office at the address specified pursuant to Article XIII, in the name of Astec but under the sole dominion and control of the Agent, for the benefit of the Lenders and in which Astec shall have no interest other than as set forth in Section 8.1. The Agent will invest any funds on deposit from time to time in the Letter of Credit Collateral Account in certificates of deposit of the Agent having a maturity not exceeding thirty (30) days. Nothing in this Section 2.11.7 shall either obligate the Agent to require Astec to deposit any funds in the Letter of Credit Collateral Account or limit the right of the Agent to release any funds held in the Letter of Credit Collateral Account other than as required by Section 8.1. Nature of Obligations. (a) In addition to amounts payable as elsewhere provided in this Section 2.11, Astec hereby agrees to protect, indemnify, pay and save the Issuer, the Agent and the Lenders harmless from and against any and all loss, liability, damage and expense (including attorneys' fees and expenses) which the Issuer, the Agent or the Lenders may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of a Facility Letter of Credit, other than as a result of the Issuer, the Agent or the Lenders' gross negligence or willful misconduct, or (ii) the failure of the Issuer to honor a drawing under such Facility Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto governmental authority. (b) As among Astec, the Issuer, the Agent and the Lenders, Astec assumes all risks of the acts and omissions of, or misuse of the Facility Letters of Credit by, the respective beneficiaries of the Facility Letters of Credit. In furtherance and not in limitation of the foregoing, the Issuer, the Agent and the Lenders shall not be responsible for (i) the forms, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any Facility Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Facility Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of a Facility Letter of Credit to comply fully with conditions required in order to draw upon such Facility Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages by mail, cable, telegraph, telex or otherwise; (v) errors in interpretation of technical terms; (vi) misapplication by the beneficiary of a Facility Letter of Credit of the proceeds of any drawing under such Facility Letter of Credit; (viii) any consequences arising from causes beyond the control of the Issuer, the Agent or the Lenders, except in each case caused solely by the gross negligence or willful misconduct of the Issuer, the Agent or the Lenders. (c) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Issuer, the Agent or any Lender under or in connection with the Facility Letters of Credit or any related certificates, if taken or omitted in good faith, shall not put the Issuer, the Agent or such Lender under any resulting liability to Astec or relieve Astec of any of its obligations hereunder to the Issuer, the Agent or any Lender. Existing Letters of Credit. The Trencor Letter of Credit, the KPI Letter of Credit and each letter of credit listed on Schedule 2.11.9 shall be deemed a Facility Letter of Credit under this Agreement and shall count against the Facility Letter of Credit Limit, and the Issuer shall be deemed for all purposes of this Agreement to have sold to each Lender, and each Lender shall be deemed, without further action by any party hereto, to have purchased from the Issuer, a participation interest equal to its Percentage of the face amount of the Trencor Letter of Credit, the KPI Letter of Credit and each letter of credit listed on Schedule 2.11.9 and the related Facility Letter of Credit Obligations. Except as provided in Section 2.11.6 above, the terms and conditions (including the provisions relating to reimbursements for drawings) of the Trencor LC Agreement shall govern the Trencor Letter of Credit. Astec agrees that this Agreement shall be the "Credit Agreement" defined in the Trencor LC Agreement for all purposes from and after the Original Closing Date. Bank One hereby agrees that, during the term of this Agreement and any extensions or renewals hereof, the Trencor Letter of Credit will be extended or renewed upon request of Astec and Trencor, Inc.; provided, however, that Astec and Trencor, Inc. have satisfied and complied with the terms and conditions for extension and renewal contained herein and in the Trencor LC Agreement. TAXES; YIELD PROTECTION Taxes. (i) All payments by the Borrowers to or for the account of any Lender or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all Taxes. If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Agent, (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.1) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (b) such Borrower shall make such deductions, (c) such Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable law and (d) such Borrower shall furnish to the Agent the original copy of a receipt evidencing payment thereof within thirty (30) days after such payment is made. (ii) In addition, the Borrowers hereby agree to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note ("Other Taxes"). (iii) The Borrowers hereby agree to indemnify the Agent and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.1) paid by the Agent or such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within thirty (30) days of the date the Agent or such Lender makes demand therefor pursuant to Section 3.6. (iv) Each Lender that is not incorporated under the laws of the United States of America or a state thereof (each a "Non-U.S. Lender") agrees that it will, not more than ten (10) Business Days after the date of this Agreement, (i) deliver to each of Astec and the Agent two (2) 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) deliver to each of Astec and the Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and certify that it is entitled to an exemption from United States backup withholding tax. Each Non-U.S. Lender further undertakes to deliver to each of Astec and the Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by Astec or the Agent. All forms or amendments described in the preceding sentence shall certify that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States 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 or amendment with respect to it and such Lender advises Astec and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. (v) For any period during which a Non-U.S. Lender has failed to provide Astec with an appropriate form pursuant to clause (iv) above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under clause (iv) above, the Borrowers shall take such steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover such Taxes. (vi) Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Borrowers (with a copy to the Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. (vii) If the U.S. Internal Revenue Service or any other governmental authority of the United States or any other country or any political subdivision thereof asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or properly completed, because such Lender failed to notify the Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the Agent under this subsection, together with all costs and expenses related thereto (including attorneys' fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent). The obligations of the Lenders under this Section 3.1(vii) shall survive the payment of the Obligations and termination of this Agreement. Yield Protection. If, on or after the date of this Agreement, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in the interpretation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable Lending Installation with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) subjects any Lender or any applicable Lending Installation to any Taxes, or changes the basis of taxation of payments (other than with respect to Excluded Taxes) to any Lender in respect of its Eurodollar Loans or Facility Letters of Credit (or participations therein), or (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to Eurodollar Advances), or (iii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation of making, funding or maintaining its Eurodollar Loans or Facility Letters of Credit (or participations therein) or reduces any amount receivable by any Lender or any applicable Lending Installation in connection with its Eurodollar Loans or in connection with Facility Letters of Credit (or participations therein), or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of Eurodollar Loans held, Facility Letters of Credit issued or participated in, or interest received, by it, by an amount deemed material by such Lender, and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending Installation of making or maintaining its Eurodollar Loans or Revolving Commitment or of issuing or participating in Facility Letters of Credit or to reduce the return received by such Lender or applicable Lending Installation in connection with such Eurodollar Loans, Revolving Commitment or Facility Letters of Credit, then, within fifteen (15) days of demand by such Lender, the Borrowers shall pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction in amount received. Changes in Capital Adequacy Regulations. If a Lender determines the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender is increased as a result of a Change, then, within fifteen (15) days of demand by such Lender, the Borrowers shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender determines is attributable to this Agreement, its Loans, its Revolving Commitment or its Facility Letters of Credit (or participations therein) (after taking into account such Lender's policies as to capital adequacy). "Change" means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement. Availability of Types of Advances. If any Lender determines that maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Lenders determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Advances are not available or (ii) the interest rate applicable to Eurodollar Advances does not accurately reflect the cost of making or maintaining Eurodollar Advances, then the Agent shall suspend the availability of Eurodollar Advances and require any affected Eurodollar Advances to be repaid or converted to Floating Rate Advances, subject to the payment of any funding indemnification amounts required by Section 3.5. Funding Indemnification. If any payment of a Eurodollar Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not made on the date specified by a Borrower for any reason other than default by the Lenders, such Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such Eurodollar Advance. Lender Statements; Survival of Indemnity. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurodollar Loans to reduce any liability of the Borrowers to such Lender under Sections 3.1, 3.2 and 3.3 or to avoid the unavailability of Eurodollar Advances under Section 3.4, so long as such designation is not, in the judgment of such Lender, disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to Astec (with a copy to the Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.3 or 3.5. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrowers in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Eurodollar Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by Astec of such written statement. The obligations of the Borrowers under Sections 3.1, 3.2, 3.3 and 3.5 shall survive payment of the Obligations and termination of this Agreement. CONDITIONS PRECEDENT Initial Credit Extension. The Lenders shall not be required to make the initial Credit Extension hereunder and this Agreement shall not become effective unless the Borrowers have furnished to the Agent with sufficient copies for the Lenders the following items (and the date upon which all such items shall have been so furnished is referred to as the "Closing Date"): Copies of the articles of incorporation together with all amendments thereto, and a certificate of good standing of each of the Borrowers, all certified by the appropriate governmental officer in each Borrower's jurisdiction of incorporation. Copies certified by the Secretary or Assistant Secretary of each Borrower, of their respective by-laws and of their respective Board of Directors' resolutions (and resolutions of other bodies, if any are deemed necessary by counsel for the Agent) authorizing the execution, delivery and performance of the Loan Documents to which such Borrower is a party. An incumbency certificate, executed by the Secretary or Assistant Secretary of each Borrower, which shall identify by name and title and bear the signature of the officers of each Borrower authorized to sign the Loan Documents to which such Borrower is a party and to make borrowings hereunder, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by Astec. A certificate, signed by the Chief Financial Officer of Astec, stating that on the initial Borrowing Date, the representations and warranties contained in this Agreement are true and correct and that no Default or Unmatured Default has occurred and is continuing. A written opinion of counsel for the Borrowers, in substantially the form of Exhibit C-1 hereto and of special Canadian counsel to Astec, in substantially the form of Exhibit C-2 hereto, in each case addressed to the Agent and the Lenders. Notes payable to the order of each Lender duly executed by the applicable Borrower and a Swing Line Note payable to the order of the Swing Line Lender duly executed by Astec. The Pledge Agreement duly executed by Astec, together with certificates representing the capital stock pledged pursuant thereto and customary duly executed blank stock powers with respect thereto. A UCC-3 termination statement for filing with the Secretary of State of Tennessee releasing Bank One's interest in the Collateral as granted pursuant to the terms of the Prior Credit Agreement. A UCC-1 financing statement suitable for filing with the Secretary of State of Tennessee showing Astec as a debtor and the Collateral Agent as secured party covering the Collateral. Evidence that Astec shall have paid all fees, costs and expenses required to be paid by it pursuant to Section 9.7 hereof and for which an invoice has been submitted to it. The insurance certificate described in Section 5.23. Executed copies of the Note Purchase Agreements, the Pledge Agreement and such other documents executed in connection with the Senior Notes as the Agent, Lenders or their counsel may reasonably request. Evidence that on the Closing Date, the Borrowers have repaid all Tranche A Revolving Loans (as defined in the Prior Credit Agreement) and Tranche B Revolving Loans (as defined in the Prior Credit Agreement) outstanding under the Prior Credit Agreement, together with accrued and unpaid interest thereon and all amounts required to be paid pursuant to Section 3.5 of the Prior Credit Agreement in connection with the repayment of such Tranche A Revolving Loans and Tranche B Revolving Loans on the Closing Date and the Aggregate Commitment under the Prior Credit Agreement shall have been terminated and all Liens thereunder released. Such other documents as the Lenders or their counsel may have reasonably requested. Each Credit Extension. The Lenders shall not be required to make any Credit Extension and the Issuer shall not be required to issue any Facility Letter of Credit, and the Swing Line Lender shall not be required to required to make any Swing Line Loan, unless on the applicable Credit Extension Date: (a) There exists no Default or Unmatured Default. (b) The representations and warranties contained in Article V of this Agreement and in Section 3 of the Pledge Agreement are true and correct as of such Credit Extension Date except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall be true and correct on and as of such earlier date. (c) All legal matters incident to the making of such Credit Extension shall be satisfactory to the Lenders and their counsel. Each Borrowing Notice or LC Issuance Request or Notice of Swing Line Loan with respect to each such Credit Extension shall constitute a representation and warranty by the Borrowers that the conditions contained in Sections 4.2(a) and (b) have been satisfied. The Agent may require a duly completed Compliance Certificate as a condition to making a Credit Extension. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS The Borrowers jointly and severally represent and warrant to the Lenders that: Corporate Existence and Standing. Each Credit Party is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite authority, including all licenses, registrations, permits, franchises, patents, copyrights, trademarks, tradenames, consents and approvals, to own its property and assets and consummate the transactions contemplated hereby and to conduct its business, and is qualified to do business and is in good standing or otherwise authorized to conduct business in each jurisdiction in which its business is conducted and where such qualification is necessary. Authorization and Validity. Each Borrower has the corporate power and authority and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder. The execution and delivery by each Borrower of the Loan Documents to which it is a party and the performance of its obligations hereunder and thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents to which it is a party constitute legal, valid and binding obligations of each Borrower, enforceable against such Borrower in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally. No Conflict; Government Consent. Neither the execution and delivery by either Borrower of the Loan Documents to which it is a party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on any Credit Party or any Credit Party's articles of incorporation or by-laws or the provisions of any indenture, instrument or agreement to which any Credit Party is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the Property of any Credit Party pursuant to the terms of any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, any of the Loan Documents. Financial Statements. The December 31, 2000 consolidated financial statements of the Credit Parties heretofore delivered to the Agent and the Lenders were prepared in accordance with Agreement Accounting Principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Credit Parties at such date and the consolidated results of their operations for the period then ended. All financial projections will be prepared by the Borrowers in good faith, based upon information and assumptions reasonably believed to be sound and accurate and represent reasonable forecasts of the Credit Parties' future operations and financial performance. Material Adverse Change. Since December 31, 2000, there has been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the Credit Parties, which could have a Material Adverse Effect. Taxes. Each Credit Party has filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by any Credit Party, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with Agreement Accounting Principles and as to which no Lien exists. No tax liens have been filed and no claims are being asserted with respect to any such taxes. The charges, accruals and reserves on the books of each Credit Party in respect of any taxes or other governmental charges are adequate. Litigation and Contingent Obligations. Except as listed on Schedule 5.7 hereto, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the best knowledge of any of their officers, threatened against or affecting any Credit Party which could have a Material Adverse Effect or which seeks to prevent, enjoin or delay the making of any Credit Extension. Other than any liability incident to such litigation, arbitration or proceedings, no Credit Party has any material contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4. Subsidiaries and Affiliates. Schedule 5.8 hereto contains an accurate and complete list of all presently existing Subsidiaries of Astec setting forth their respective jurisdictions of incorporation or organization and the percentage of their respective capital stock or other ownership interests owned by Astec or other Subsidiaries. All of the issued and outstanding shares of capital stock of such Subsidiaries are free from Liens (except for the Lien of the Pledge Agreement) and have been duly authorized and issued and are fully paid and non-assessable. All of such Subsidiaries (including AFS) are Wholly-Owned Subsidiaries. AFS has no Subsidiaries. ERISA. The Unfunded Liabilities of all Single Employer Plans do not in the aggregate exceed $5,000,000. No Credit Party nor any other member of the Controlled Group has incurred, or is reasonably expected to incur, any withdrawal liability to Multiemployer Plans in excess of $1,000,000 in the aggregate. Each Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Plan, no Credit Party nor any other members of the Controlled Group has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan. Each foreign employee benefit plan sponsored or maintained by any Credit Party or any other member of the Controlled Group, or with respect to which any Credit Party or any other member of the Controlled Group has any material liability (a "Foreign Plan"), is in compliance in all material respects with all applicable laws. No Credit Party or any other member of the Controlled Group has incurred or expects to incur any liability with respect to a Foreign Plan which could have a Material Adverse Effect. Accuracy of Information. All factual information heretofore or contemporaneously furnished by or on behalf of any Credit Party to the Agent or the Lenders for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all other such factual information hereafter furnished by or on behalf of any Credit Party to the Agent or the Lenders will be, true and accurate (taken as a whole) on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time. Regulation U. No Credit Party is engaged principally, or as one of its important activities, in the business of purchasing or carrying margin stock (as defined in Regulation U) ("Margin Stock"). Neither the Loans nor any of the proceeds thereof, are for the purpose, whether immediate, incidental or ultimate of (a) buying or carrying Margin Stock, or (b) extending credit to others for the purpose of buying or carrying Margin Stock, or (c) refunding indebtedness originally incurred for such purpose, or for any purpose which entails a violation of, or which is inconsistent with, the provisions of Regulations of the Board of Governors of the Federal Reserve System, including Regulation U. Both before and after giving effect to any stock repurchases permitted by Section 6.10, Margin Stock constitutes less than twenty-five percent (25%) of the value of those assets of all Credit Parties which are subject to any limitation on sale, pledge or other restriction hereunder. Material Agreements. No Credit Party is a party to any agreement or instrument or subject to any charter or other corporate restriction which could have a Material Adverse Effect. No Credit Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any agreement to which it is a party, which default could have a Material Adverse Effect or (ii) any agreement or instrument evidencing or governing Indebtedness, including, without limitation, Contingent Obligations. Compliance With Laws. Each Credit Party has complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof, having jurisdiction over the conduct of their respective businesses or the ownership of their respective Properties, including, without limitation, Environmental Laws and ERISA. No Credit Party has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable foreign, federal, state and local environmental, health and safety statutes and regulations or the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a Release of any Hazardous Materials into the environment, which non-compliance or remedial action could have a Material Adverse Effect. Environmental Warranties. Except as set forth on Schedule 5.14 hereto: (a) all facilities and property (including underlying groundwater) owned or leased by any Credit Party has been, and continues to be, owned or leased by such entity in material compliance with all Environmental Laws; (b) there has been no past, and there are no pending or threatened (1) claims, complaints, notices or requests for information received by any Credit Party with respect to any alleged violation of any Environmental Law, or (ii) complaints, notices or inquiries to any Credit Party regarding potential liability under any Environmental Law which, in either case, have caused or could reasonably be expected to cause liabilities in excess of $1,000,000; (c) there have been no Releases of Hazardous Materials at, on or under any property now or previously owned or leased by any Credit Party that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect; (d) each Credit Party has been issued and is in compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary or desirable for their businesses; (e) no property now or previously owned or leased by any Credit Party is listed or proposed for listing (with respect to owned property only) on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list of sites requiring investigation or clean-up; (f) there are no underground storage tanks, active or abandoned, including petroleum storage tanks, at, on or under any property now or previously owned or leased by any Credit Party that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect; (g) no Credit Party has directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on CERCLIS or on any similar state list or which is the subject of federal, state or local enforcement actions or other investigations which may lead to material claims against any Credit Party for any remedial work, damage to natural resources or personal injury, including, but not limited to, claims under CERCLA; (h) there are no polychlorinated biphenyls or friable asbestos present at any property now or previously owned or leased by any Credit Party that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect; and (i) in the ordinary course of its business, the officers of Astec consider the effect of Environmental Laws on the business of Astec and its Subsidiaries, in the course of which they identify and evaluate potential risks and liabilities accruing to the Credit Parties due to Environmental Laws. On the basis of this consideration, Astec has concluded that Environmental Laws cannot reasonably be expected to have a Material Adverse Effect. Ownership of Properties. Except as set forth on Schedule 5.15 hereto, on the date of this Agreement, each Credit Party will have good title, free of all Liens other than those permitted by Section 6.18, to all of the Property and assets reflected in the most recent consolidated financial statements provided to the Agent as owned by them. Investment Company Act. No Credit Party is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. Public Utility Holding Company Act. No Credit Party is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. Plan Assets; Prohibited Transactions. Neither Borrower is an entity deemed to hold "plan assets" within the meaning of 29 C.F.R. Section 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor any Credit Extension gives rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. Intellectual Property. Each Credit Party owns or possesses all of the patents, trademarks, service marks, trade names, copyrights and licenses necessary for the present and planned future conduct of its respective business except as set forth on Schedule 5.19. Solvency. (a) No Credit Party (other than Astec Export Company, Inc., a Barbados corporation, and Astec Investments, Inc., a Tennessee corporation) is insolvent and the consummation of the transactions contemplated herein will not render any Credit Party insolvent. Immediately after the consummation of the transactions to occur on the date hereof and immediately following the making of each Credit Extension, if any, made on the date hereof and after giving effect to the application of the proceeds of such Credit Extensions, (i) the fair value of the assets of the Credit Parties on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, whether or not subordinated, absolute, fixed or contingent, material or immaterial, liquidated or unliquidated or otherwise (taking into account, with respect to all contingent liabilities, the likelihood of such liabilities becoming actual), of the Credit Parties on a consolidated basis; (ii) the present fair saleable value of the property of the Credit Parties on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Credit Parties on a consolidated basis on their debts and other liabilities, whether or not subordinated, absolute, fixed or contingent, material or immaterial, liquidated or unliquidated or otherwise (taking into account, with respect to all contingent liabilities, the likelihood of such liabilities becoming actual), as such debts and other liabilities become absolute and matured; (iii) the Credit Parties on a consolidated basis will be able to pay their debts and liabilities, whether or not subordinated, absolute, fixed or contingent, material or immaterial, liquidated or unliquidated or otherwise (taking into account, with respect to all contingent liabilities, the likelihood of such liabilities becoming actual), as such debts and liabilities become absolute and matured; and (iv) the Credit Parties on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted after the date hereof. (b) The Borrowers do not intend to, or to permit any Credit Party to, and the Borrowers do not believe that they or any Credit Party will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing of and amounts of cash to be received by it or any such Credit Party and the timing of the amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Credit Party. Licenses. Each Credit Party possesses adequate assets, licenses, permits, authorizations, patents, patent applications, copyrights, trademarks, trademark applications and tradenames to continue to conduct its business as heretofore conducted. No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any of the foregoing which taken in isolation or when considered with all other such revocations or terminations could have a Material Adverse Effect. The Borrowers have no notice or knowledge of any fact or any past, present or threatened occurrence that could preclude or impair any Credit Party's ability to retain or obtain any authorization necessary for the operation of their respective businesses. Pledge Agreement. The provisions of the Pledge Agreement are effective to create, in favor of the Collateral Agent, for the benefit of itself, the Agent, the Lenders and the holders of the Senior Notes, a legal, valid and enforceable security interest in the Collateral. Insurance. The certificate signed by an Authorized Officer of Astec that attests to the existence and adequacy of, and summarizes, the property and casualty insurance program carried by Astec with respect to Astec and its Subsidiaries and that has been furnished by Astec to the Agent and the Lenders, is complete and accurate. This summary includes the insurer's or insurers' name(s), policy number(s), expiration date(s), amount(s) of coverage, type(s) of coverage, exclusion(s) and deductible(s). This summary also includes similar information, and describes any reserves, relating to any self-insurance program that is in effect. COVENANTS During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing, the Borrowers hereby jointly and severally make the following agreements for themselves and on behalf of each Credit Party. Financial Reporting. The Borrowers will and will cause each Credit Party to maintain a system of accounting established and administered in accordance with Agreement Accounting Principles, and furnish to the Lenders: (a) Within one hundred five (105) days after the close of each of its fiscal years, an unqualified (except for qualifications relating to changes in accounting principles or practices reflecting changes in generally accepted principles of accounting and required or approved by Astec's independent certified public accountants) audit report certified by independent certified public accountants, acceptable to the Lenders, prepared in accordance with Agreement Accounting Principles as in effect at such time on a consolidated and consolidating basis (consolidating statements need not be certified by such accountants) for itself and the Credit Parties including without limitation balance sheets as of the end of such period, related profit and loss and reconciliation of surplus statements, and a statement of cash flows, accompanied by (a) any management letter prepared by said accountants, (b) a certificate of said accountants that, in the course of their examination necessary for their certification of the foregoing, they have obtained no knowledge of any Default or Unmatured Default, or if, in the opinion of such accountants, any Default or Unmatured Default shall exist, stating the nature and status thereof and (c) a letter from said accountants addressed to the Lenders acknowledging that such Lenders are extending credit in primary reliance on such financial statements and authorizing such reliance. (b) Within forty-five (45) days after the close of each of the first three quarterly periods of each of its fiscal years, for Astec, consolidated and consolidating unaudited balance sheets as at the close of each such period and consolidated and consolidating profit and loss and a statement of cash flows for such quarter and for the period from the beginning of such fiscal year to the end of such quarter, all certified by Astec's Chief Financial Officer. (c) As soon as available, but in any event within sixty (60) days after the beginning of each fiscal year of Astec, a copy of the plan and forecast (including, without limitation, a projected consolidated and consolidating balance sheet, income statement and funds flow statement) of the Credit Parties for such fiscal year, certified by Astec's Chief Financial Officer. (d) Together with the financial statements required under Sections 6.1(a) and (b), a Compliance Certificate. (e) Within two hundred seventy (270) days after the close of each Plan year, a statement of the Unfunded Liabilities of each Single Employer Plan. (f) As soon as possible and in any event within five (5) days after any Borrower knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by Astec's Chief Financial Officer, describing said Reportable Event and the action which Astec proposes to take with respect thereto. (g) Without limitation to Section 6.26, as soon as possible and in any event within ten (10) days after receipt by any Credit Party, a copy of (a) any notice or claim to the effect that any Credit Party is or may be liable to any Person as a result of the Release by any Credit Party, or any other Person of any Hazardous Materials into the environment, and (b) any notice alleging any violation of any Environmental Law by any Credit Party which, in either case, could reasonably be expected to have a Material Adverse Effect. (h) Promptly upon the furnishing thereof to the shareholders of Astec, copies of all financial statements, reports and proxy statements so furnished. (i) Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which Astec files with the Securities and Exchange Commission or with the Federal Trade Commission. (j) Within 30 days after the end of each calendar month, a Borrowing Base Certificate . (k) Such other information (including, without limitation, non-financial information) as the Agent or any Lender may from time to time reasonably request. Use of Proceeds. Astec will use the proceeds of Loans made under the Tranche A Commitment (i) in the case of the initial Advance, to repay in part the Tranche A Revolving Loans (as defined in the Prior Credit Agreement) outstanding under the Prior Credit Agreement, (ii) for Acquisitions permitted by Section 6.16, and (iii) for general corporate purposes. AFS will use the proceeds of Loans under the Tranche B Commitment (a) in the case of the initial Advance, to repay in part the Tranche B Revolving Loans (as defined in the Prior Credit Agreement) outstanding under the Prior Credit Agreement, and (b) to finance Qualifying Financing Leases, Qualifying Operating Leases and Qualifying Chattel Paper. The Borrowers will not, nor will they permit any Subsidiary to, use any of the proceeds of the Loans to purchase or carry any Margin Stock. Notice of Default. The Borrowers will, and will cause each Credit Party to, give prompt notice in writing to the Agent and the Lenders of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect. Conduct of Business. The Borrowers will, and will cause each Credit Party to, (i) carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted, (ii) do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, and (iii) do or cause to be done all things necessary to preserve, renew and keep in full force and effect the rights, licenses, registrations, authorization, permits, franchises, patents, copyrights, trademarks and tradenames material to the conduct of its business. Taxes. The Borrowers will, and will cause each Credit Party to, pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, and pay all charges for labor and materials which if unpaid might give rise to liens on such Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with Agreement Accounting Principles. Insurance. The Borrowers will, and will cause each Credit Party to, maintain with financially sound and reputable insurance companies insurance on all their Property in such amounts and covering such risks as is consistent with sound business practice, including, without limitation, casualty, liability and worker's compensation insurance, and each Borrower will furnish to any Lender upon request full information as to the insurance carried by it and each Credit Party. All such insurance policies shall contain provisions providing that the insurance shall not be cancelable except on thirty (30) days' prior notice to the Lenders. Compliance with Laws. The Borrowers will, and will cause each Credit Party to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, including, without limitation, Environmental Laws, ERISA and laws and regulations governing Foreign Plans. Maintenance of Properties. The Borrowers will, and will cause each Credit Party to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times. Inspection. The Borrowers will, and will cause each Credit Party to, permit the Lenders, by their respective representatives and agents, to inspect any of the Property, corporate books and financial records of each Credit Party, to examine and make copies of their respective books of accounts and other financial records, and to discuss the affairs, finances and accounts of each Credit Party with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Lenders may designate. Dividends. The Borrowers will not, nor will they permit any Credit Party to, declare or pay, directly or indirectly, any dividends or make any other distributions, whether in cash or property, or a combination thereof, on its capital stock or other equity interests (other than dividends payable in its own capital stock) or redeem, repurchase or otherwise acquire or retire any of its capital stock or other equity interests at any time outstanding, except that (a) any Subsidiary of Astec may declare and pay dividends to Astec or to a Wholly-Owned Subsidiary of Astec, and (b) Astec may repurchase in accordance with applicable law and Regulation U up to 1,500,000 shares of its common stock if after giving effect to such repurchase, the Borrowers are in compliance with all of the terms hereof, including, without limitation, Section 6.22.1 on a pro forma basis and Section 5.11. Indebtedness. The Borrowers will not, nor will they permit any Credit Party to, create, incur or suffer to exist any Indebtedness, except: The Credit Extensions; Indebtedness described in Schedule 6.11 hereto; Indebtedness of any Subsidiary to Astec or to any Wholly-Owned Subsidiary of Astec; Indebtedness incurred in the ordinary course of business with respect to customer deposits, trade payables and all other unsecured current liabilities not the result of borrowing and not evidenced by any note or any other similar instrument; Indebtedness assumed in connection with Acquisitions permitted by Section 6.16(i); provided, however, that any such Indebtedness assumed in connection therewith does not exceed in the aggregate $10,000,000 at any time; Indebtedness in respect of Rate Hedging Obligations incurred on an unsecured basis on terms and in amounts satisfactory to the Agent; Indebtedness in connection with industrial revenue bond financings where the Letter of Credit thereunder is issued pursuant to Section 2.11; Contingent Obligations permitted by Section 6.17; Indebtedness evidenced by the Senior Notes as in existence on the Closing Date in an aggregate principal amount not to exceed $80,000,000, as reduced by any repayments of principal thereof; Indebtedness in connection with Permitted Securitizations such that the aggregate outstanding principal amount of commercial paper or term notes issued in connection with all such Permitted Securitizations does not exceed $150,000,000. Other Indebtedness (including up to $10,000,000 of Indebtedness incurred by Credit Parties, whether guaranteed or not guaranteed by the Borrowers) not to exceed $20,000,000 at any time. Merger. The Borrowers will not, and will not permit any Credit Party to, consolidate with or merge with any other corporation or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to any Person (except that (x) a Securitization Subsidiary may transfer its assets in connection with a Permitted Securitization and (y) any Credit Party may merge with or into, or convey, transfer or lease substantially all of its assets to, any Borrower or any Wholly-Owned Subsidiary if (1) in any such merger or consolidation involving a Borrower, such Borrower is the survivor and (2) immediately after giving effect to any such merger, consolidation or conveyance, transfer or lease, no Default or Unmatured Default would exist) unless: the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease substantially all of the assets of such Borrower or such Credit Party as an entirety, as the case may be, shall be a solvent corporation organized and existing under the laws of the United States or any State thereof (including the District of Columbia), and, in the case of any such transaction involving a Borrower, if such Borrower is not such successor corporation, (i) such successor corporation shall have executed and delivered to the Agent its assumption of the due and punctual performance and observance of each covenant and condition of any Loan Documents to which it is a party and (ii) shall have caused to be delivered to the Agent an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Agent, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof; immediately after giving effect to such transaction, no Default or Unmatured Default shall have occurred and be continuing. No such conveyance, transfer or lease of substantially all of the assets of such Borrower or such Credit Party shall have the effect of releasing such Borrower or such Credit Party or any successor corporation that shall theretofore have become such in the manner prescribed in this Section 6.12 from its liability under any Loan Documents to which it is a party. Sale of Assets. The Borrowers will not, nor will they permit any Credit Party to, lease, sell or otherwise dispose of its Property to any other Person except for (a) sales of inventory in the ordinary course of business, (b) leases, sales or other dispositions of its Property that, together with all other Property of the Credit Parties previously leased, sold or disposed of (other than inventory in the ordinary course of business) as permitted by this Section during the twelve-month period ending with the month in which any such lease, sale or other disposition occurs, do not constitute a Substantial Portion of the Property of the Credit Parties and do not materially adversely affect the business or operations of the Credit Parties, (c) Permitted Recourse Lease Sales, (d) other sales by AFS of financing and operating leases (including Qualifying Operating Leases and Qualifying Financing Leases) and other chattel paper (including Qualifying Chattel Paper) on a non-recourse basis provided that the Tranche B Revolving Loans at no time exceed the Tranche B Borrowing Base and (e) sales of accounts receivable, lease receivables, notes, chattel paper and other similar property pursuant to a Permitted Securitization. Each of the Subsidiaries of Astec shall at all times be a Wholly-Owned Subsidiary of Astec. Sale of Accounts. Except for Permitted Recourse Lease Sales and sales pursuant to Permitted Securitizations, the Borrowers will not, nor will they permit any Credit Party to, sell or otherwise dispose of any leases or notes or accounts receivable, with recourse. Sale and Leaseback. The Borrowers will not, nor will they permit any Credit Party to, sell or transfer any of its Property in order to concurrently or subsequently lease as lessee such or similar Property. Investments and Acquisitions. The Borrowers will not, nor will they permit any Credit Party to, make or suffer to exist any Investments (including, without limitation, loans and advances to, and other Investments in, its Subsidiaries), or commitments therefor, or to create any Subsidiary or to become or remain a partner in any partnership or joint venture, or to make any Acquisition of any Person, except: (a) Short-term obligations of, or fully guaranteed by, the United States of America. (b) Commercial paper rated A-1 or better by Standard and Poor's Rating Group, a division of McGraw-Hill Corporation or P-1 or better by Moody's Investors Service, Inc. (c) Demand deposit accounts maintained in the ordinary course of business. (d) Certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000. (e) Existing Investments in Subsidiaries and other Investments in existence on the date hereof and described in Schedule 5.8 hereto. (f) Additional Investments or capital contributions in AFS, subsequent to the Closing Date not to exceed $20,000,000 in the aggregate. (g) Investments in (i) Securitization Subsidiaries in an aggregate amount not to exceed $5,000,000, (b) captive insurance companies of the Borrowers in an aggregate amount not to exceed $6,000,000 and (iii) other domestic Wholly-Owned Subsidiaries of Astec, other than AFS. (h) Such other Investments, subject to the reasonable approval of the Required Lenders. (i) Permitted Acquisitions by Astec; provided, however, that (i) the aggregate purchase price (including any portion thereof that is deferred) of such Acquisitions, including consideration in the form of cash, cash equivalents and common stock and assumed Indebtedness and Indebtedness paid at the time of the consummation thereof, does not exceed $60,000,000 during any one fiscal year, (ii) the aggregate purchase price (including any portion thereof that is deferred) of such Acquisitions, including consideration in the form of cash and cash equivalents only and assumed Indebtedness and Indebtedness paid at the time of the consummation thereof, does not exceed $25,000,000 during any one fiscal year, (iii) no Unmatured Default or Default has occurred and is continuing or will result therefrom and Astec submits a certificate to the Agent at the time of the consummation of each such Acquisition to such effect and certifying that the Credit Parties are and will be in compliance on a pro forma basis with the financial and other covenants hereunder after giving effect to such Acquisition, (iv) 100% of the outstanding capital stock or other equity interests in each Subsidiary acquired or formed in connection with each such Acquisition shall be and, except as permitted by Section 6.13, shall remain directly owned by Astec, and (v) the Collateral Agent, for the ratable benefit of the Agent, the Lenders and the holders of the Senior Notes, shall have, pursuant to the Pledge Agreement, a perfected first priority security interest in 100% of the capital stock or other equity interests in each Domestic Subsidiary acquired or formed in connection with each such Acquisition and 65% (or such greater percentage in which a security interest may be granted without resulting in adverse tax consequences to Astec under the Code as in effect from time to time) of each Foreign Subsidiary acquired or formed in connection with each such Acquisition, and Astec shall deliver to the Agent a supplement to Schedule A to the Pledge Agreement describing such capital stock or other equity interests, the certificates, if any, representing such capital stock or other equity interests, customary duly executed blank stock powers with respect thereto and such other documentation as the Agent shall request to effect the perfection of such security interest, together with such evidence of requisite corporate action and opinions of counsel as the Agent may reasonably request. Contingent Obligations. Except as permitted pursuant to Section 6.11(d), the Borrowers will not, nor will they permit any Credit Party to, make or suffer to exist any Contingent Obligation (including, without limitation, any Contingent Obligation with respect to the obligations of a Subsidiary), except (a) by endorsement of instruments for deposit or collection in the ordinary course of business, (b) the guaranty by Astec of the Obligations of AFS pursuant to Article XVI, (c) Contingent Obligations relating to Permitted Recourse Lease Sales, and (d) other Contingent Obligations to the extent that the aggregate amount of such Contingent Obligations plus the Contingent Obligations existing as permitted under clause (c) does not exceed twenty percent (20%) of the Borrowers' Consolidated Tangible Net Worth determined as of the end of the most recently ended fiscal quarter of the Borrowers for which financial statements are available. Liens. The Borrowers will not, nor will they permit any Credit Party to, create, incur, assume or suffer to exist any Lien in, of or on its Property (now owned or hereafter acquired) or income of any Credit Party, except: (a) Liens for taxes, assessments or governmental charges or levies on its Property in the ordinary course of business if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with Agreement Accounting Principles shall have been set aside on its books. (b) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than sixty (60) days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books. (c) Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation. (d) Utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of any Credit Party. (e) Liens existing on the date hereof and described in Schedule 5.15 hereto. (f) Liens securing Indebtedness permitted under Section 6.11(e); provided, however, that such Liens encumber only assets purchased in connection with any such Acquisition and not any other Property of any Credit Party. (g) Liens arising under the Pledge Agreement. (h) Liens securing the Obligations. (i) Liens arising out of (i) Permitted Recourse Lease Sales or (ii) permitted sales by AFS of financing or operating leases (including Qualifying Operating Leases and Qualifying Financing Leases) or other chattel paper (including Qualifying Chattel Paper) on a non-recourse basis; provided, however, that such Liens pertain only to assets purchased in connection with such sales. (j) Purchase money security interests on any Property acquired or held by the Company or its Subsidiaries, securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such Property; provided that (i) any such Lien attaches to such Property concurrently with or within 20 days after the acquisition thereof, (ii) such Lien attaches solely to the Property so acquired in such transaction, (iii) the principal amount of the debt secured thereby does not exceed 100% of the cost of such Property, and (iv) the principal amount of the Indebtedness secured by any and all such purchase money security interests shall not at any time exceed $10,000,000. (k) Liens upon assets of any Securitization Subsidiary relating to any Permitted Securitization. (l) Liens granted by Kolberg-Pioneer, Inc. in its assets in favor of Astec Holdings, Inc. or another Credit Party securing intercompany loans made to Kolberg-Pioneer, Inc. in connection with the Portec Acquisition. (m) Liens granted by Breaker Technology, Inc. and Breaker Technology, Ltd., in their respective assets in favor of Astec Holdings, Inc. or another Credit Party securing intercompany loans made to Breaker Technology, Inc. and Breaker Technology, Ltd. in connection with the acquisition of certain assets from Teledyne Industries Canada Limited and Teledyne CM Products, Inc. Transactions with Affiliates. The Borrowers will not, nor will they permit any Credit Party to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except Permitted Securitizations and transactions in the ordinary course of business and pursuant to the reasonable requirements of such Credit Party's and such Affiliate's business and upon fair and reasonable terms no less favorable to such Credit Party or such Affiliate than such Credit Party or such Affiliate would obtain in a comparable arms-length transaction. Amendments to Certain Agreements. The Borrowers will not, nor will they permit any Credit Party to, amend or waive any substantive term or provision of its certificate or articles of incorporation or by-laws, without in each case, the prior written consent of the Required Lenders. Financial Covenants. Leverage Ratio. At all times after the date hereof, the Borrowers will cause to be maintained a Leverage Ratio of not more than the following during each of the following periods, measured as of the end of each fiscal quarter during each such period. Period Leverage Ratio Prior to and including January 1, 2003 3.25:1.0 January 2, 2003 and thereafter 3.0:1.0 Consolidated Tangible Net Worth. The Borrowers will at all times cause to be maintained a minimum Consolidated Tangible Net Worth of not less than $63,500,000, plus fifty percent (50%) of positive Consolidated Net Income for each fiscal quarter of the Borrowers ending on or after September 30, 2001, plus the cash proceeds from the issuance and sale of any common stock, preferred stock, warrant or other equity securities of the Credit Parties, net of any brokerage commissions and any other reasonable costs or expenses directly attributable to such issuance. Rentals. The Borrowers will not, nor will they permit any Credit Party to, create, incur or suffer to exist obligations for Rentals in excess of $6,000,000 during any one fiscal year on a non-cumulative basis in the aggregate for the Credit Parties. Fixed Charge Coverage Ratio. The Borrowers will cause to be maintained, as at the last day of each fiscal quarter, a ratio of (a) Consolidated Net Income, minus extraordinary gains or plus extraordinary losses, plus income tax expense, plus Interest Expense (including any Interest Expense relating to commercial paper issued in connection with a Permitted Securitization even though not directly incurred by a Credit Party), plus Lease Rentals to (b) Interest Expense (including any Interest Expense relating to commercial paper issued in connection with a Permitted Securitization even though not directly incurred by a Credit Party) of the Credit Parties on a consolidated basis, plus Lease Rentals, for the four most recently ended fiscal quarters of not less than 2.0 to 1.0. AFS Leases. AFS shall not retain financing and operating leases (including Qualifying Financing Leases and Qualifying Operating Leases) with respect to which the aggregate residual value of the equipment leased at the end of the term of such leases exceeds in the aggregate $20,000,000 at any time. Fixed Asset Expenditures. The Borrowers will not, nor will they permit any Credit Party to, expend, or be committed to expend, in the acquisition of fixed assets, in excess of eight percent (8%) of Consolidated Net Revenue during any one fiscal year on a non-cumulative basis in the aggregate for the Credit Parties. Subordinated Indebtedness. The Borrowers will not, and will not permit any Credit Party to, make any amendment or modification to the indenture, note or other agreement evidencing or governing any Subordinated Indebtedness, or directly or indirectly voluntarily prepay, defease or in substance defease, purchase, redeem, retire or otherwise acquire, any Subordinated Indebtedness. Accounting Method. The Borrowers will not, and will not permit any Credit Party to, change its fiscal year or method of accounting, except as required by Agreement Accounting Principles. Environmental Covenant. The Borrowers will, and will cause each Credit Party to: (a) use and operate all of its facilities and properties in compliance with all Environmental Laws, keep all necessary environmental permits, approvals, certificates and licenses in effect and remain in compliance therewith, and handle all Hazardous Materials in compliance with all applicable Environmental Laws; (b) immediately notify the Lenders and provide copies upon receipt of all written claims, complaints, notices or inquiries relating to the environmental condition of its facilities and properties or compliance with Environmental Laws, and promptly cure and have dismissed with prejudice any such actions and proceedings to the satisfaction of the Lenders; and (c) provide such information and certifications which any Lender may reasonably request from time to time to insure compliance with this Section 6.26. Litigation and Other Notices. The Borrowers will, and will cause each Credit Party to, give the Lenders prompt written notice of the following: (a) the issuance by any court or governmental agency or authority of any injunction, order, decision or other restraint prohibiting, or having the effect of prohibiting, the making of the Advances or other Credit Extensions or the initiation of any litigation or similar proceeding seeking any such injunction, order or other restraint; and (b) the filing or commencement of any action, suit or proceeding against any Credit Party whether at law or in equity or by or before any court or any federal, state, municipal or other governmental agency or authority and which, if adversely determined against any Credit Party, as the case may be, is likely to (in such Borrower's reasonable judgment) result in liability in excess of $2,000,000 in the aggregate. Pledge of Stock of Foreign Subsidiaries. In the event that a Default or Unmatured Default has occurred and is continuing, Astec will, at the request of the Agent, grant to the Collateral Agent, for the ratable benefit of the Collateral Agent, the Agent, the Lenders and the holders of the Senior Notes, pursuant to the Pledge Agreement, a security interest in each Foreign Subsidiary's capital stock or other equity interests in which it does not then have a security interest, and will deliver to the Collateral Agent the certificates, if any, representing such capital stock or other equity interests, customary duly executed stock powers with respect thereto and such other documentation as the Collateral Agent shall request to effect such grant of a security interest and the perfection thereof, together with such evidence of requisite corporate action and opinions of counsel as the Collateral Agent may reasonably request. Material Subsidiaries. Effective upon any Person becoming a Material Subsidiary of Astec or any of its Subsidiaries, Astec shall, and shall cause each Domestic Subsidiary to, pledge the stock or other equity interests thereof held by it to the Collateral Agent pursuant to pledge documentation reasonably acceptable to the Collateral Agent; provided that the equity interests of Securitization Subsidiaries and a captive insurance company of the Borrowers need not be pledged at any time; provided further that, subject to Section 6.27, only 65% (or such greater percentage in which a security interest may be granted without resulting in adverse tax consequences to Astec under the Code as in effect from time to time) of the equity interests of any Foreign Subsidiary directly owned by Astec, any Domestic Subsidiary or combination thereof shall be required to be pledged. In connection with such pledge, Astec shall cause to be provided to the Collateral Agent such opinions of counsel and other documentation as the Collateral Agent shall reasonably request. DEFAULTS The occurrence of any one or more of the following events shall constitute a Default: 7.1. Any representation or warranty made or deemed made by or on behalf of any Credit Party to the Lenders or the Agent under or in connection with this Agreement, any other Loan Document, any Credit Extension, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false or misleading on the date as of which made. 7.2. Nonpayment of (a) principal of any Note or of any Reimbursement Obligation when due (including, without limitation, failure to make any payment required by Section 2.1.3), or (b) interest upon any Note or of any commitment fee or other obligation under any of the Loan Documents within five (5) days after the same becomes due. 7.3. The breach by any Borrower of any of the terms or provisions of any of Sections 6.2, 6.4, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.22.1, 6.22.2, 6.22.3, 6.22.4, 6.23, 6.24 or 6.28. 7.4. The breach by any Borrower (other than a breach which constitutes a Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this Agreement which is not remedied within twenty (20) days after written notice from the Agent or any Lender, provided that if such breach is not capable of being cured within such twenty (20) day period, such cure period shall be extended for a period of sixty (60) additional days so long as such Borrower has diligently begun to cure such breach and diligently pursues such cure thereafter. 7.5. Failure of any Credit Party to pay any Indebtedness, including, without limitation, the Senior Notes and any Contingent Obligation, when due; or the default by any Credit Party in the performance of any term, provision or condition contained in any agreement under which any Indebtedness, including, without limitation, any Contingent Obligation, was created or is governed, after the expiration of all applicable cure periods, or any other event shall occur or condition exist, the effect of which is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or any Indebtedness of any Credit Party shall be declared to be due and payable or required to be prepaid or repurchased (other than by a regularly scheduled payment) prior to the stated maturity thereof; or any Credit Party shall not pay, or admit in writing its inability to pay, its debts generally as they become due. 7.6. Any Credit Party shall (a) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect or similar state or foreign laws, (b) make an assignment for the benefit of creditors, (c) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (d) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or similar state or foreign laws, or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (e) take any corporate action to authorize or effect any of the foregoing actions set forth in this Section 7.6 or (f) fail to contest in good faith any appointment or proceeding described in Section 7.7. 7.7. Without the application, approval or consent of any Credit Party, a receiver, trustee, examiner, liquidator or similar official shall be appointed for any Credit Party or any Substantial Portion of their respective Property, or a proceeding described in Section 7.6(d) shall be instituted against any Credit Party and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of sixty (60) consecutive days. 7.8. Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of (each a "Condemnation"), all or any portion of the Property of any Credit Party which, when taken together with all other Property of the Credit Parties so condemned, seized, appropriated, or taken custody or control of, during the twelve-month period ending with the month in which any such Condemnation occurs, constitutes a Substantial Portion of. 7.9. Any Credit Party shall fail within thirty (30) days to pay, bond or otherwise discharge one or more (a) judgments or orders for the payment of money in excess of $500,000 (or the equivalent thereof in currencies other than U.S. Dollars) in the aggregate, or (b) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgment(s), in any such case, is/are not stayed on appeal or otherwise being appropriately contested in good faith. 7.10. The Unfunded Liabilities of all Single Employer Plans shall exceed in the aggregate $5,000,000, any Reportable Event shall occur in connection with any Plan or any Credit Party or any member of the Controlled Group incurs liability under a Foreign Plan which could have a Material Adverse Effect. 7.11. Any Credit Party or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that it has incurred withdrawal liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans by any Credit Party or any other member of the Controlled Group as withdrawal liability (determined as of the date of such notification), exceeds $500,000 or requires payments exceeding $100,000 per annum. 7.12. Any Credit Party or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of such Credit Party and the other members of the Controlled Group (taken as a whole) to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years of each such Multiemployer Plan immediately preceding the plan year in which the reorganization or termination occurs by an amount exceeding $1,000,000. 7.13. Any Credit Party shall be the subject of any proceeding pertaining to the release by (i) any Credit Party, (ii) any Person acting on any Credit Party's behalf or (iii) any predecessor in interest to the assets and properties of any Credit Party of Hazardous Material into the environment, or any violation of any Environmental Laws which, in either case, could have a Material Adverse Effect. 7.14. Any Change in Control shall occur. 7.15. The occurrence of any "default" or "event of default", as defined in any Loan Document (other than this Agreement) or the breach of any of the terms or provisions of any Loan Document (other than this Agreement), which default or breach continues beyond any period of grace therein provided. 7.16. Nonpayment by any Credit Party of any Rate Hedging Obligation or the breach by any Credit Party of any term, provision or condition contained in any agreement, device or arrangement giving rise to any Rate Hedging Obligation. 7.17. The Agent shall fail to have a valid and perfected first priority security interest in all of the capital stock or other equity interests of each Subsidiary of Astec (or such lesser amount in the case of Foreign Subsidiaries as is required by this Agreement) and in all other Collateral, except as permitted by the terms of the Pledge Agreement, the Pledge Agreement shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability thereof, or Astec shall fail to comply with any of the terms or provisions of the Pledge Agreement. 7.18. An event shall have occurred that could give rise to a Material Adverse Effect. 7.19. The representations and warranties set forth in Section 5.18 shall at any time not be true and correct. 7.20. Any of the Loan Documents shall cease, for any reason, to be in full force and effect, or any party to any Loan Document shall so assert. ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES Acceleration. (a) If any Default described in Section 7.6 or 7.7 occurs with respect to any Credit Party, (i) the obligations of the Lenders to make Loans hereunder and the obligations of the Issuer to issue Facility Letters of Credit shall automatically terminate and the Obligations shall immediately become due and payable without presentment, demand, protest or notice of any kind, all of which each Borrower hereby expressly waives and without any election or action on the part of the Agent or any Lender and (ii) each Borrower will be and become thereby unconditionally obligated, without the need for demand or the necessity of any act or evidence, to deliver to the Agent, at its address specified pursuant to Article XIII, for deposit into the Letter of Credit Collateral Account, an amount (the "Collateral Shortfall Amount") equal to the excess, if any, of (A) 100% of the sum of the aggregate maximum amount remaining available to be drawn under the Facility Letters of Credit (assuming compliance with all conditions for drawing thereunder) issued by the Issuer and outstanding as of such time, over (B) the amount on deposit in the Letter of Credit Collateral Account at such time that is free and clear of all rights and claims of third parties and that has not been applied by the Lenders against the Obligations. (b) If any Default occurs and is continuing (other than a Default described in Section 7.6 or 7.7), (i) the Required Lenders may terminate or suspend the obligations of the Lenders to make Loans and the obligation of the Issuer to issue Facility Letters of Credit hereunder, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrowers hereby expressly waive and (ii) the Required Lenders may, upon notice delivered to Astec and in addition to the continuing right to demand payment of all amounts payable under this Agreement, make demand on Astec to deliver (and Astec will, forthwith upon demand by the Required Lenders and without necessity of further act or evidence, be and become thereby unconditionally and jointly and severally obligated to deliver), to the Agent, at its address specified pursuant to Article XIII, for deposit into the Letter of Credit Collateral Account an amount equal to the Collateral Shortfall Amount. (c) If at any time while any Default is continuing, the Agent determines that the Collateral Shortfall Amount at such time is greater than zero, the Agent may make demand on Astec to deliver (and Astec will, forthwith upon demand by the Agent and without necessity of further act or evidence, be and become thereby unconditionally obligated to deliver), to the Agent as additional funds to be deposited and held in the Letter of Credit Collateral Account an amount equal to such Collateral Shortfall Amount at such time. (d) The Agent may at any time or from time to time after funds are deposited in the Letter of Credit Collateral Account, apply such funds to the payment of the Obligations and any other amounts as shall from time to time have become due and payable by the Borrowers to the Lenders under the Loan Documents. (e) At any time while any Default is continuing, neither the Borrowers nor any Person claiming on behalf of or through the Borrowers shall have any right to withdraw any of the funds held in the Letter of Credit Collateral Account. After all of the Obligations have been indefeasibly paid in full, any funds remaining in the Letter of Credit Collateral Account shall be returned by the Agent to Astec or paid to whoever may be legally entitled thereto at such time. (f) The Agent shall exercise reasonable care in the custody and preservation of any funds held in the Letter of Credit Collateral Account and shall be deemed to have exercised such care if such funds are accorded treatment substantially equivalent to that which the Agent accords its own property, it being understood that the Agent shall not have any responsibility for taking any necessary steps to preserve rights against any Persons with respect to any such funds. Amendments. Subject to the provisions of this Article VIII, the Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrowers may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrowers hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of each Lender directly or indirectly affected thereby: (a) Extend the maturity of any Loan or Note or forgive all or any portion of the principal amount thereof, or reduce the rate or extend the time of payment of interest or fees thereon. (b) Reduce or extend the Reimbursement Obligations, or reduce the rate or change the time of payment of any fees related to Facility Letters of Credit or Swing Line Loans; (c) Reduce the percentage specified in the definition of Required Lenders. (d) Extend the Facility Termination Date, or reduce the amount or extend the payment date for the scheduled or mandatory commitment reductions or prepayments required under Sections 2.1.3 and 2.4, or increase the amount of the Revolving Commitment, the Tranche A Commitment or the Tranche B Commitment of any Lender hereunder, or permit either Borrower to assign its rights under this Agreement. (e) Amend this Section 8.2. Release all or substantially all of the Collateral. Release Astec's guaranty found in Article XVI. No amendment of any provision of this Agreement relating to the Agent, the Issuer or the Swing Line Lender shall be effective without the written consent of the Agent, the Issuer or the Swing Line Lender, as the case may be. The Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement. Preservation of Rights. No delay or omission of the Lenders or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Credit Extension notwithstanding the existence of a Default or the inability of any Borrower to satisfy the conditions precedent to such Credit Extension shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent and the Lenders until the Obligations have been paid in full. GENERAL PROVISIONS Survival of Representations. All representations and warranties of the Borrowers contained in this Agreement shall survive delivery of the Notes and the making of the Loans herein contemplated. Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to any Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. Taxes. Any Taxes (excluding Excluded Taxes) or other similar assessments or charges made by any governmental or revenue authority in respect of the Loan Documents shall be paid by the Borrowers, together with interest and penalties, if any. Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. Entire Agreement. The Loan Documents, together with the letter agreement referred to in Section 2.4.1(b), embody the entire agreement and understanding among the Borrowers, the Agent and the Lenders and supersede all prior agreements and understandings among the Borrowers, the Agent and the Lenders relating to the subject matter thereof. Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns; provided, however, that the parties hereto expressly agree that the Arranger shall enjoy the benefits of the provisions of Sections 9.7, 9.11 and 10.10 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement. Expenses; Indemnification. The Borrowers shall reimburse the Agent and the Arranger for any and all costs, internal charges and out-of-pocket expenses (including without limitation attorneys' fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent) paid or incurred by the Agent or the Arranger in connection with the preparation, negotiation, execution, delivery, syndication, review, amendment, modification and administration of the Loan Documents. The Borrowers also agree to reimburse the Agent, the Arranger and the Lenders for any costs, internal charges and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Agent, the Arranger and the Lenders, which attorneys may be employees of the Agent, the Arranger or the Lenders) paid or incurred by the Agent, the Arranger or any Lender in connection with the collection and enforcement of the Loan Documents. The Borrowers further agree to indemnify the Agent, the Arranger, each Lender, their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent, the Arranger, any Lender or any affiliate is a party thereto) which any of them may pay or incur arising out of or relating to (i) this Agreement, (ii) the other Loan Documents, (iii) the transactions contemplated hereby, (iv) the direct or indirect application or proposed application of the proceeds of any Loan hereunder or the use of any Facility Letter of Credit, (v) the Release of Hazardous Materials in, onto or from any Credit Party's owned or leased property and (vi) any violation of Environmental Laws. The obligations of the Borrowers under this Section shall survive the termination of this Agreement and the payment and performance of the Obligations. Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders. Accounting. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles. Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. Nonliability of Lenders. The relationship between the Borrowers, on the one hand, and the Lenders and the Agent, on the other, shall be solely that of borrower and lender. Neither the Agent, the Arranger nor any Lender shall have any fiduciary responsibilities to the Borrowers. Neither the Agent, the Arranger nor any Lender undertakes any responsibility to the Borrowers to review or inform the Borrowers of any matter in connection with any phase of any Credit Party's business or operations. The Borrowers agree that neither the Agent, the Arranger nor any Lender shall have liability to any Credit Party (whether sounding in tort, contract or otherwise) for losses suffered by any Credit Party in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined by a court of competent jurisdiction in a final and non-appealable order that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. Neither the Agent, the Arranger nor any Lender shall have any liability with respect to, and each Borrower hereby waives, releases and agrees not to sue for, any special, indirect or consequential damages suffered by it in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby. Confidentiality. Each Lender agrees to hold any confidential information which it may receive from the Borrowers pursuant to this Agreement in confidence, except for disclosure (a) to other Lenders and their respective Affiliates, (b) to legal counsel, accountants, and other professional advisors to that Lender or to a Transferee each of whom shall be subject to the restrictions set forth in this Section, (c) to regulatory officials, (d) to any Person as requested pursuant to or as required by law, regulation, or legal process, (e) to any Person in connection with any legal proceeding to which that Lender is a party, (f) to such Lender's direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, each of whom shall be subject to the restrictions set forth in this Section, and (g) as permitted by Section 12.4. Interest Limitation. Anything in this Agreement, the Notes or any other Loan Document to the contrary notwithstanding, a Borrower shall never be required to pay interest at a rate in excess of the highest lawful rate, and if the effective rate of interest that would otherwise be payable under this Agreement, the Notes or any other Loan Document would exceed the highest lawful rate, or if any holder of any Note shall receive monies that are deemed to constitute interest which would increase the effective rate of interest payable under this Agreement, the Notes or any other Loan Document to a rate in excess of the highest lawful rate, then (a) the amount of interest that would otherwise be payable under this Agreement, the Notes and the other Loan Documents shall be reduced to the amount allowed under applicable law, and (b) any interest paid in excess of the highest lawful rate shall, at the option of the holder of such Note, be either refunded to the payor or credited on the principal of the Note. Loan Documents. In the event of any conflict or inconsistency between the terms and provisions of this Agreement and those of any other Loan Document, the terms and provisions of this Agreement shall govern and control to the extent of such conflict or inconsistency. Interpretation. In this Agreement and each other Loan Document, unless a clear contrary intention appears: (a) The singular number includes the plural number and vice versa; (b) Reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by the Loan Documents, and reference to a Person in a particular capacity excludes such Person in any other capacity; (c) reference to either gender includes the other gender; (d) reference to any agreement (including this Agreement and the Schedules and Exhibits and the other Loan Documents), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof and the other Loan Documents, and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor; and (e) reference to any law, rule, regulation, order, decree, requirement, policy, guideline, directive or interpretation means as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect on the determination date, including rules and regulations promulgated thereunder. Nonreliance. Each Lender hereby represents that it is not relying on or looking to any Margin Stock for the repayment of the Loans or the Reimbursement Obligations provided for herein. Disclosure. The Borrowers and the Lenders hereby (a) acknowledge and agree that Bank One and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with the Borrowers and their Affiliates, and (b) waive any liability of Bank One or such Affiliate of Bank One to the Borrowers or any Lender, respectively, arising out of or resulting from such investments, loans or relationships other than liabilities arising out of the gross negligence or willful misconduct of Bank One or its Affiliates. THE AGENT Appointment; Nature of Relationship. Bank One, NA is hereby appointed by each of the Lenders as its contractual representative (herein referred to as the "Agent") hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Agent agrees to act as such contractual representative upon the express conditions contained in this Article X. Notwithstanding the use of the defined term "Agent," it is expressly understood and agreed that the Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan Document and that the Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders' contractual representative, the Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a "representative" of the Lenders within the meaning of the Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders hereby agrees to assert no claim against the Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives. Powers. The Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent. General Immunity. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to any Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is determined in a final non-appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of such Person. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered solely to the Agent; (d) the existence or possible existence of any Default or Unmatured Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any collateral security; or (g) the financial condition of any Borrower or any guarantor of any of the Obligations or of any of Astec's or any such guarantor's respective Subsidiaries. The Agent shall have no duty to disclose to the Lenders information that is not required to be furnished by a Borrower to the Agent at such time, but is voluntarily furnished by a Borrower to the Agent (either in its capacity as Agent or in its individual capacity). Action on Instructions of Lenders. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders or the Lenders, as the case may be, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders and on all holders of Notes. The Lenders hereby acknowledge that the Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders. The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. Employment of Agents and Counsel. The Agent may execute any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Agent and the Lenders and all matters pertaining to the Agent's duties hereunder and under any other Loan Document. Reliance on Documents; Counsel. The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent. Agent's Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Agent ratably in proportion to their respective Revolving Commitments (or, if the Revolving Commitments have been terminated, in proportion to their Revolving Commitments immediately prior to such termination) (i) for any amounts not reimbursed by the Borrowers for which the Agent is entitled to reimbursement by the Borrowers under the Loan Documents, (ii) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses incurred by the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents, provided that (i) no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Agent and (ii) any indemnification required pursuant to Section 3.1(vii) shall, notwithstanding the provisions of this Section 10.8, be paid by the relevant Lender in accordance with the provisions thereof. The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement. Rights as a Lender. In the event the Agent is a Lender, the Agent shall have the same rights and powers hereunder and under any other Loan Document with respect to its Revolving Commitment and its Loans as any Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with Astec or any of its Subsidiaries in which Astec or such Subsidiary is not restricted hereby from engaging with any other Person. The Agent, in its individual capacity, is not obligated to remain a Lender. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent, the Arranger or any other Lender and based on the financial statements prepared by Astec and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent, the Arranger or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and Astec, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign. The Agent may be removed at any time with or without cause by written notice received by the Agent from the Required Lenders, such removal to be effective on the date specified by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint, on behalf of the Borrowers and the Lenders, a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders within thirty days after the resigning Agent's giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Borrowers and the Lenders, a successor Agent. Notwithstanding the previous sentence, the Agent may at any time without the consent of the Borrowers or any Lender, appoint any of its Affiliates which is a commercial bank as a successor Agent hereunder. If the Agent has resigned or been removed and no successor Agent has been appointed, the Lenders may perform all the duties of the Agent hereunder and the Borrowers shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning or removed Agent. Upon the effectiveness of the resignation or removal of the Agent, the resigning or removed Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation or removal of an Agent, the provisions of this Article X shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents. In the event that there is a successor to the Agent by merger, or the Agent assigns its duties and obligations to an Affiliate pursuant to this Section 10.11, then the term "Prime Rate" as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Agent. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Unmatured Default hereunder unless the Agent has received written notice from a Lender or a Borrower referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. Delegation to Affiliates. The Borrowers and the Lenders agree that the Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to which the Agent is entitled under Articles IX and X. Execution of Collateral Documents. The Lenders hereby empower and authorize the Agent to execute and deliver to Astec on their behalf the Pledge Agreement and all related financing statements and any financing statements, agreements, documents or instruments as shall be necessary or appropriate to effect the purposes of the Pledge Agreement. Collateral Releases. The Lenders hereby empower and authorize the Collateral Agent to execute and deliver to Astec on their behalf any agreements, documents or instruments as shall be necessary or appropriate to effect any releases of Collateral which shall be permitted by the terms hereof or of any other Loan Document or which shall otherwise have been approved by the Required Lenders (or, if required by the terms of Section 8.2, all of the Lenders) in writing. SETOFF; RATABLE PAYMENTS Setoff. In addition to, and without limitation of, any rights of the Lenders under applicable law, if any Borrower becomes insolvent, however evidenced, or any Default or Unmatured Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender or any Affiliate of any Lender to or for the credit or account of any Borrower may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part thereof, shall then be due. Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Loans or participations in Facility Letters of Credit or Swing Line Loans (other than payments received pursuant to Sections 3.1, 3.2, 3.3 or 3.5) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Loans or participations in Facility Letters of Credit or Swing Line Loans held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of Loans and participations in Facility Letters of Credit. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their Loans, Facility Letters of Credit and Swing Line Loans. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrowers and the Lenders and their respective successors and assigns, except that (a) no Borrower shall have the right to assign its rights or obligations under the Loan Documents and (b) any assignment by any Lender must be made in compliance with Section 12.3. The parties to this Agreement acknowledge that clause (b) of this Section relates only to absolute assignments and does not prohibit assignments creating security interests, including, without limitation, (x) any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank or (y) in the case of a Lender which is a fund, any pledge or assignment of all or any portion of its rights under this Agreement or any Note to its trustee in support of its obligations to its trustee; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3. The Agent may treat the Person which made any Loan or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3; provided, however, that the Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Loan or which holds any Note to direct payments relating to such Note to another Person. Any assignee of the rights to any Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan. Participations. Permitted Participants; Effect. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any participation in Facility Letters of Credit owned by such Lender, any Note held by such Lender, any Revolving Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the holder of any such Note for all purposes under the Loan Documents, all amounts payable by the Borrowers under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrowers and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan, Facility Letter of Credit, Swing Line Loan or Revolving Commitment in which such Participant has an interest which forgives principal, interest or fees or reduces the interest rate or fees payable with respect to any such Loan, Facility Letter of Credit, Swing Line Loan or Revolving Commitment, postpones any date fixed for any regularly-scheduled payment of principal of, or interest or fees on, any such Loan, Facility Letter of Credit, Swing Line Loan or Revolving Commitment, releases any guarantor of any such Loan, Facility Letter of Credit or Swing Line Loan or releases any substantial portion of collateral, if any, securing any such Loan, Facility Letter of Credit or Swing Line Loan. Benefit of Setoff. The Borrowers agree that each Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender. Assignments. Permitted Assignments. Any Lender may, in the ordinary course of its business and in accordance with applicable law, and with the consent of the Agent and the Issuer, at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations under the Loan Documents, provided that no such assignment shall be of less than $5,000,000 of such selling Lender's Revolving Commitment or (if the Aggregate Commitment has been terminated) of aggregate principal amount of such selling Lender's Loans, unless such assignment is of the entire remaining amount of such selling Lender's Revolving Commitment and Loans. All assignments shall include a pro rata portion of such Lender's Tranche A Commitment (and the Tranche A Loan Obligations) and Tranche B Commitment (and the Tranche B Revolving Loans). Such assignment shall be substantially in the form of Exhibit E hereto or in such other form as may be agreed to by the parties thereto and the Agent. The consent of the Agent shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate thereof, which consent shall not be unreasonably withheld or delayed. A fee of $4,000 shall be payable to the Agent by either the assigning Lender or the Purchaser for each assignment. Effect; Effective Date. Upon (i) delivery to the Agent of an assignment, together with any consents required by Section 12.3.1, and (ii) payment of the $4,000 fee to the Agent for processing such assignment (unless such fee is waived by the Agent), such assignment shall become effective on the effective date specified in such assignment. The assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Revolving Commitment, Loans, participation in Facility Letters of Credit and Swing Line Loans under the applicable assignment agreement constitutes "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by the Borrowers, the Lenders or the Agent shall be required to release the transferor Lender with respect to the percentage of the Aggregate Commitment, Loans, participation in Facility Letters of Credit and Swing Line Loans assigned to such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.2, the transferor Lender, the Agent and the Borrowers shall make appropriate arrangements so that replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their Revolving Commitment, as adjusted pursuant to such assignment. In addition, within a reasonable time after the effective date of any assignment, the Agent shall, and is hereby authorized and directed to, revise Schedule 1 reflecting the revised Percentages of each of the Lenders and shall distribute such revised Schedule 1 to each of the Lenders and Astec and such revised Schedule 1 shall replace the old Schedule 1 and become part of this Agreement. Dissemination of Information. The Borrowers authorize each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of the Credit Parties; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.12 of this Agreement. Tax Treatment. If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 2.9. NOTICES Giving Notice. Except as otherwise permitted by Section 2.6 with respect to borrowing notices, all notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of a Borrower or the Agent, at its address or facsimile number set forth on the signature pages hereof, (y) in the case of any Lender, at its address or facsimile number set forth below its signature hereto or in its administrative information sheet or (z) in the case of any party, at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and Astec in accordance with the provisions of this Section 13.1. Each such notice, request or other communication shall be effective (i) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (ii) if given by mail, seventy-two (72) hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section; provided that notices to the Agent under Article II shall not be effective until received. Change of Address. A Borrower, the Agent and any Lender may change the address for service of notice upon it by a notice in writing to the other parties hereto. COUNTERPARTS This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when (a) it has been executed by the Borrowers, the Agent and the Lenders and each party has either notified the Agent, by telex or telephone, that it has taken such action and (b) the conditions precedent set forth in Section 4.1 have been satisfied. CHOICE OF LAW, CONSENT TO JURISDICTION, WAIVER OF JURY TRIAL CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1 ET SEQ, BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. CONSENT TO JURISDICTION. EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND EACH BORROWER 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 ANY BORROWER 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. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS. WAIVER OF JURY TRIAL. EACH BORROWER, THE AGENT AND EACH LENDER HEREBY EXPRESSLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TRIAL BY JURY IN ANY ACTION OR 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 ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. THE TERMS AND PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT. ASTEC GUARANTY Guaranty of Payment and Performance of Obligations of AFS. Astec hereby guarantees to the Agent and the Lenders, as a primary obligor and not merely as a surety, the full and punctual payment when due (whether at maturity, by acceleration or otherwise), as well as the performance, of all of the Obligations incurred or owed by or chargeable to AFS (the "AFS Obligations"). Astec's obligation under this Article XVI is an absolute, unconditional and continuing guaranty of the full and punctual payment and performance of all of the AFS Obligations and not of their collectability only and is in no way conditioned upon any requirement that the Agent or the Lenders first attempt to collect any of the AFS Obligations from AFS or resort to any collateral security, any balance of any deposit account or credit on the books of any Lender in favor of AFS or any other Person or other means of obtaining payment. Should AFS default in the payment or performance of any of the AFS Obligations, the Agent may cause the obligations of Astec (as guarantor) hereunder with respect to such AFS Obligations to become forthwith due and payable to the Agent and the Lenders, without demand or notice of any nature, all of which are expressly waived by Astec. Additional Amounts. Astec further agrees, as the primary obligor and not as a guarantor only, to pay to the Agent and the Lenders, forthwith upon demand in funds immediately available to the Agent and the Lenders, all reasonable costs and expenses (including court costs and legal fees and expenses) incurred or expended by the Agent and the Lenders in connection with the AFS Obligations, this Article XVI and the enforcement thereof, together with interest on amounts recoverable under this Article XVI from the time when such amounts become due until payment, at a rate of interest equal to the rate after default for Floating Rate Advances set forth in Section 2.2.8. Waivers by Astec: Agent's and Lenders' Freedom to Act. Astec waives notice of acceptance of this Article XVI, notice of any action taken or omitted by the Agent or any Lender in reliance on this Article XVI, and any requirement that the Agent or the Lenders be diligent or prompt in making demands under this Article XVI, giving notice of any default by AFS or asserting any other rights of the Agent or any Lender under this Article XVI. Astec also irrevocably waives all defenses that at any time may be available in respect of the AFS Obligations by virtue of any statute of limitations, valuation, stay, moratorium law or other similar law now or hereafter in effect. Astec also irrevocably waives any benefit of any collateral which may from time to time secure the AFS Obligations and authorizes the Agent and the Lenders to take any action or exercise any remedy with respect thereto which they in their discretion shall determine, without notice to Astec. Astec agrees that the validity and enforceability of this Article XVI 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 AFS 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 AFS Obligations or any part thereof or any agreement relating thereto, or any collateral securing the AFS Obligations or any part thereof; (c) any waiver of any right, power or remedy or of any default with respect to the AFS 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 with respect to the AFS Obligations or any part thereof; (e) the enforceability or validity of the AFS Obligations or any part thereof or the genuineness, enforceability or validity of any agreement relating thereto or with respect to the AFS Obligations or any part thereof; (f) the application of payments received from any source to the payment of Indebtedness other than the AFS Obligations, any part thereof or amounts which are not covered by this Article XVI even though the Lenders or the Agent might lawfully have elected to apply such payments to any part or all of the AFS Obligations or to amounts which are not covered by this Article XVI or (g) the existence of any claim, setoff or other rights which Astec may have at any time against any of AFS in connection herewith or any unrelated transaction, all whether or not Astec shall have had notice or knowledge of any act or omission referred to in the foregoing clauses (a) through (g) of this Section 16.3. Unenforceability of AFS Obligations Against AFS. Notwithstanding (a) any change of ownership of AFS or the insolvency, bankruptcy or any other change in the legal status of AFS; (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 AFS Obligations; (c) the failure of AFS or the undersigned 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 AFS Obligations or this Article XVI, or to take any other action required in connection with the performance of all obligations pursuant to the AFS Obligations or this Article XVI; or (d) if any of the moneys included in the AFS Obligations have become irrecoverable from AFS for any other reason other than indefeasible payment in full of the AFS Obligations in accordance with their terms, this Article XVI shall nevertheless be binding on Astec. This Article XVI shall be in addition to any other guaranty or other security for the AFS 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 AFS Obligations is stayed upon the insolvency, bankruptcy or reorganization of AFS, or for any other reason, all such amounts otherwise subject to acceleration under the terms of this Agreement, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with the AFS Obligations shall be immediately due and payable by Astec. Subrogation; Subordination. Astec shall not enforce or otherwise exercise any right of subrogation to any of the rights of any Lender against AFS until all of the AFS Obligations are indefeasibly paid in full. The payment of any amounts due with respect to any indebtedness of AFS now or hereafter owed to Astec is hereby subordinated to the prior payment in full of all of the AFS Obligations. Astec agrees that, after the occurrence of any default in the payment or performance of any of the AFS Obligations, Astec will not demand, sue for or otherwise attempt to collect any such indebtedness of AFS to Astec until all of the AFS Obligations shall have been paid in full. If, notwithstanding the foregoing sentence, Astec shall collect, enforce or receive any amounts in respect of such indebtedness while AFS Obligations are still outstanding, such amounts shall be collected, enforced and received by Astec as trustee for the Agent and the Lenders and be paid over to the Agent on account of the AFS Obligations without affecting in any manner the liability of Astec under the other provisions of this Article XVI. The provisions of this Section 16.5 shall be supplemental to and not in derogation of any rights and remedies of the Agent and the Lenders under any separate subordination agreement which the Agent and the Lenders may at any time and from time to time enter into with Astec. Termination. Astec's obligations hereunder shall continue in full force and effect until AFS Obligations are indefeasibly paid in full and this Agreement is terminated, provided that this Article XVI 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 AFS Obligations is rescinded or must otherwise be restored or returned upon the bankruptcy, insolvency, or reorganization of AFS, or otherwise, as though such payment had not been made or other satisfaction occurred, whether or not the Lenders or the Agent is in possession of this Agreement. 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 AFS Obligations shall impair, affect, be a defense to or claim against the obligations of Astec under this Article XVI. Effect of Bankruptcy. Astec's obligations under this Article XVI shall survive the insolvency of AFS and the commencement of any case or proceeding by or against AFS 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 or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes to which any AFS is subject shall postpone the obligations of Astec under this Article XVI. Setoff. Regardless of the other means of obtaining payment of any of the AFS Obligations, each of the Agent and the Lenders is hereby authorized at any time and from time to time, without notice to Astec (any such notice being expressly waived by Astec) and to the fullest extent permitted by law, to set off and apply such deposits and other sums against the obligations of Astec under this Article XVI, whether or not the Agent and the Lenders shall have made any demand under this Article XVI and although such obligations may be contingent or unmatured. Further Assurances. Astec agrees to do all such things and execute all such documents as the Agent and the Lenders may consider necessary or desirable to give full effect to this Article XVI and to perfect and preserve the rights and powers of the Agent and the Lenders hereunder. [Signature Pages Follow]   In Witness Whereof , the Borrowers, the Lenders and the Agent have executed this Agreement as of the date first above written. ASTEC INDUSTRIES, INC. By: Print Name: Title: Address: 4101 Jerome Avenue Chattanooga, Tennessee 37407 Facsimile: (423) 867-4127 Telephone: (423) 867-4210 Attention: F. McKamy Hall ASTEC FINANCIAL SERVICES, INC. By: Print Name: Title: Address: 1725 Shepherd Road Chattanooga, Tennessee 37421 Facsimile: (423) 899-4456 Telephone: (423) 899-5898 Attention: Albert E. Guth BANK ONE, NA, individually and as Agent By: Print Name: Title: Address: 1 Bank One Plaza Chicago, Illinois 60670 Facsimile: (312) 732-5296 Telephone: (312) 732-5730 Attention: David T. McNeela SUNTRUST BANK By: Print Name: Title: Address: 201 Fourth Avenue North Nashville, Tennessee 37219 Facsimile: (615) 748-5269 Telephone: (615) 748-5745 Attention: Jim Sloan AMSOUTH BANK By: Print Name: Title: Address: 601 Market Center Chattanooga, Tennessee 37402 Facsimile: (423) 752-1558 Telephone: (423) 752-1535 Attention: Tracy Brown BRANCH BANK & TRUST CO. By: Print Name: Title: Address: Corporate Accounts Division P.O. Box 15008 Winston-Salem, North Carolina 27113 Facsimile: (336) 733-3254 Telephone: (336) 733-3251 Attention: James Stallings FIRSTAR BANK By: Print Name: Title: Address: 150 Fourth Avenue North, 2d Floor Nashville, Tennessee 37219 Facsimile: (615) 251-9247 Telephone: (615) 251-9280 Attention: Russell Rogers Schedule 1 Revolving Commitments/Percentages Lender Revolving Commitment Tranche A Commitment * Tranche B Commitment* Percentage Bank One, NA $40,000,000 $40,000,000 $16,000,000 32.00% Suntrust $30,000,000 $30,000,000 $12,000,000 24.00% AmSouth Bank $25,000,000 $25,000,000 $10,000,000 20.00% Branch Bank & Trust Co. $15,000,000 $15,000,000 $6,000,000 12.00% Firstar Bank $15,000,000 $15,000,000 $6,000,000 12.00% Total $125,000,000 $125,000,000* $50,000,000* 100% *The Tranche A Commitment and Tranche B Commitment of any Lender are sublimits of the Revolving Commitment of such Lender and the obligation of any Lender to make Loans under the Tranche A Commitment and the Tranche B Commitment is limited by the Revolving Commitment of such Lender and the limitations, terms and conditions set forth in Section 2.1.

Exhibit 10.27 Bond No. LPM 8166103 SURETY BOND KNOW ALL BY THESE PRESENTS, That we Labor Ready Central, Inc. a Washington corporation with headquarters in the City of Tacoma, Washington as Principal, and Fidelity and Deposit Company of Maryland authorized to do business in Arkansas, as Surety, are held and firmly bound unto the State of Arkansas for the usc of employees of the Labor Ready Central, Inc. or other persons who may be entitled to compensation under the Arkansas workers' compensation laws, in the full and just sum of Three Hundred Thousand and 00/100–––––––Dollars  ($300,000.00***) lawful money of the United States, for the payment of which sum we bind ourselves, our successors or assigns, jointly and severally, firmly by these presents. Signed, scaled and delivered this 28th day of December 2000.           The condition of the foregoing obligation is such, that if the Labor Ready Central Inc. which is about to make application to the Arkansas Workers' Compensation Commission for permission to carry its own risk under the workers' compensation laws of the State of Arkansas without insurance, and to provide a bond guaranteeing the payment by the employer of the compensation provided for under the laws, shall, in the event such permission be granted, pay or cause to be paid direct to the employees the compensation or benefits due or that may become due on all injuries occurring subsequent to the date of the execution of this bond as provided for by the workers ­compensation laws of the State of Arkansas, and the Arkansas Workers' Compensation Commission, with the express agreement and understanding, as a condition precedent to the execution and acceptance of this bond, that it is for the benefit of the unknown and unnamed employees of the said Labor Ready Central, Inc. or to the other persons entitled thereto, and that said employees or the persons entitled to said benefits urder the laws are hereby empowered and authorized to maintain direct action on this bond, and that no defense against such direct action may or shall be interposed by the Surety. Now, if the above bonded Principal, (its heirs, executors and administrators) (its successors or assigns) shall well and truly keep, do and perform each and every, all and singular, the matters and things in said bond as set forth and specified to be by the said Principal kept, done and performed at the time and in the manner in said bond specified, then this obligation shall be null and void; otherwise to be and remain in full force and effect.           Provided, the Surety herein, by and in the execution of this bond, does hereby recognize said bond as a direct financial guaranty to said employees.           Provided, further, that the total liability of the Surety shall not exceed jointly and severally the sum hereinbefore provided.           Provided, further, the Surety herein shall have the right to cancel this bond at any time by giving the Principal herein and the Arkansas Workers' Compensation Commission at least thirty (30) days prior written notice of its desire to do so. Such cancellation, however, is not to affect Surety's liability as to any compensation for injuries to the Principal's employees occurring prior to the date of cancellation specified in such notice. ATTEST /s/ Steven Cooper Cororate Secretary Labor Ready Central, Inc. Employer By /s/ Ronald L. Junck, President Fidelity and Deposit Company of Maryland By /s/ Patrick D. Dineen, Attorney-in-Fact

  EXHIBIT 10.04   Mark C. Shepherd 28 Chestnut Place Danville, CA 94506 Dear Mark: March 15, 2001 On behalf of Egghead.com I am pleased to offer you the position of Chief Financial Officer and Sr. Vice President, reporting to me in my role as President & CEO. You will start working with us during the latter part of March on some date mutually agreed upon between the two of us. Your annual base salary will be $250,000 paid in 26 increments over the course of the year. After we reach profitability, you will participate in Egghead's Sr. Management Bonus Program, which can add substantial income in the form of variable cash compensation. In the event that you are involuntarily terminated, except for a Termination for Cause as defined below, you will be paid 6 months of base salary in a lump sum within 30 days of your termination date. Further, if you voluntarily terminate within six months following the close of a Change of Control transaction as defined below, because your duties, responsibilities, or compensation is materially diminished, or the location of your office is changed by more than 50 miles, you will be paid 6 months base salary in a lump sum within 30 days of your termination date. You will receive an option to purchase 500,000 shares of Egghead common stock, subject to board approval. 375,000 shares of this stock will vest monthly over a four-year period after a six-month "cliff". Your stock option price for this option will be based upon the closing price of Egghead.com stock the workday prior to the commencement of your employment with us. The remaining 125,000 shares of stock will be in the form of a Time Accelerated Sock Option Program (TASOP). This is a new program for Egghead and will be introduced early in the second quarter of 2001. Your strike price for this second option will be based upon the closing price of Egghead.com stock the day before the program is announced. This option either vests ratably over a 36 month period after a six-month cliff, or as Egghead reaches profitability, whichever occurs first. On the day we publicly announce that the company made a profit during the previous quarter, 50% of the shares vest. On the day we publicly announce that Egghead earned 2% in net income during the previous quarter, an additional 25% of the shares vest. Finally, on the day we publicly announce that the company earned 3% in net income during the previous quarter the remaining 25% of the shares vest. Net income excludes special charges that are related to acquisitions, amortization/write-off of goodwill and acquired R&D, special compensation charges, etc. Egghead provides employees a wide array of benefits including a 401(K) plan through Fidelity Investments and an Employee Stock Purchase Plan. Most of these benefits, including health care benefits will begin on the first day of your employment. A brochure describing all our benefits plans is enclosed. You will be required to sign a standard Employee Inventions and Assignment Agreement and an Acknowledgement and Receipt of Egghead.com's Employee Handbook. Your employment will at all times be "at will", which means that you or Egghead can terminate your employment at any time with or without cause. There will be no express or implied agreements to the contrary. Please sign and return a copy of this letter to indicate your acceptance of our offer. This offer is contingent on the completion of a background check. If you have any questions, please feel free to call me or any other member of the executive staff. This offer expires if not signed and returned by Friday, March 16, 2001. You may fax it to me on (650) 473 6990. Sincerely, /s/ Jeff Sheahan Jeff Sheahan President & CEO I accept this job offer as described above: Signature: /s/ Mark C. Shepherd Date:3/15/01 Definition of Termination for Cause: The company's termination of an executive's employment for (I) willful failure or refusal without proper cause, to substantially perform his duties as an employee of the company; (ii) the executive's conviction for any criminal act, except that a misdemeanor conviction shall not constitute "Termination for Cause" unless it shall have involved misappropriate use of funds or property, fraud, or other similar activity which bears directly upon the executive's ability to perform faithfully his duties as an employee of the Company. The executive shall have an opportunity to appeal such termination to the board of directors of the company. Definition of Change of Control Transaction: (i) a merger or consolidation in which the voting shares of the Corporation immediately before the merger or consolidation do not represent, or are not converted into shares representing, a majority of the voting poser of the surviving corporation; (ii) a transfer of shares representing more than 50% of the voting power of the Corporation to a single entity or person or group of related entities or persons; or (iii) a sale of substantially all of the assets of the Corporation. --------------------------------------------------------------------------------

Exhibit B TUCOWS INC. STOCKHOLDER AGREEMENT   THIS STOCKHOLDER AGREEMENT ("Agreement"), dated as of March __, 2001, is by and between Infonautics, Inc., a Pennsylvania corporation ("Parent"), Tucows Inc., a Delaware corporation (the "Company") and the stockholder of the Company listed on the signature page hereof (the "Stockholder"). WITNESSETH: WHEREAS, the Stockholder, as of the date hereof, is the beneficial owner (as defined in Rule 13d-3(a) under the Securities Exchange Act of 1934, as amended) of the number and class of shares of capital stock ("Stock") of the Company set forth below the name of the Stockholder on the signature page hereof (the "Shares"); WHEREAS, in reliance upon the execution and delivery of this Agreement, Parent and a wholly owned subsidiary of Parent ("Sub") will enter into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), with the Company which provides, among other things, that upon the terms and subject to the conditions thereof, Sub will be merged with and into the Company, and the Company will become a wholly owned subsidiary of Parent (the "Merger"); and WHEREAS, to induce Parent to enter into the Merger Agreement and to incur the obligations set forth therein, the Stockholder is entering into this Agreement pursuant to which the Stockholder agrees to vote in favor of the Merger and the approval of the Merger Agreement and, in the case of holders of the Company's Series A Convertible Preferred Stock, par value $.001 per share (the "Preferred Shares"), to convert the Preferred Shares into shares of the Company's common stock, par value $.001 per share ("Common Stock"), and to make certain agreements with respect to the Shares upon the terms and conditions set forth herein; NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Voting of Shares. The Stockholder agrees that until the earlier of (i) the Effective Time (as defined in the Merger Agreement) or (ii) the date on which the Merger Agreement is terminated pursuant to its terms (the earliest thereof being hereinafter referred to as the "Expiration Date"), at every meeting of stockholders of the Company at which any of the following matters is considered or voted upon, and at every adjournment or postponement thereof, and on every action or approval by written consent of the stockholders of the Company with respect thereto, the Stockholder shall vote, or cause the holder of record to vote, all Shares beneficially owned by the Stockholder as of the date of such vote or consent, and which are entitled to vote as of the date of such vote or consent, (i) for adoption and approval of the Merger Agreement and in favor of the Merger and any other transaction contemplated by the Merger Agreement and (ii) against any Acquisition Proposal (as defined below) other than the Merger. Any such vote shall be cast or consent shall be given in accordance with such procedures relating thereto as shall ensure that it is duly counted for purposes of determining that a quorum is present and for purposes of recording the results of such vote or consent. Section 2. Covenants of the Stockholder. The Stockholder covenants and agrees for the benefit of Parent that, until the Expiration Date, such Stockholder will: (a) not, directly or indirectly, sell, transfer, pledge, hypothecate, encumber, assign, tender or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, pledge, hypothecation, encumbrance, assignment, tender or other disposition of, any of the Shares beneficially owned by the Stockholder or any interest therein, provided that this restriction shall not apply to any sale, transfer, pledge, hypothecation, encumbrance, assignment, tender or disposition (or contract, option, arrangement or understanding with respect thereto) to any person who agrees to be bound by the terms of this Agreement; (b) not grant any powers of attorney or proxies or consents in respect of any of the Shares beneficially owned by the Stockholder, deposit any of such Shares into a voting trust, enter into a voting agreement with respect to any of such Shares or otherwise restrict the ability of the holder of any of the Shares beneficially owned by the Stockholder freely to exercise all voting rights with respect thereto; (c) not, and shall direct and cause the Stockholder's agents not to: (i) initiate, solicit or seek, directly or indirectly, any inquiries or the making or implementation of any proposal or offer (including, without limitation, any proposal or offer to the Company's stockholders or any of them) with respect to a merger, acquisition, consolidation, recapitalization, liquidation, dissolution or similar transaction involving, or any purchase of all or any substantial portion of the assets or any equity securities of, the Company (an "Acquisition Proposal"); (ii) engage in any negotiations concerning an Acquisition Proposal, or provide any confidential information or data to, or have any substantive discussions with, any person relating to an Acquisition Proposal; or (iii) otherwise cooperate in any effort or attempt to make, implement or accept an Acquisition Proposal; (d) shall notify Parent immediately if any inquiries, proposals or offers related to an Acquisition Proposal are received by, any confidential information or data in connection with an Acquisition Proposal is requested from, or any negotiations or discussions related to an Acquisition Proposal are sought to be initiated or continued with, the Stockholder, and shall immediately cease and terminate any existing activities, including discussions or negotiations with any parties, conducted heretofore with respect to any of the foregoing and will take the necessary reasonable steps to inform his agents of the obligations undertaken in Section 2(c) above and this Section 2(d). (e) take, or cause to be taken, all action, and do, or cause to be done, all reasonable things necessary or advisable in order to consummate and make effective the transactions contemplated by this Agreement. Section 3. Representations and Warranties of the Stockholder. The Stockholder represents and warrants to Parent that: (a) the execution, delivery and performance by the Stockholder of this Agreement will not conflict with, require a consent, waiver or approval under, or result in a breach of or default under, any of the terms of any contract, commitment or other obligation (written or oral) to which the Stockholder is a party or by which any of the Stockholder's assets may be bound, and, if the Stockholder is a corporation or partnership, the organizational documents of such Stockholder; (b) this Agreement has been duly executed and delivered by the Stockholder and, if the Stockholder is a corporation or partnership, has been duly authorized by all requisite corporate or partnership action of such Stockholder, as the case may be, and upon its execution and delivery by Parent, will constitute a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to creditors' rights generally, and the availability of injunctive relief and other equitable remedies; (c) the Stockholder is the sole owner of the Shares, and the Shares represent all shares of the Stock beneficially owned by the Stockholder at the date hereof, and the Stockholder does not have any right to acquire, nor is the Stockholder the beneficial owner of, any other shares of Stock or any securities convertible into or exchangeable or exercisable for any shares of Stock (other than shares subject to options granted by the Company or issuable upon conversion of the Shares); (d) the Stockholder has full right, power and authority to execute and deliver this Agreement and to perform the Stockholder's obligations hereunder; and (e) the Stockholder owns the Shares free and clear of all liens, claims, pledges, charges, proxies, restrictions, encumbrances, proxies, voting trusts and voting agreements of any nature whatsoever other than as provided by this Agreement. The representations and warranties contained herein shall be made as of the date hereof and as of each day from the date hereof through and including the Effective Time (as defined in the Merger Agreement). If the Stockholder is an officer or director of the Company, the Stockholder represents and acknowledges that the Stockholder is executing this Agreement in such Stockholder's individual capacity, and not in his capacity as an officer or director of the Company. Section 4. Adjustments; Additional Shares. In the event (a) of any stock dividend, stock split, merger (other than the Merger), recapitalization, reclassification, combination, exchange of shares or the like of the capital stock of the Company on, of or affecting the Shares or (b) that the Stockholder shall become the beneficial owner of any additional shares of Stock or other securities entitling the holder thereof to vote or give consent with respect to the matters set forth in Section 1 (including, without limitation, shares of Stock acquired upon the exercise of options), then the terms of this Agreement shall apply to the shares of capital stock or other instruments or documents held by the Stockholder immediately following the effectiveness of the events described in clause (a) or the Stockholder becoming the beneficial owner thereof as described in clause (b), as though, in either case, they were Shares hereunder. Section 5. Conversion of Preferred Shares. Pursuant to Article 4(B)(5) of the Certificate of Incorporation of the Company, as amended, the Stockholder agrees prior to or at the Effective Time to convert all of the Preferred Shares to shares of the Company's Common Stock. Section 6. Legend. Concurrently with the execution of this Agreement, the Stockholder is surrendering to the Company the certificates representing the Shares, and is hereby requesting that the following legend be placed on the certificates representing such Shares and shall request that such legend remain thereon until the Expiration Date: "The shares of capital stock represented by this certificate are subject to a Stockholder Agreement, dated as of March __, 2001, among the holder of this Certificate, Infonautics, Inc. and Tucows Inc. which agreement, among other things, restricts the sale or transfer of such shares except in accordance therewith." In the event that the Stockholder shall become the beneficial owner of any additional shares of Stock or other securities entitling the holder thereof to vote or give consent with respect to the matters set forth in Section 1, the Stockholder shall, upon acquiring such beneficial ownership, surrender to the Company the certificates representing such shares or securities and request that the foregoing legend be placed on such certificates and remain thereon until the Expiration Date. The Stockholder shall provide Parent with satisfactory evidence of his compliance with this Section 6 on or prior to the date ten business days after the execution hereof. Section 7. Specific Performance. The Stockholder acknowledges that the agreements contained in this Agreement are an integral part of the transactions contemplated by the Merger Agreement, and that, without these agreements, Parent would not enter into the Merger Agreement, and acknowledges that damages would be an inadequate remedy for any breach by the Stockholder of the provisions of this Agreement. Accordingly, the Stockholder, Parent and the Company each agree that the obligations of the parties hereunder shall be specifically enforceable and neither party shall take any action to impede the other from seeking to enforce such right of specific performance. Section 8. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed duly given (i) upon receipt, if delivered by hand, (ii) one day after deposit, if deposited with a nationally recognized courier service that guarantees next day delivery, or (iii) three business days after mailing, if mailed by registered or certified mail, postage prepaid, return receipt requested, to the Stockholder at the address listed on the signature page hereof, to Parent at 590 North Gulph Road, King of Prussia, PA 19406, Attention: President and CEO, with a copy to Joanne R. Soslow, Esquire, Morgan, Lewis & Bockius LLP, 1701 Market Street, Philadelphia, PA 19102, and to the Company at 96 Mowat Avenue, Toronto, Ontario M6K 3M1, Canada, Attn: Elliot Noss and Graham Morris, with a copy to David Fox, Esquire, Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, NY 10036, or to such other address as any party may have furnished to the other in writing in accordance herewith. Section 9. Binding Effect; Survival. This Agreement shall become effective as of the date hereof and shall remain in effect until the Expiration Date. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, personal representatives, successors and assigns. Neither this Agreement nor any of the rights, interests or obligations of the parties hereto may be assigned without the prior written consent of the other party. Section 10. Governing Law; Consent to Jurisdiction and Service of Process. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to any principles of conflicts of law that would compel the application of the substantive laws of a jurisdiction other than Delaware. Each of the parties hereto hereby consents to the jurisdiction of any state or federal court located within the state of Delaware and irrevocably agrees that all actions or proceedings relating to this Agreement may be litigated in such courts. The parties hereto accept the nonexclusive jurisdiction of the aforesaid courts and waive any defense of forum non convenient, and irrevocably agree to be bound by any judgment rendered thereby (subject to any appeal available with respect to such judgment) in connection with this Agreement. The Stockholder hereby irrevocably appoints Company to serve as his, her or its agent, to receive on his, her or its behalf service of all process in any such proceeding in any such court, such service being hereby acknowledged by the Stockholder to be effective and binding service in every respect. The Stockholder hereby agrees that service upon the Stockholder by mail shall constitute sufficient notice and service of process. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of Parent to bring proceedings or obtain or enforce judgments against the Stockholder in the courts of any other jurisdiction. Section 11. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be an original and all of which together shall constitute one and the same agreement. Section 12. Effect of Headings. The section headings herein are for convenience of reference only and shall not affect the construction hereof. Section 13. Additional Agreements; Further Assurance. Subject to the terms and conditions herein provided, the Stockholder agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement. The Stockholder will provide Parent with all documents which may reasonably be requested by Parent and will take reasonable steps to enable Parent to obtain all rights and benefits provided it hereunder. The Stockholder hereby gives any consents or waivers that are reasonably required for the consummation of the Merger under the terms of any agreement to which the Stockholder is party or pursuant to any rights the Stockholder may have. Section 14. Amendment; Waiver. No amendment or waiver of any provision of this Agreement or consent to departure therefrom shall be effective unless in writing and signed by Parent, the Stockholder and the Company, in the case of an amendment, or by the party which is the beneficiary of any such provision, in the case of a waiver or a consent to depart therefrom. Section 15. Severability. If any term provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 16. Effectiveness. This Agreement shall not become effective unless Marvin I. Weinberger and Ms. Fran Solow Weinberger (the "Weinbergers") shall have entered into a shareholders agreement among the Weinbergers, Parent and the Company containing substantially the same terms and conditions as contained herein. Section 17. Enforcement. The Company will upon demand pay to Parent the amount of any and all reasonable expenses of Parent, including the reasonable fees and disbursements of its counsel, which Parent may incur in connection the enforcement of this Agreement by Parent. Section 18. Time. Time is of the essence with respect to this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] --------------------------------------------------------------------------------   IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto all as of the day and year first above written. INFONAUTICS, INC.   By: __________________________ Name: Title:   TUCOWS INC.   By: __________________________ Name: Title:   STOCKHOLDER   ______________________________ (Signature)   ______________________________ (Signature of Spouse)   Print Name of Stockholder ______________________________ Address: ___________ ______ ____________  Number and Class of Shares:

EMPLOYMENT AND NON-COMPETITION AGREEMENT THIS AGREEMENT made as of the 1st day of February, 2000 by and among SOUTHINGTON SAVINGS BANK, with its principal offices at 121 Main Street, Southington, CT 06489 (The "Bank"), BANCORP CONNECTICUT, INC., with its principal offices at 121 Main Street, Southington, CT 06489 (the "Parent Corp.") and ROBERT D. MORTON, an individual residing in Southington, CT (the "Executive"). W I T N E S S E T H : Executive is currently employed by the Bank as its President and Chief Executive Officer and by the Parent Corp. as its President and Chief Executive Officer. This Agreement is entered into to set forth the terms of Executive's employment with the Bank and Parent Corp. and in order to ensure that the Bank and the Parent Corp. will have the continued attention and dedication of Executive, notwithstanding the possibility, threat or occurrence of a "Change of Control" (as defined below) of the Bank or the Parent Corp.. Accordingly, in consideration of the mutual promises and covenants contained herein, including but not limited to, the severance benefits provided to Executive by Bank or the Parent Corp. in the circumstances set forth below, and Executive's having access to Bank's and/or the Parent Corp.'s confidential business and technological information, the parties agree as follows: 1.     DEFINITIONS Where used in this Agreement: A.     "Cause" shall mean (a) the willful, repeated or continued failure by the Executive to perform duties reasonably requested of him hereunder, after Executive is notified in writing of such failure and fails to cure same within 15 days following his receipt of such notice; (b) commission by the Executive of a felony or a crime involving moral turpitude; (c) repeated misuse by the Executive of alcohol or controlled substances; (d) deception, fraud, misrepresentation, dishonesty, breach of fiduciary duty involving personal profit; (e) any act or omission by the Executive which substantially impairs the Bank's business, good will or reputation; (f) any willful violation by the Executive of any relevant and material law, rule or regulation of which Executive is aware or reasonably should have been aware, after Executive is notified in writing of such violation and fails to cure such violation within 15 days following his receipt of such notice (unless such violation is incapable of being cured, in which case no such notice or opportunity to cure shall be required): (g) any other material violation of any provision of this Agreement, including, but not limited to, restrictive covenants against competition and disclosure of confidential information, after Executive is notified in writing of such violation and fails to cure such violation within 15 days following his receipt of such notice (unless such violation is incapable of being cured, in which case no such notice or opportunity to cure shall be required); (h) Executive's removal and/or permanent prohibition from participating in the conduct of the Bank's affairs by the Commissioner of Banking of the State of Connecticut or the FDIC; or (i) termination of all obligations of the Bank and/or the Parent Corp. under this Agreement by the FDIC in connection with an agreement to provide financial assistance to or on behalf of the Bank and/or Parent Corp.. B.     "Change of Control" shall mean, with respect to either the Bank or the Parent Corp., the occurrence of any of the following:           (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 the Bank or the Parent Corp. (The "Outstanding Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Bank or the Parent Corp. entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); provided, however, that for purposes of this subparagraph (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Bank or the Parent Corp. (ii) any acquisition by the Bank or the Parent Corp., (iii) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Bank or the Parent Corp. or any corporation controlled by the Bank or the Parent Corp. or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subparagraph (c) below; or           (b)    Individuals who, as of the date hereof, are members of the Board of Directors of the Bank or the Parent Corp. (The "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors of the Bank or the Parent Corp.; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Bank's or the Parent Corp.'s shareholders, was approved by a vote of at lease 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 of Directors of the Bank or the Parent Corp.; or           (c)     Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Bank or the Parent Corp. (a "Business Combination") unless, immediately following such Business Combination, each of the following conditions are satisfied: (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 662/3% 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 (including, without limitation, a corporation which, as a result of such transaction, owns the Bank or the Parent Corp. or all or substantially all of the Bank's or the Parent Corp.'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 Common Stock and Outstanding 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 the Bank or Parent Corp. or any related corporation 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 Board at the time of the execution of the initial agreement, or of the action of such Board, providing for such Business Combination; or           (d)     Approval by the shareholders of the Bank or the Parent Corp. of a complete liquidation or dissolution of the Bank or the Parent Corp. that is not pursuant to a business Combination. C.     "Disability" shall mean the Executive's inability by reason of any physical or mental injury or illness to substantially perform the services required of him hereunder either for a period in excess of one hundred eighty (180) consecutive days or for a period of one hundred eighty (180) days in the aggregate during any three hundred sixty (360) day period. 2.      EMPLOYMENT DUTIES (a)     The Bank and Parent Corp. will employ the Executive as its President and Chief Executive Officer. The Executive will continue in such employment for the duration of the Term of Employment (as set forth below) and will perform all services which may be required of him in such office, and such services and assignments as may be issued by the Bank's Chief Executive Officer, in each case consistent with the title and responsibilities of his position and his expertise. (b)     Executive understands and agrees that Executive shall not, while employed by Bank and Parent Corp., undertake or engage in any other employment occupation or business enterprise without the prior written consent of Bank and Parent Corp.. The provisions of this Paragraph 4 shall not be deemed to preclude membership in professional societies, lecturing or the acceptance of honorary positions, that are in any case incidental to Executive's employment by Bank and Parent Corp. and which are not adverse or antagonistic to Bank and Parent Corp., their business or prospects, financial or otherwise. 3.     TERM OF EMPLOYMENT Subject to the renewal provisions of this Agreement, the term of this Agreement shall commence on February 1, 2000 and shall expire on December 31, 2001 (the "Initial Period"), unless terminated earlier by either party in accordance with the provisions of Paragraph 8. This Agreement shall automatically renew for successive one year periods unless either party (the Bank and the Parent Corp. being considered as one party for purposes of this Paragraph 3) delivers written notice of its intention not to renew this Agreement at least twelve (12) months prior to the expiration of the then-current term. The phrase "Term of Employment" shall mean the Initial Period and all renewal periods. In the event that Executive's employment relationship with Bank is terminated, Executive's obligations under Paragraphs 10 and 11 hereof nevertheless shall survive such termination. 4.     COMPENSATION (a)     For service commencing April 1, 2000, the Executive's base salary will be at the annual rate of Two Hundred Fifty Thousand Five Hundred ($250,500.00) Dollars. The Bank will review the Executive's salary annually, on or before April 1st of each employment year. The Executive's base salary will not be reduced below $250,500.00 or, if his base salary is increased, below such increased amount. (b)     The Executive's base salary will be paid at periodic intervals in accordance with the Bank's payroll practices for executive employees. (c)     The Bank will deduct and withhold, from any payments to the Executive hereunder, any and all federal, state and local income and employment withholding taxes and any other amounts required to be deducted or withheld by the Bank under applicable law. 5.     EXPENSE REIMBURSEMENT The Bank shall reimburse the Executive for all customary, ordinary and necessary business expenses incurred by him in the performance of his duties hereunder in accordance with Bank policies and procedures. 6.     FRINGE BENEFITS During the Term of Employment, the Executive will be eligible to participate in any retirement plan, group life insurance plan, group medical and dental insurance plan (same co-payments as applicable to other employees of the Bank), accidental death and dismemberment plan, short-term and long-term disability program and other employee benefit plans that are made available to other executive officers and for which he qualifies, together with supplemental plans now existing for his benefit. The Executive will be eligible for five (5) weeks of paid vacation during each calendar year in which he is employed hereunder. 7.     DEATH If the Executive dies during the Term of Employment, the employment relationship created by this Agreement will terminate, and the Executive's salary shall continue to be paid to his designated beneficiary or, if none, to his personal representative only through the end of the month in which his death occurred. In addition, the Executive, or his designated beneficiary or personal representative, will be entitled to such death benefits as may be payable under Paragraph 6. 8.     TERMINATION (a)    This Agreement may be terminated only under the following circumstances:   (i) Any party may terminate this Agreement on thirty (30) days notice to the other party (except as provided below);   (ii) This Agreement and the Executive's employment shall terminate upon Executive's death or retirement in accordance with the Company's normal retirement policies;   (iii) If the Executive is disabled within the meaning of Paragraph 1C, the Company may terminate his employment upon not less than thirty (30) days prior written notice unless during such thirty day period Executive resumes the performance of his duties hereunder on a full-time basis; or   (iv) The Company may immediately terminate the Executive's employment for "Cause" (as defined above). (b)     In the event that the Bank or Parent Corp. terminates the Executive's employment due to Disability or pursuant to Section 8(a)(ii), Executive or his estate will be entitled to receive all accrued salary and benefits through the date of termination, including, without limitation, all benefits to which he is entitled under any disability plans or insurance maintained by the Bank or Parent Corp.. (c)     In the event that the Bank or Parent Corp. terminates the Executive's employment for Cause, or Executive terminates this Agreement pursuant to Section 8(a)(i), the Executive will be entitled to receive all accrued salary and benefits through the date of termination. 9.     SEVERANCE BENEFIT (a)     If (i) the Bank or Parent Corp. terminates this Agreement without "Cause" (other than on account of the Executive's death, retirement or "Disability") or (ii) the Executive voluntarily terminates his employment with six (6) months following the occurrence of a Change of Control, the Executive will be entitled to receive in full satisfaction of the Bank's and Parent Corp.'s obligations to the Executive under this Agreement (A) all accrued salary and benefits through the effective date of such termination; (B) a severance benefit equal to the sum of (x) thirty-six (36) months pay at Executive's then current base salary payable either in a single lump sum or, at the Executive's option, over thirty-six (36) month period in accordance with the Bank's regular payroll cycle and (y) three times the most recent annual bonus received by Executive from the Bank or the Parent Corp.; and (C) all benefits then owed to Executive under all employee benefit plans maintained by the Bank and/or the Parent Corp.. In addition, all stock options granted to the Executive by the Bank and/or the Parent Corp. shall be fully exercisable, except to the extent that the acceleration of vesting thereunder will materially adversely affect the accounting treatment applicable to any Change of Control. In addition, Executive shall continue to receive paid coverage (subject to his payment of the same share of the premium cost as is paid by other Bank employees) under the Bank's group health insurance plan (as such plan may be modified from time to time), in accordance with Executive's coverage elections in effect immediately prior to his termination of employment, for a period commencing at the termination of his employment and ending at the earlier of (i) twelve (12) months thereafter; or (ii) the date on which Executive obtains coverage under another employer's group health plan, in which case Executive's participation in the Bank's plan will terminate. Thereafter, the Executive shall have whatever rights are available to him under the Consolidation Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"). (b)     Except as expressly set forth above, the foregoing payments and benefits to the Executive shall not be reduced by the amount of any compensation or benefits received by the Executive from other employers following the termination of this Agreement. 10.     CONFIDENTIALITY The Executive has been, and will in the future be, exposed to confidential information of the Bank and/or the Parent Corp., including, but not limited to, financial information, business plans, product and service ideas, new and existing customer lists, vendor lists, account information, pricing policies, trade secrets, methods, procedures and confidential information of the Bank's and/or the Parent Corp.'s customers (the "Confidential Information"). The Executive agrees as follows: (a)     All Confidential Information expressly is understood to be the property of the Bank and/or its customers. All such Confidential Information and any other records or documents of the Bank in the possession or control of Executive shall be returned to the Bank immediately upon the cessation of the Executive's employment with the Bank.           (b)     The Executive shall keep all Confidential Information strictly confidential, and shall not use such Confidential Information on his own behalf or on behalf of any third parties or disclose the same to any third parties, either directly or indirectly, except in furtherance of the Bank's business or as the Bank may direct. 11.     POST-EMPLOYMENT RESTRICTIONS ON COMPETITION           (a)     In consideration of the severance benefits provided to the Executive herein, which Executive acknowledges he would not otherwise be entitled to in the absence of this Agreement, the Executive covenants and agrees that, for a period of one (1) year following the voluntary termination by Executive of his employment with the Bank pursuant to Section 8(a)(i) for any reason (except following a Change of Control), he will not accept employment or otherwise provide services in the position or function of President and Chief Executive Officer or in any similar capacity to any bank headquartered or having its Connecticut operations headquartered within the "Restricted Territory" set forth on Exhibit A. The foregoing restriction applies solely to the Executive's employment or performance of services to banks headquartered or having their Connecticut operations headquartered within the Restricted Territory. In addition, the Executive covenants and agrees that, during the term of this Agreement and for a period of one (1) year following the termination of his employment with the Bank for any reason, he will not encourage or solicit directly or indirectly any employee of the Bank (i) to leave the Bank for any reason or (ii) to devote less that all of his or her efforts to the Bank's business.           (b)     The Executive and the Bank acknowledge and agree that they have attempted to limit Executive's ability to compete with the Bank only to a reasonable extent. It is the desire and intent of the parties hereto that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. However, the Executive and the Bank agree that if a court finds that the scope of any one or more of the provisions contained in this Paragraph 11 shall, for any reason, be invalid, illegal, excessively broad, unreasonable, or unenforceable in any respect, then the court may modify the covenant to render it reasonable. 12.     SEVERABILITY If any provision, paragraph, or subparagraph of this Agreement is determined by a Court to be void, invalid, illegal, unreasonable or unenforceable, in whole or in part, this adjudication shall not affect the validity of any other provision in this Agreement. Each provision, paragraph or subparagraph of this Agreement is severable from every other provision, paragraph and subparagraph and constitutes a separate and distinct covenant. 13.     REMEDIES The Executive acknowledges and agrees that compliance with the confidentiality obligations and non-competition contained in this Agreement is necessary and essential to protect the business and goodwill of Bank and/or the Parent Corp., and that a breach of this Agreement by the Executive will result in irreparable and continuing damage to Bank and/or the Parent Corp., for which money damages would not provide adequate relief. Consequently, Executive agrees that, in the event that he breaches or threatens to breach the confidentiality obligations contained in this Agreement, the Bank and/or the Parent Corp., shall be entitled to either or both:           (a)     immediate injunctive relief in order to prevent the continuation of such harm to Bank and/or to the Parent Corp. and to enforce the terms of this Agreement without the necessity of posting a bond; and           (b)     money damages insofar as they can be determined. Nothing in this Agreement shall be construed to prohibit Bank from pursuing any other remedy, the parties having agreed that all remedies are cumulative. 14.     GOVERNING LAW AND JURISDICTION This Agreement and the enforceability thereof shall be governed by and construed in accordance with the laws of the State of Connecticut. Any action or proceeding arising out of or relating to this Agreement may be commenced in any state court or United States District Court located in the State of Connecticut. 15.     MODIFICATION The Parent Corp., the Bank and the Executive agree that this Agreement may not be modified or amended except by a written instrument executed by Executive and an authorized officer of Bank and the Parent Corp.. 16.     COMPLETE AGREEMENT This Agreement constitutes the entire agreement among the Parent Corp., the Bank and Executive and shall supersede and prevail over all other prior agreements, understandings or representations by or between the parties, whether oral or written, with respect to the subject matters contained herein. 17.     ASSIGNMENT This Agreement and the rights and obligations of the parties hereto shall bind and inure to the benefit of any successor or successors of Bank and the Parent Corp. by reorganization, merger or consolidation and any assignee of all or substantially all of its business and properties, but neither this Agreement nor any rights or benefits hereunder may be assigned by Executive. 18.     WAIVERS If any party hereto shall waive any breach of any provisions of this Agreement, such party shall not be deemed to have waived any preceding or succeeding breach of the same or any other provision of the Agreement. 19.     HEADINGS The headings of the sections in this Agreement are inserted for convenience only and shall not be deemed to constitute a part of the Agreement nor to affect the meaning of the Agreement. 20.     ATTORNEYS' FEES If any party to this Agreement breached any terms of this Agreement, then that party shall pay to the non-defaulting party all of the non-defaulting party's costs and expenses, including reasonable attorneys' fees, incurred by that party in enforcing the terms of this Agreement. 21.     CERTAIN ADDITIONAL PAYMENTS TO THE EXECUTIVE           (a)     Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Parent Corp. and/or the Bank 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 (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any similar section of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to an the "Excise Tax"), then, notwithstanding any provision herein to the contrary, 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 and employment taxes and any Excise Tax imposed upon the Gross-up Payment, the Executive retains under this Agreement, after the imposition of all applicable taxes, the same amount that he would have retained had he not been subject to the Excise Tax. The Gross-up Payment under this Paragraph shall be made no later than the later of (i) thirty (30) days following the date of the Payment; or (ii) the determination by the Accounting Firm pursuant to Paragraph 21(b) that a Gross-up Payment is required.           (b)     Subject to the provisions of Paragraph 21(c), all determinations required to be made under this Paragraph, including whether a Gross-up Payment is required and the amount of such Gross-up Payment, shall be made by a recognized firm of certified public accountants to be designated by the bank (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Parent Corp. and/or the Bank and the Executive within 30 days of termination of employment under this Agreement, if applicable, or such earlier time as is required by the Executive or the Parent Corp. and/or the Bank. When calculating the amount of the Gross-up Payment, the Executive shall be deemed to pay:           (i)     Federal income taxes at the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made, and           (ii)     Any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained for deduction of such state and local taxes if paid in such year.           All fees and expenses of the Accounting Firm shall be borne solely by the Bank and/or the Parent Corp.. The Bank or the Parent Corp. shall furnish an engagement letter to the Accounting Firm in a form acceptable to the Bank and the Parent Corp. and the Accounting Firm in connection with the performance of the Accounting Firm's services hereunder.           If the Accounting Firm has performed services for the person, entity or group who causes a Change of Control, or affiliate thereof, the Executive may select an alternative accounting firm from any nationally recognized firm of certified public accountants (which alternative firm shall be referred to hereunder as the "Accounting Firm"). If the Accounting Firm determines that no Excise Tax is payable by the executive, the Bank and/or Parent Corp. shall cause the Accounting Firm to furnish the Executive with an opinion that he has substantial authority not to report any Excise Tax on his federal income tax return. Any determination by the Accounting Firm shall be binding upon the Parent Corp. and the Bank 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 Parent Corp. and/or the Bank as a result of such determination should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Parent Corp. and/or the Bank exhausts its remedies pursuant to Section 21(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 Parent Corp. and/or the Bank to or for the benefits of the Executive.           (c)     The Executive shall notify the Parent Corp. and/or the Bank in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Parent Corp. and/or the Bank of the Gross-up Payment. Such notification shall be given as soon as practicable but no later than twenty business days after the Executive receives written notice of such claim and shall apprise the Parent Corp. and/or the Bank of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which he gives such notice to the Parent Corp. and/or Bank (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Parent Corp. and/or the Bank notified the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:   (i) give the Parent Corp. and/or the Bank any information reasonably requested by the Parent Corp. and/or the Bank relating to such claim;         (ii) Take such action in connection with contesting such claim as the Parent Corp. and/or the Bank 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 Parent Corp. and/or the Bank.         (iii) cooperate with the Parent Corp. and/or the Bank in good faith in order effectively to contest such claim, and         (iv) permit the Parent Corp. and/or the Bank to participate in any proceedings relating to such claim; provided, however, that the Parent Corp. and/or the Bank shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and such other costs and expenses. Without limitation on the foregoing provisions of this Paragraph, the Parent Corp. and/or the Bank shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in a permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Parent Corp. and/or the Bank shall determine; provided, however, that if the Parent Corp. and/or the Bank directs the Executive to pay such claim and sue for a refund, the Parent Corp. and/or the Bank shall advance the amount of such payment to the Executive, on an interest free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Parent Corp. and/or the Bank's control of the contest shall be limited to issues with respect to which a Gross-up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.           (d)     If, after the receipt by the Executive of any amount advanced by the Parent Corp. and/or the Bank pursuant to Paragraph 21(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Parent Corp. and/or the Bank's complying with the requirements of Paragraph 21(c)) promptly pay to the Parent Corp. and/or the Bank the amount of such refund (together with any interest paid or credited thereon by the taxing authority after deducting any taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Parent Corp. and/or the Bank pursuant to Paragraph 21(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Parent Corp. and/or the Bank does not notify the Executive in writing of its intent to contest such denial or refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-up Payment required to be paid under Paragraph 21(a). The forgiveness of such advance shall be considered part of the Gross-up Payment and subject to gross-up for any taxes (including interest or penalties) associated therewith. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date and year first above written.   SOUTHINGTON SAVINGS BANK           /s/ Walter Hushak                        By:    Walter Hushak   Title:  Chairman             BANCORP CONNECTICUT INC.           /s/ Walter Hushak                         By:    Walter Hushak   Title:  Director             EXECUTIVE           /s/ Robert D. Morton                     Robert D. Morton   -------------------------------------------------------------------------------- EXHIBIT A RESTRICTED TERRITORY           The restriction set forth in Paragraph 11 of this Agreement to which this Exhibit is attached shall apply to banks headquartered or having Connecticut operations headquartered in the following municipalities within the State of Connecticut:           Southington, Meriden, Wallingford, New Britain, Plainville, Cheshire, Wolcott, Waterbury and Bristol    

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.19 SALES AGENT AGREEMENT     THIS AGREEMENT is entered into as of March 1, 2001, by and between PerfectData Corporation, a California corporation, with its principal place of business at 110 West Easy Street, Simi Valley, California 93065-1689 (hereinafter "CLIENT"), and Terry J. Baker with his principal place of business at 1595 Regatta Road, Laguna Beach, California 92651 (hereinafter "TJB"). CLIENT and TJB are hereinafter referred to as (the "Parties"). WITNESSETH:     In consideration of the promises and mutual covenants hereinafter contained, the parties hereto agree as follows: 1.The Services     TJB shall act as a non-exclusive sales agent for the CLIENT to sell to retailers the CLIENT's products anywhere in the world (hereinafter referred to as the "Services"). All customers to which TJB sells the CLIENT's products shall be the CLIENT's customers and not TJB's customers. TJB agrees to use his reasonable efforts to solicit orders for the sale of the products. TJB shall promptly forward to the CLIENT all orders solicited for the products. The CLIENT may discontinue production of any particular style of its products at any time in its sole discretion. TJB shall cooperate as reasonably requested by the CLIENT in the collection of overdue accounts resulting from orders solicited by TJB. TJB shall place all product orders with the CLIENT on such forms and in accordance with such procedures as the CLIENT shall establish from time to time. CLIENT shall have the right, in its sole discretion, to accept or reject any order. TJB may not bind the CLIENT. All sales of product, shall be made at the prices set forth on the CLIENT's price list, as published from time to time by the CLIENT. The CLIENT shall have the exclusive right, in its sole discretion, to determine whether, to what extent and on what terms credit shall be extended to customers. 2.Compensation and Reimbursement     (a) CLIENT shall pay TJB a base fee of $5,000 per month during the term hereof payable on the 1st day of each month commencing March 1st, 2001. CLIENT will also reimburse TJB for related out-of-pocket expenses (with documented receipts) including but not limited to travel and telephone expenses. Any expense greater than $250.00 will be pre-approved by CLIENT. Upon the execution hereof, CLIENT shall also pay to TJB a $5,000 signing bonus.     (b) The Client will also pay to TJB a commission equal to five (5%) percent of the client's Net Sales in excess of (i) Four Hundred Fifty Thousand ($450,000) Dollars per calendar quarter commencing with the quarter ending June 30, 2001 and (ii) One Hundred Fifty Thousand ($150,000) Dollars for March 2001. Each commission payment shall be made within thirty (30) days of the end of the quarter and by April 30, 3001 with respect to March, 2001. In the event that this Agreement is terminated prior to march 31, 2002, the amount to be paid under this Section (b) shall be based upon a pro rata amount of $450,000 based upon the amount of days in the quarter elapsed prior to the date of termination (e.g., if one-third of the quarter elapsed the commission shall be 5% of Net Sales in excess of $150,000). For purposes of this Agreement, the term "Net Sales" shall mean the invoice price of the product shipped by the CLIENT during the term hereof minus cash, trade or promotional discounts, allowances, returns, bad debts, sales tax and shipping and handling charges. The commission paid for a sale with respect to which the product is returned or the receivable is a "bad debt" shall be deducted from the commission payment or, if his future commission is payable, shall be repaid by TJB to CLIENT upon demand a receivable shall be deemed to be a "bad debt" if it is more than 60 days past due. E–38 --------------------------------------------------------------------------------     (c) TJB shall be responsible for the payment of all federal, state and local taxes of any kind that are attributable to the compensation he receives.     (d) TJB agrees to devote as much time as is reasonably necessary in performing services hereunder to maximize CLIENT's sales.     (e) TJB agrees that he unconditionally waives his the right under Section 2 (c)(ii) of the Consulting Agreement, dated August 29, 2000 (the "Prior Agreement"), to have stock options granted him to purchase an aggregate of 40,000 shares of the Client's Common Stock. 3.Confidential Relationship     (a) "Confidential Information" shall include confidential and/or proprietary information such as business plan, knowledge, advice, marketing plans, projections, financial statements and data, contracts, customers, know-how, designs, operating methods, employees, trade secrets and ownership information. "Confidential Information" does not include information which (i) is or becomes generally available to the public other than as a result of disclosure by TJB; or (ii) was available to TJB on a non-confidential basis prior to its disclosure to TJB as evidenced by documents in TJB's files; or (iii) is obtained from third parties not subject to a similar duty to maintain such information as confidential In connection with this Agreement, TJB will be provided, and will have access to, certain Confidential Information of CLIENT. TJB acknowledges and understands that the CLIENT's Confidential Information is a valuable asset and property of CLIENT, and that CLIENT could suffer irreparable harm from the disclosure of all or any of such Confidential Information to third parties. Accordingly, TJB agrees (i) to hold all of CLIENT's Confidential Information in strict confidence, (ii) not to disclose any of such Confidential Information to third parties without the specific prior written consent of CLIENT, and (iii) not to use any such Confidential Information except for purposes absolutely necessary to the performance of its obligations under this Agreement. If TJB is legally required to disclose any Confidential Information of the CLIENT, TJB shall promptly notify the CLIENT of such requirements so that the CLIENT may seek an appropriate protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. If such protective order or other remedy is not obtained, or a party grants a waiver hereunder. TJB may furnish that portion (and only that portion) of the Confidential Information which TJB is legally compelled to disclose, and TJB shall use its best efforts to obtain reliable assurance that confidential treatment will be accorded any Confidential Information so furnished. In no event shall TJB oppose any action by the CLIENT to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information.     (b) During the term of this Agreement, TJB agrees that he shall not, directly or indirectly, in any capacity, on his own behalf or on behalf of any third party, sell or market any product which is competitive with any products sold by the CLIENT. TJB agrees that he shall not, directly or indirectly, in any capacity, on his own behalf or on behalf of any third party, during the term of this agreement or during the two (2) year period after the termination or expiration of the term, sell or market the "Silkyboard" product or any new version of the "Silkyboard" product. 4.Propriety Rights     The work product of the Services, and any writings, discoveries, inventions and innovations resulting from the Services, shall be promptly communicated to and become the property of CLIENT. TJB shall perform all lawful acts requested by CLIENT, (i) to perfect CLIENT's title therein, and (ii) where applicable, to enable CLIENT, or its nominee to obtain and maintain copyright, patent or other legal protection therefore anywhere in the world. Any such property that is copyrightable subject matter shall be considered a work made for hire, and CLIENT shall own the copyright and all extensions thereof the full and exclusive rights comprised in any such property. E–39 -------------------------------------------------------------------------------- 5.Term.     This Agreement shall be effective from march 1, 2001 to March 31, 2002. Either party may terminate this agreement for any reason with or without cause with thirty (30) advance written notice. If this Agreement is terminated before the above date, CLIENT's sole obligation shall be to pay TJB the amount due through the termination date. In the event of termination, or upon expiration of this Agreement, TJB shall return to CLIENT any and all equipment, documents, or materials, and all copies made thereof which TJB received from CLIENT for the purposes of this Agreement. 6.Indemnification     CLIENT shall indemnify and save TJB harmless from any damages, liabilities, expenses, and costs (including attorney's fees and court costs) incurred by TJB arising from or relating to this agreement, except for damages, liabilities, expenses, and costs resulting from TJB's misconduct or gross negligence in connection with this agreement. 7.Notices     All notices and billings shall be in writing and sent to the following addresses: PerfectData Corporation   Terry J. Baker 110 West Easy Street   1595 Regatta Road Simi Valley, CA 93065-1689   Laguna Beach, CA 92651 8.General (a)The terms and conditions of Paragraph 3, 4 and 6 hereof shall survive the expiration or termination of this Agreement as the case may be. (b)TJB shall not subcontract any of the Services to be performed without the prior written consent of CLIENT. (c)TJB shall perform the Services as an independent contractor and shall not be considered an employee of CLIENT for any purpose. (d)TJB shall maintain a presence with the CLIENT's offices at a minimum of 1 day per week. (e)This Agreement shall be governed by and construed in accordance with the state laws of the State of California. (f)This Agreement shall constitute the entire understanding between TJB and CLIENT relating to the terms and conditions of the services to be performed by TJB. (g)The Prior Agreement is hereby terminated except for Sections 3, 4 and 6 thereof which survive such termination. (h)TJB agrees that any breach or threatened breach by him of Section 3 or 4 of this Agreement shall entitle the CLIENT, in addition to all other legal remedies available to it, to a temporary or permanent injunction to enjoin such breach or threatened breach. TJB waives any defense that the CLIENT has an adequate remedy at law as a result of any such breach. E–40 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date written above. PerfectData Corporation   Terry J. Baker By:   /s/ HARRIS SHAPIRO      By:   /s/ TERRY J. BAKER        --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- Date: 3/1/01   Date: 3/1/01 E–41 -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.19 SALES AGENT AGREEMENT

Exhibit 10.1 [icclogo.jpg] 4460 ParkAvenue New York, NY 10022 Tel: (212) 521-1780 Fax: (212) 521-1949 Internet Address: [email protected] ICC INDUSTRIES INC. JOHN L. ORAM PRESIDENT           October 25, 2001 Pharmaceutical Formulations Inc. 460 Plainview Avenue Edison, New Jersey 08818 Attention:          Mr. James Ingram, President Re:     Conversion of ICC's Preferred Shares and Rights Offering Gentlemen: In connection with ICC’s conversion of its 2,500,000 shares of Series A Cumulative Redeemable Convertible Preferred Stock, this will confirm that ICC and PFI have agreed that ICC will convert its preferred stock and unpaid dividends at a conversion price of $.34 per share of common stock (instead of the $.075 per share conversion price at which ICC is entitled to convert such shares). This means that 10,441,176 shares would be issued to ICC on such conversion, instead of the 47,333,333 shares that would have been issued at a $.075 conversion price. The conversion shall occur on the date of completion of the formalities required to increase PFI’s authorized capital (i.e. immediately following the filing of the appropriate Certificate of Amendment to PFI’s Certificate of Incorporation, after approval at PFI’s next annual meeting). This will also confirm that ICC and PFI have agreed that ICC shall convert $15,000,000 of debt owed to ICC by PFI at the same price and on the same date as the conversion of the preferred shares, resulting in the issuance of an additional 44,117,647 shares to ICC, for a total of 54,558,823 shares to be issued to ICC at that time. After the above issuances of common stock, ICC would own 74,194,718 shares (or 87.40%) of the outstanding common shares. This will also confirm the agreement between ICC and PFI that PFI may offer the minority shareholders the right to subscribe to a proportionate number of common shares, also at $.34 per share, in order that their interests will not be diluted. If the shareholders do not approve an increase in the authorized capital of the Company at the next shareholders’ meeting, currently scheduled for November 28, 2001, the conversion rights under the preferred stock and accumulated dividends will revert to the original conversion rights as outlined in the Certificate of Designation, Preferences and Rights of Series A Cumulative Redeemable Convertible Preferred Stock of Pharmaceutical Formulations, Inc.; provided, however, that the conversion price shall never be lower than the then-par value of the Company’s common stock. If no rights offering substantially as outlined in the proxy statement for the annual meeting takes place on or prior to December 31, 2002, the agreements between the Company and ICC as set forth in this letter with regard to offering stock to the minority shareholders will be null and void. If the Company makes a rights offering on or prior to December 31, 2002 (and no other rights offering has been made after the date of this letter) and the price of shares that may be subscribed to by other shareholders with regard to conversion of the preferred stock and accrued dividends and the conversion of ICC debt is lower than $.34 per share, the conversions of preferred stock and debt noted above shall be revised such that ICC will receive for no additional consideration such number of additional shares at that price per share as it would have received had it converted its preferred shares and existing debt at that conversion price and the Company’s rights offering to the minority shareholders shall be based on such new number of shares being issued to ICC; provided, however, that no shares shall be issued to ICC or in any rights offering at a price less than the par value of such shares.   Very truly yours, ICC INDUSTRIES INC. /s/ John L. Oram                     John L. Oram JLO:leb AGREED: PHARMACEUTICAL FORMULATIONS, INC. By:     /s/ James C. Ingram                               James C. Ingram           President

    EXHIBIT 10.06             SILICON VALLEY BANK     Amendment to Loan Documents       Borrower: ZAMBA CORPORATION Address: 3033 Excelsior Boulevard, Suite 200   Minneapolis, Minnesota 55416 Date: as of June 30, 2001                   THIS AMENDMENT TO LOAN DOCUMENTS is entered into between SILICON VALLEY BANK,  COMMERCIAL FINANCE DIVISION (“Silicon”), whose address is 3003 Tasman Drive, Santa Clara, California  95054, and the borrower(s) named above (individually and collectively, jointly and severally, the “Borrower”), whose chief executive office is located at the above address (“Borrower’s Address”).                 The Parties agree to amend the Loan and Security Agreement between them, dated as of February 27, 2001 (as otherwise amended, the “Loan Agreement”), as follows, effective as of the date hereof.  (Capitalized terms used but not defined in this Amendment, shall have the meanings set forth in the Loan Agreement.):                 1.             Modification of TNW Base Amount.  The definition of “TNW Base Amount” set forth in Section 5 of the Schedule is hereby amended in its entirety to read as follows: The term “TNW Base Amount” means, as of any date of determination, the amount set forth below corresponding to the time period set forth below: (A) during the period commencing on the date of this Agreement and ending on June 30, 2001, $4,500,000; (B) during the period commencing on July 1, 2001 and ending on September 30, 2001, $3,291,000; and (C) from and after October 1, 2001, $3,416,000.                   2.             Additional Warrants.  The following hereby is added to the Schedule, in proper numerical order, as a new Section 9(5) thereof: (5)   Warrants.  On the date of execution and delivery of that certain Amendment to Loan Documents dated as of June 30, 2001 between Silicon and Borrower (the “June 30, 2001 Amendment”) (such date, the “Target Date”), Borrower shall provide Silicon with additional five-year warrants to purchase an additional 35,000 shares of common stock of the Borrower, at a price per share equal to the Target Date Designated Price (as defined herein), on terms acceptable to Silicon, all as set forth in the Warrant to Purchase Stock (the "Target Date Warrant") and related Registration Rights Agreement being executed concurrently with the June 30, 2001 Amendment.  The Target Date Warrant shall be deemed fully earned on the Target Date, shall be in addition to all interest and other fees, and shall be non-refundable. As used herein, the term "Target Date Designated Price" means the average closing price of the Shares reported for the 5 trading days immediately before the Target Date.                 3.             Representations True.  Borrower represents and warrants to Silicon that all representations and warranties set forth in the Loan Agreement, as amended hereby, are true and correct.                 4.             Fee.  In consideration for Silicon entering into this Amendment, Borrower shall concurrently pay Silicon a fee in the amount of $5,000.00, which shall be non-refundable and in addition to all interest and other fees payable to Silicon under the Loan Documents.  Silicon is authorized to charge said fee to Borrower’s loan account. [remainder of page intentionally left blank; signature page follows]                 5.             General Provisions.  This Amendment, the Loan Agreement, any prior written amendments to the Loan Agreement signed by Silicon and Borrower, and the other written documents and agreements between Silicon and Borrower set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, representations, agreements and under­standings between the parties with respect to the subject hereof.  Except as herein expressly amended, all of the terms and provisions of the Loan Agreement, and all other documents and agreements between Silicon and Borrower shall continue in full force and effect and the same are hereby ratified and confirmed.      Borrower:   Silicon:       ZAMBA CORPORATION   SILICON VALLEY BANK             By \s\ Michael H. Carrel   By    \s\ J. Anthony Clarkson   --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- President or Vice President   Title      Vice President       --------------------------------------------------------------------------------         By \s\ Ian Nemerov       --------------------------------------------------------------------------------       Secretary      

Exhibit 10.36     AMENDMENT TO PROMISSORY NOTE   This AMENDMENT TO PROMISSORY NOTE (the “Amendment”) is made this 31st day of August 2001, between EpicEdge, Inc., a Texas corporation (“Maker”), and Carl R. Rose  (“Payee”).   PREAMBLE   WHEREAS, Maker executed a Convertible Promissory Note on the 7th day of November, 2000 whereby it promised to pay to the order of Payee the sum of $400,000, (the “Original Note”), and   WHEREAS, in order to maximize the purposes for which the Original Note was procured, Maker and Payee have agreed to amend the payment terms.   NOW, THEREFORE, in exchange for ten and no/100 dollars ($10), the mutual promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend the Original Note as follows:   1.     Section (a) of the introductory paragraph of the Original Note shall be amended to reflect that interest shall be paid based on the principal amount plus accrued interest commencing September 1, 2001;   2.     Section 1(b) of the Original Note shall be deleted;   3.     Section 3(a) of the Original Note shall be amended to increase the conversion rate from fifty cents ($.50) to one dollar ($1.00);   4.     Section 2 of the Original Note shall be amended to increase the cure period upon written notice of an event of default from ten (10) days to thirty (20) days;   5.     Section (b) of introductory paragraph of the Original Note shall be amended to reflect that the principal shall mature on December 1, 2002. If the company defaults, the Payee has at its sole discretion the right to either convert the note at $.50 per share, demand payment or to extend the maturity date until December 1, 2003. If the company again defaults, the Payee has at its sole discretion the right to either convert the note at $.25 per share, demand payment or extend the maturity date until December 1, 2004.   6.     All other terms of the Original Note shall remain unmodified.   IN WITNESS WHEREOF, each of the parties hereto has executed this Amendment or has caused this Amendment to be executed on its behalf by a representative duly authorized, all as of the date first above set forth.   MAKER:         EPICEDGE, INC.         By:     Name:     Title:           PAYEE:             CARL R. ROSE    

Exhibit 10(iii)A(2) Page 23 NONQUALIFIED STOCK OPTION AGREEMENT (SURRENDERED ASPIRATION AWARD) THIS AGREEMENT, made as of the 4th day of October, 2000 (the "Grant Date"), between National Service Industries, Inc., a Delaware corporation (the "Company"), and "Name" (the "Optionee"). WHEREAS, the Company has adopted the National Service Industries, Inc. Long-Term Achievement Incentive Plan (the "Plan") in order to provide additional incentive to certain officers and key employees of the Company and its Subsidiaries; and WHEREAS, the Optionee performs services for the Company and/or one of its Subsidiaries; and WHEREAS, the Committee responsible for administration of the Plan has determined to grant the Option to the Optionee as provided herein, in accordance with the election previously made by the Optionee to surrender all or a portion of Optionee's Aspiration Achievement Incentive Award in exchange for Options. NOW, THEREFORE, the parties hereto agree as follows: 1. Grant of Option. ----- -- ------ 1.1 The Company hereby grants to the Optionee the right and option (the "Option") to purchase all or any part of an aggregate of "Amount" whole Shares subject to, and in accordance with, the terms and conditions set forth in this Agreement. 1.2 The Option is not intended to qualify as an Incentive Stock Option within the meaning of Section 422 of the Code. 1.3 This Agreement shall be construed in accordance and consistent with, and subject to, the provisions of the Plan (the provisions of which are incorporated herein by reference) and, except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same definitions as set forth in the Plan. 2. Purchase Price. -------- ----- The price at which the Optionee shall be entitled to purchase Shares upon the exercise of the Option shall be $19.4375 per Share. 3. Duration of Option. -------- -- ------ The Option shall be exercisable to the extent and in the manner provided herein for a period of ten (10) years from the Grant Date (the "Exercise Term"); provided, however, that the Option may be earlier terminated as provided in Section 6 hereof. Exhibit 10(iii)A(2) Page 24 4. Exercisability of Option. -------------- -- ------ The Option is, immediately upon grant, fully vested and exercisable, subject to expiration and termination as provided herein. 5. Manner of Exercise and Payment. ------ -- -------- --- ------- 5.1 Subject to the terms and conditions of this Agreement and the Plan, the Option may be exercised by delivery of written notice to the Company, at its principal executive office. Such notice shall state that the Optionee is electing to exercise the Option and the number of Shares in respect of which the Option is being exercised and shall be signed by the person or persons exercising the Option. If requested by the Committee, such person or persons shall (i) deliver this Agreement to the Secretary of the Company who shall endorse thereon a notation of such exercise and (ii) provide satisfactory proof as to the right of such person or persons to exercise the Option. 5.2 The notice of exercise described in Section 5.1 shall be accompanied by the full purchase price for the Shares in respect of which the Option is being exercised, in cash, by check, or by transferring Shares to the Company having a Fair Market Value on the day preceding the date of exercise equal to the cash amount for which such Shares are substituted. 5.3 Upon receipt of notice of exercise and full payment for the Shares in respect of which the Option is being exercised, the Company shall, subject to Section 17 of the Plan, take such action as may be necessary to effect the transfer to the Optionee of the number of Shares as to which such exercise was effective. 5.4 The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to any Shares subject to the Option until (i) the Option shall have been exercised pursuant to the terms of this Agreement and the Optionee shall have paid the full purchase price for the number of Shares in respect of which the Option was exercised, (ii) the Company shall have issued and delivered the Shares to the Optionee, and (iii) the Optionee's name shall have been entered as a stockholder of record on the books of the Company, whereupon the Optionee shall have full voting and other ownership rights with respect to such Shares. 6. Termination of Employment. ----------- -- ---------- 6.1 In General. -- ------- If the employment of the Optionee with the Company and its Subsidiaries shall terminate for any reason, other than for the reasons set forth in Sections 6.2 and 7.2 below, the Option shall terminate on the date of the Optionee's termination of employment. 6.2 Termination of Employment Due to Specified Reasons. ----------- -- ---------- --- -- --------- -------- If the Optionee's termination of employment is due to death, Disability, Exhibit 10(iii)A(2) Page 25 Retirement (termination on or after age 65), termination by the Company other than for cause, termination after attaining age 55, or voluntary termination, the following shall apply: (a) Termination Due To Death. In the event the Optionee dies while actively employed, the Option shall remain exercisable until seven (7) years after the date of grant or one (1) year after the date of termination, whichever is later (but in any event not beyond the Exercise Term), by (A) a Permitted Transferee (as defined in Section 8 below), if any, or such person(s) that have acquired the Optionee's rights under such Option by will or by the laws of descent and distribution, or (B) if no such person described in (A) exists, the Optionee's estate or representative of the Optionee's estate. (b) Termination by Disability. In the event the employment of the Optionee is terminated by reason of Disability, the Option shall remain exercisable until seven (7) years after the date of grant or one (1) year after the date the Committee determines the Optionee terminated for Disability, whichever is later (but in any event not beyond the Exercise Term). In the event of the Optionee's death after such termination, the Option shall continue to be exercisable in accordance with this subsection (b) as if the Optionee had lived and the Options shall be exercisable by the persons described in (a) above. (c) Termination by Retirement or by the Company Without Cause. In the event the employment of the Optionee is terminated by reason of Retirement (at or after age 65) or by the Company for any reason other than for cause, the Option shall remain exercisable until seven (7) years after the date of grant or five (5) years after the date of termination, whichever is later (but in any event not beyond the Exercise Term). In the event of the Optionee's death after such Retirement or termination, the Option shall continue to be exercisable in accordance with this subsection (c) as if the Optionee had lived and the Options shall be exercisable by the persons described in (a) above. (d) Termination After Attaining Age 55. In the event the Optionee terminates employment (other than as a result of death or Disability) after attaining age 55 but prior to age 65, unless the Committee determines otherwise at the time of such termination, the Option shall remain exercisable until five (5) years after the date of grant (but not beyond the Exercise Term). In the event of the Optionee's death after such termination, the Option shall continue to be exercisable in accordance with this subsection (d) as if the Optionee had lived and the Options shall be exercisable by the persons described in (a) above. Exhibit 10(iii)A(2) Page 26 (e) Voluntary Termination. In the event Optionee voluntarily terminates employment, the Options shall remain exercisable until ninety (90) days after the date of termination (but not beyond the Exercise Term). 7. Effect of Change in Control. ------ -- ------ -- ------- 7.1 Notwithstanding anything contained to the contrary in this Agreement, in the event of a Change in Control, the Optionee shall be permitted to surrender for cancellation within sixty (60) days after such Change in Control, the Option or any portion of the Option to the extent not yet exercised, and the Optionee shall be entitled to receive immediately a cash payment in an amount equal to the excess, if any, of (A) the greater of (x) the Fair Market Value on the date preceding the date of surrender, of the shares subject to the Option or portion of the Option surrendered, or (y) the Adjusted Fair Market Value of the Shares subject to the Option or portion thereof surrendered, over (B) the aggregate purchase price for such Shares under the Option; provided, however, that if the Option was granted within six (6) months prior to the Change in Control and the Optionee may be subject to liability under Section 16(b) of the Exchange Act, the Optionee shall be entitled to surrender the Option, or any portion of the Option, for cancellation during the sixty (60) day period following the expiration of six (6) months from the Grant Date and to receive the amount described above with respect to such surrender for cancellation. 7.2 If the employment of the Optionee is terminated within two (2) years following a Change in Control, the Option shall continue to be exercisable at any time until seven (7) years after the date of grant or three (3) years after the date of such termination of employment, whichever is later, but in no event after expiration of the Exercise Term. 8. Nontransferability. ------------------ The Option shall not be transferable other than by will or by the laws of descent and distribution. Notwithstanding the foregoing, the Option may be transferred, in whole or in part, without consideration, by written instrument signed by the Optionee, to any members of the immediate family of the Optionee (i.e., spouse, children, and grandchildren), any trusts for the benefit of such family members or any partnerships whose only partners are such family members (the "Permitted Transferees"). Appropriate evidence of any such transfer to the Permitted Transferees shall be delivered to the Company at its principal executive office. If all or part of the Option is transferred to a Permitted Transferee, the Permitted Transferee's rights hereunder shall be subject to the same restrictions and limitations with respect to the Option as the Optionee. During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee, or if applicable, by the Permitted Transferees. Exhibit 10(iii)A(2) Page 27 9. No Right to Continued Employment. -- ----- -- --------- ---------- Nothing in this Agreement or the Plan shall be interpreted or construed to confer upon the Optionee any right with respect to continuance of employment by the Company or a Subsidiary, nor shall this Agreement or the Plan interfere in any way with the right of the Company or a Subsidiary to terminate the Optionee's employment at any time. 10. Adjustments. ----------- In the event of a Change in Capitalization, the Committee may make appropriate adjustments to the number and class of Shares or other stock or securities subject to the Option and the purchase price for such Shares or other stock or securities. The Committee's adjustment shall be made in accordance with the provisions of Section 11 of the Plan and shall be effective and final, binding, and conclusive for all purposes of the Plan and this Agreement. 11. Terminating Events. ----------- ------ Subject to Section 7 hereof, upon the effective date of (i) the liquidation or dissolution of the Company or (ii) a merger or consolidation of the Company (a "Transaction"), the Option shall continue in effect in accordance with its terms and the Optionee shall be entitled to receive in respect of all Shares subject to the Option, upon exercise of the Option, the same number and kind of stock, securities, cash, property, or other consideration that each holder of Shares was entitled to receive in the Transaction. 12. Withholding of Taxes. ----------- -- ----- The Company shall have the right to deduct from any distribution of cash to the Optionee an amount equal to the federal, state, and local income taxes and other amounts as may be required by law to be withheld (the "Withholding Taxes") with respect to the Option. If the Optionee is entitled to receive Shares upon exercise of the Option, the Optionee shall pay the Withholding Taxes to the Company in cash prior to the issuance of such Shares. In satisfaction of the Withholding Taxes, the Optionee may make a written election (the "Tax Election"), which may be accepted or rejected in the discretion of the Committee, to have withheld a portion of the Shares issuable to him or her upon exercise of the Option, having an aggregate Fair Market Value equal to the withholding Taxes, provided that, if the Optionee may be subject to liability under Section 16(b) of the Exchange Act, the election must comply with the requirements applicable to Share transactions by such Optionees. 13. Employee Bound by the Plan. -------- ----- -- --- ---- The Optionee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. Exhibit 10(iii)A(2) Page 28 14. Modification of Agreement. ------------ -- --------- This Agreement may be modified, amended, suspended, or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the parties hereto. 15. Severability. ------------ Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms. 16. Governing Law. --------- --- The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of Delaware without giving effect to the conflicts of laws principles thereof. 17. Successors in Interest. ---------- -- -------- This Agreement shall inure to the benefit of and be binding upon each successor corporation. This Agreement shall inure to the benefit of the Optionee's legal representatives. All obligations imposed upon the Optionee and all rights granted to the Company under this Agreement shall be final, binding, and conclusive upon the Optionee's heirs, executors, Permitted Transferees, administrators, and successors. 18. Resolution of Disputes. ---------- -- -------- Any dispute or disagreement which may arise under, or as a result of, or in any way relate to, the interpretation, construction, or application of this Agreement shall be determined by the Committee. Any determination made hereunder shall be final, binding, and conclusive on the Optionee and the Company for all purposes. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. ____________________________________________ By:__________________________________________________ Secretary James S. Balloun Chairman, President, and Chief Executive Officer -------------------------------------------------- Name of Optionee: "Name"

10(c), (d), (j), (k), (l), (m), (r), (s) SECRETARIAL CERTIFICATION INDEPENDENT SUBCOMMITTEE OF THE PERSONNEL/SHAREHOLDER RELATIONS COMMITTEE OF TCF FINANCIAL CORPORATION  April 30, 2001 ******************************************************************************              Following discussion, and upon motion duly made, seconded and carried, the following resolutions were adopted: WHEREAS, the Independent Sub-Committee of the Personnel Committee has authority to recommend amendments to the plan and trust of the Executive Deferred, Senior Officer and Directors’ Deferred Compensation Plans and Trusts and the Board of Directors has authority to approve such amendments (subject to participant consent, where required); and              WHEREAS, the Independent Sub-Committee of the Personnel Committee has the authority to approve amendments to the Supplemental Employee Retirement Plan (“SERP”) Plan and Trust; and              NOW, THEREFORE, IT IS HEREBY              RESOLVED, that the following Appendix is hereby added to the Executive, Senior Officer and Directors’ Deferred Compensation Plans and Trusts and to the SERP Plan and Trust, effective May 16, 2001: APPENDIX RE: IRS NOTICE 2000-56 Notwithstanding anything to the contrary in the Plan or Trust, effective on and after May 16, 2001, TCF Financial stock or other assets contributed to the Trust by TCF Financial or any other Company for the benefit of employees or service providers of TCF Financial or such Company are subject to the claims of creditors (in the event of insolvency) of both TCF Financial and such Company.  In addition, such stock and assets are subject to the claims of creditors (in the event of insolvency) of any Company from which benefits are due to a participant or beneficiary under the terms of the Plan. Nothing in this Appendix, however, shall relieve any Company of its obligation to pay any benefits due from the Company to a participant or beneficiary under the terms of the Plan. Notwithstanding anything to the contrary in the Plan or Trust, effective on and after May 16, 2001, any TCF Financial stock or other assets not transferred to a Company’s employees or their beneficiaries will revert to TCF Financial upon termination of the Trust. ***********************************************              FURTHER RESOLVED, that Section 5(l) is hereby added to the Executive Deferred and Senior Officer Deferred compensation Plans reading as follows, and Section III(c), second paragraph, first clause of the SERP Plan is hereby amended in full to read as follows: Effective for distributions commencing on or after May 16, 2001, an Eligible Employee may elect to have benefits due under this Plan distributed in any one of the forms allowed by the Plan, provided that the election is in writing and is executed and delivered to TCF Financial or to its Corporate Secretary (or designee) on behalf of TCF Financial, no later than one year (365 days) before such Employee’s termination of employment or other distribution event.              FURTHER RESOLVED, that Section 5.a.of the Directors Deferred Compensation Plan is hereby amended in full to read as follows: Effective for distributions commencing on or after May 16, 2001, on or about the 30th day following a Director’s termination of service on all boards of directors of the Companies, the balance credited to the Director’s Account shall be paid in one single distribution of TCF Stock or in annual installment distributions of TCF Stock over the number of years directed by the Director in an election made by the Director, provided that such election is in writing and is executed and delivered to the Committee or the Secretary, on behalf of the Committee, no later than one year before such Director’s termination of service. I, Gregory J. Pulles, Secretary of  TCF Financial Corporation do hereby certify that the foregoing is a true and correct copy of excerpt of minutes of the Personnel/Shareholder Relations Committee TCF Financial Corporation meeting held on April 30, 2001 and that the minutes have not been modified or rescinded as of the date hereof. (Corporate Seal)           Dated:  July 2, 2001     /s/ Gregory J. Pulles   --------------------------------------------------------------------------------   Gregory J. Pulles  

Exhibit 10.26   LOAN MODIFICATION AGREEMENT   This Loan Modification Agreement is entered into as of November 1, 2001, by and between Broadvision Inc. ("Borrower") and Silicon Valley Bank ("Bank").   1.             DESCRIPTION OF EXISTING INDEBTEDNESS:  Among other indebtedness which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other documents, a Loan and Security Agreement, dated July 2, 1997, as may be amended from time to time, (the "Loan Agreement").  The Loan Agreement provided for, among other things, a Committed Line in the original principal amount of Three Million Dollars ($3,000,000).  The Loan Agreement has been modified pursuant to a First Amendment to Loan and Security Agreement dated February 5, 1998, pursuant to which, among other things, a Revolving Committed Line in the original principal amount of Two Million Two Hundred Fifty Thousand Dollars ($2,250,000) was incorporated.  Furthermore, the Loan Agreement has been modified pursuant to a Second Loan Modification Agreement dated May 3, 2000, pursuant to which, among other things, the original principal amount of the Revolving Committed Line increased to Ten Million Dollars ($10,000,000). Defined terms used but not otherwise defined herein shall have the same meanings as in the Loan Agreement.   Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as the "Indebtedness."   2.             DESCRIPTION OF COLLATERAL AND GUARANTIES.  Repayment of the Indebtedness is secured by the Collateral as described in the Loan Agreement and that certain Intellectual Property Security Agreement, dated July 2, 1997.   Hereinafter, the above-described security documents and guaranties, together with all other documents securing repayment of the Indebtedness shall be referred to as the "Security Documents".  Hereinafter, the Security Documents, together with all other documents evidencing or securing the Indebtedness shall be referred to as the "Existing Loan Documents".   3.             DESCRIPTION OF CHANGE IN TERMS.   A.            Modification(s) to Loan Agreement. A 1.             The following term under Section 1.1 entitled “Definitions” is hereby amended to read as follows:   “Revolving Maturity Date” is March 3, 2002.   4.             CONSISTENT CHANGES.  The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.   5.             PAYMENT OF LOAN FEE.  Borrower shall pay to Bank a fee in the amount of Seven Thousand Five Hundred Dollars ($7,500) (the “Loan Fee), plus all out-of-pocket expenses.   6.             CONCERNING REVISED ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE.  THE BORROWER AFFIRMS AND REAFFIRMS THAT NOTWITHSTANDING THE TERMS OF THE SECURITY DOCUMENTS TO THE CONTRARY, (I) THAT THE DEFINITION OF “CODE”, “UCC” OR “UNIFORM COMMERCIAL CODE” AS SET FORTH IN THE SECURITY DOCUMENTS SHALL BE DEEMED TO MEAN AND REFER TO “THE UNIFORM COMMERCIAL CODE AS ADOPTED BY THE STATE OF DELAWARE, AS MAY BE AMENDED AND IN EFFECT FROM TIME TO TIME AND (II) THE COLLATERAL IS ALL ASSETS OF THE BORROWER.  IN CONNECTION THEREWITH, THE COLLATERAL SHALL INCLUDE, WITHOUT LIMITATION, THE FOLLOWING CATEGORIES OF ASSETS AS DEFINED IN THE CODE: GOODS (INCLUDING INVENTORY, EQUIPMENT AND ANY ACCESSIONS THERETO), INSTRUMENTS (INCLUDING PROMISSORY NOTES), DOCUMENTS, ACCOUNTS (INCLUDING HEALTH-CARE-INSURANCE RECEIVABLES, AND LICENSE FEES), CHATTEL PAPER (WHETHER TANGIBLE OR ELECTRONIC), DEPOSIT ACCOUNTS, LETTER-OF-CREDIT RIGHTS (WHETHER OR NOT THE LETTER OF CREDIT IS EVIDENCED BY A WRITING), COMMERCIAL TORT CLAIMS, SECURITIES AND ALL OTHER INVESTMENT PROPERTY, GENERAL INTANGIBLES (INCLUDING PAYMENT INTANGIBLES AND SOFTWARE), SUPPORTING OBLIGATIONS AND ANY AND ALL PROCEEDS OF ANY THEREOF, WHEREVER LOCATED, WHETHER NOW OWNED OR HEREAFTER ACQUIRED.   7.             NO DEFENSES OF BORROWER.  Borrower (and each guarantor and pledgor signing below) agrees that, as of the date hereof, it has no defenses against the obligations to pay any amounts under the Indebtedness.   8.             CONTINUING VALIDITY.  Borrower (and each guarantor and pledgor signing below) understands and agrees that in modifying the existing Indebtedness, Bank is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Loan Documents.  Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect.  Bank's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Indebtedness.  Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Indebtedness.  It is the intention of Bank and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Bank in writing.  No maker, endorser, or guarantor will be released by virtue of this Loan Modification Agreement.  The terms of this paragraph apply not only to this Loan Modification Agreement, but also to all subsequent loan modification agreements.   9.             CONDITION.        The effectiveness of this Loan Modification Agreement is conditioned upon payment of the Loan Fee.   This Loan Modification Agreement is executed as of the date first written above.   BORROWER:   BANK:       BROADVISION, INC.   SILICON VALLEY BANK       By:     By:   Name:     Name:   Title:     Title:    

AMENDMENT NO. 5 TO EMPLOYMENT AGREEMENT AND AMENDMENT NO. 5 TO CHANGE OF CONTROL AGREEMENT                     This Amendment No. 5 to Employment Agreement and Amendment No. 5 to Change of Control Agreement is made as of the 31st day of October, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Lawrence B. Hawkins (the "Employee"). W I T N E S S E T H:                     WHEREAS, the Company has entered into an Employment Agreement with the Employee dated as of August 1, 1995, which has been previously amended four times (as amended, the "Employment Agreement");                     WHEREAS, the Company has entered into a Change of Control Agreement with the Employee dated as of December 5, 1995, which has been previously amended four times (as amended, the "Change of Control Agreement"); and                     WHEREAS, the Company and the Employee have agreed to an extension of the terms of the Employment Agreement and the Change of Control Agreement, as set forth herein.                     NOW, THEREFORE, for and in consideration of the continued employment of Employee by the Company and the payment of wages, salary and other compensation to Employee by the Company, the parties hereto agree as follows, effective October 31, 2000;                     Section 1.     Except as expressly amended herein, all of the terms and provisions of the Employment Agreement and Change of Control Agreement shall remain in full force and effect.                     Section 2.     Article I, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: > >             Employment Term.     The term of this Agreement (the "Employment > > Term") shall commence on the Agreement Date and shall continue through > > October 31, 2001, subject to any earlier termination of Employee's status as > > an employee pursuant to this Agreement.                     Section 3.     Article II, Section 2.1(a) of the Change of Control Agreement is hereby amended to read in its entirety as follows: > >             2.1    Employment Term and Capacity after Change of Control. (a) > > If a Change of Control occurs on or before October 31, 2001, then the > > Employee's employment term (the "Employment Term") shall continue through > > the second anniversary of the Change of Control, subject to any earlier > > termination of Employee's status as an employee pursuant to this Agreement.                     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above.   STEWART ENTERPRISES, INC. By:  /s/ James W. McFarland                               James W. McFarland            Compensation Committee Chairman     EMPLOYEE:   /s/   Lawrence B. Hawkins                                               Lawrence B. Hawkins

Exhibit 10.1 OCEAN ENERGY, INC. OUTSIDE DIRECTORS DEFERRED FEE PLAN (As Amended and Restated Effective July 1, 2001) 1. History and Purposes of the Plan The Ocean Energy, Inc. Outside Directors Deferred Fee Plan ("Plan") was originally adopted on May 16, 1983 by Ocean Energy, Inc., a Delaware corporation (the "Company"), formerly known as Ocean Energy, Inc, a Texas corporation, Seagull Energy Corporation and Seagull Pipeline Corporation, and is intended to provide a method for attracting and retaining qualified outside directors for the Company and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its shareholders. Effective as of March 30, 1999, the Company merged the Ocean Energy, Inc. Outside Directors Fee Plan with and into the Plan and amended and restated the Plan in order to reflect the plan merger and the merger of Ocean Energy, Inc., a Delaware corporation with and into Seagull Energy Corporation. Effective as of July 1, 2001 (the "Effective Date"), the Company has again restated the Plan for the purpose of incorporating previously-adopted amendments into the text of the Plan and for the purpose of further amending the Plan in certain respects. 2. Administration of the Plan Except as otherwise specifically provided herein, the Plan shall be administered by the Organization & Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board"). The Committee is authorized to interpret the Plan and may from time to time adopt such rules and regulations, consistent with the provisions of the Plan, as it may deem advisable to carry out the Plan. All decisions made by the Committee shall be final. All expenses incurred in connection with the administration of the Plan shall be borne by the Company. In certain cases arising under the Plan, action or approval must be taken by either the full Board or by a committee of "Non-Employee Directors" as described in Rule 16b-3 promulgated by the Securities Exchange Commission (such board or committee being referred to herein as the "Rule 16b-3 Committee"). 3. Participation in the Plan (a) Participation. Each outside director who was a participant in the Plan ("Participant") on the Effective Date shall remain a Participant in this restatement of the Plan as of the Effective Date. Each other director shall become a Participant on the later of (1) the Effective Date or (2) the date he becomes an outside director. For purposes of this Paragraph, an "outside director" is an individual who is a validly elected or appointed director of the Company and who does not perform any services for the Company in a common-law employee capacity. (b) Deferral of Director's Fees. A Participant may elect to defer director's fees (whether annual, periodic or special) to be earned by such Participant for services rendered under the Plan by filing with the Committee an election to defer receipt of all or a designated portion of such fees. (c) Time and Manner of Making Elections. Any deferral election that may be made by a Participant under the Plan shall be made with respect to the period commencing on January 1 (or, if later, the date the Participant is first elected or appointed to the Board) and ending on December 31 of each year ("Service Period") during which services are rendered by such Participant and must be made prior to the first day of such Service Period; provided, however, that the deferral election with respect to a Participant's initial Service Period may be made no later than thirty days after the date the Participant is first elected or appointed to the Board and shall be prospective only. All deferral elections shall be made in the manner and form prescribed by the Committee. Deferral elections made prior to the Effective Date with respect to the Service Period that includes the Effective Date shall remain in effect for the remainder of such Service Period. (d) Nature of Elections. A Participant's election to defer receipt of all or a designated portion of his fees for a Service Period shall continue in force and effect for future Service Periods unless modified or revoked by such Participant. Any such modification or revocation shall be effective only as of the first day of a Service Period and must be made prior to the first day of such Service Period. A modification or revocation of an existing deferral election shall be made in the manner and form prescribed by the Committee. Any deferral election (whether in the nature of an initial election, an unrevised continuing election or a revised continuing election) with respect to a Service Period shall be irrevocable as of the first day of such Service Period or, if later, the day following the last day upon which an election may be made with respect to a Service Period. Notwithstanding the foregoing, in the event that the Rule 16b-3 Committee, in its sole discretion, determines that a Participant has an unforseeable emergency pursuant to Paragraph 6, the Rule 16b-3 Committee may revoke the Participant's deferral election then in effect, if any, in connection with such determination. A Participant whose deferral election is so revoked may make a new deferral election in the manner and form prescribed by the Committee prior to the first day of any subsequent Service Period. 4. Crediting of Deferred Fees to Plan Accounts (a) Establishment of Plan Accounts. The Committee shall establish a memorandum bookkeeping account (the "Plan Account") for each Participant in the Plan. The Committee shall credit to each Participant's Plan Account the Participant's deferred fees as soon as practicable after such fees are earned by the Participant. Further, the Committee shall credit to each Participant's Plan Account such additional amounts at such times as may be determined by the Committee in its sole discretion; provided, however, that the Committee shall credit to the Plan Account of each Participant who is a member of the Board during the period beginning on the Effective Date and ending on December 31, 2001 (the "Benefit Period") an additional amount of $17,500 (the "2001 Additional Amount") as soon as practicable after the Benefit Period. (b) Deemed Investment of Funds. (1) The amounts credited to each Participant's Plan Account shall be deemed to be invested in the Fidelity Money Market Trust: Retirement Money Market Portfolio until such Participant designates, in accordance with the procedures established from time to time by the Committee, the manner in which amounts credited to his Plan Account shall be deemed to be invested from among the investment funds made available from time to time by the Committee for the deemed investment of Plan Accounts (the "Investment Funds"), which may include an Investment Fund (an "OEI Stock Fund") investing in the common stock of the Company, par value $.10 per share ("Company Stock"). A Participant may designate one of such Investment Funds for the deemed investment of all the amounts credited to his Plan Account or he may split the deemed investment of the amounts credited to his Plan Account among such Investment Funds in such increments as the Committee may prescribe. The deemed investment of amounts credited to a Participant's Plan Account shall be based on the value of the applicable Investment Funds at the time such amounts are credited or subsequently converted pursuant to an initial deemed investment designation or pursuant to Paragraph (b)(2) below. Deemed investment elections in effect immediately prior to the Effective Date shall remain in effect following the Effective Date unless and until changed or converted pursuant to Paragraph (b)(2) below. (2) A Participant may (i) change his deemed investment designation for future amounts to be credited to his Plan Account or (ii) convert his deemed investment designation with respect to the amounts already credited to his Plan Account; provided, however, that (I) a Participant may change his deemed investment designation of an OEI Stock Fund only for future amounts to be credited to his Plan Account and (II) in the event of a change described in clause (I), any amounts already credited to the Participant's Plan Account that were deemed invested in an OEI Stock Fund shall remain so invested until paid to such Participant pursuant to Paragraph 5. Any such change or conversion shall be made in accordance with the procedures established by the Committee, and the frequency of such changes may be limited by the Committee; provided, however, that a change described in clause (I) of the preceding sentence must be made prior to the beginning of a calendar quarter and shall become effective only as of the first day of such calendar quarter. Notwithstanding the foregoing, if the Committee credits an additional amount to a Participant's Plan Account pursuant to Paragraph (a) above, the Committee may designate one or more Investment Funds for the deemed investment of such additional amount; provided however, that the 2001 Additional Amount credited to a Participant's Plan Account pursuant to Paragraph (a) above shall be deemed to be invested in an OEI Stock Fund until paid to the Participant pursuant to Paragraph 5. (c) Allocation of Net Income or Net Loss Equivalents. The balance of each Participant's Plan Account shall be adjusted at such times and in such manner as the Committee deems appropriate to reflect the value of the Investment Funds, including any net income (or net loss) thereto resulting from interest, dividends or other distributions. A Participant's Plan Account shall continue to be so adjusted as long as there is any balance credited to such account. (d) Matching Deferrals. Effective as of January 1, 2002, if a Participant designates an OEI Stock Fund for the deemed investment of all or a portion of the deferred fees to be credited to his Plan Account, at the same time as such deferred fees are credited to his Plan Account and deemed invested in an OEI Stock Fund (the "Deemed OEI Stock Fund Investment"), an additional amount equal to the OEI Deemed Stock Fund Investment shall be credited to the Participant's Plan Account and deemed invested in an OEI Stock Fund. 5. Payment of Deferred Fees (a) Payment Election Generally. A Participant shall elect, subject to the provisions of Paragraphs (b), (c) and (d) below, the time (which may not be prior to the latest of (i) the date on which he ceases to be a member of the Board or (ii) the date on which he ceases to be a member of the Senior Advisory Council to the Board and the mode (which may either be a lump sum payment or monthly, quarterly, or annual installment payments over a specified term certain) for payment of amounts credited to his Plan Account during a Service Period (and the income credited thereto). A Participant may revise his election regarding the time and mode of payment of amounts credited to his Plan Account only if, and at such time as, such revised election is approved by a Rule 16b-3 Committee; provided, however, that such revised election shall not be effective until the later of (A) the January 1 following the date such revised election is approved or (B) the date that is six months after the date such revised election is approved. In the absence of direction by a Participant regarding the time or mode of payment of amounts credited to his Plan Account during a Service Period (and the income credited thereto), such amounts shall be distributed in a lump sum payment as soon as practicable after the later of (i) the date on which he ceases to be a member of the Board or (ii) the date on which he ceases to be a member of the Senior Advisory Council to the Board. (b) Payment Upon Death. In the event of a Participant's death, the balance of such Participant's Plan Account, computed as of the date of his death, shall be paid in one lump sum to his designated beneficiary within the first four months following the date of such Participant's death. A Participant, by written instrument filed with the Committee in such manner and form as it may prescribe, may designate one or more beneficiaries to receive payment of the amounts credited to his Plan Account in the event of his death. Any such beneficiary designation may be changed from time to time prior to the death of the Participant. In the absence of a beneficiary designation on file with the Committee at the time of a Participant's death, the executor or administrator of the Participant's estate shall be deemed to be his designated beneficiary. (c) Payment Upon Plan Termination. In the event the Plan is terminated by the Company, the Committee, in its sole discretion, may elect to pay the balance of each Participant's Plan Account to such Participant in one lump sum as soon as practicable after the date of such Plan termination. (d) Payment Upon Change of Control. With respect to any Participant (1) who ceases to be a director of the Company (or any successor) as a result of or in connection with a change of control that is not approved, recommended and supported by at least two-thirds of the directors that were also directors prior to the occurrence of any such change of control in actions taken prior to, and with respect to, such change of control or (2) who ceased to be a member of the Board or of the Senior Advisory Council to the Board prior to such change of control but who is entitled to receive (or is receiving) payments under the Plan at the time of such change of control, the balance of such Participant's Plan Account, computed as of the date of such change of control or, for Participants described in clause (1), the date such Participant ceases to be a director of the Company (or any successor), if later, shall be paid to such Participant in one lump sum as soon as practicable, but no later than thirty days following such date. For purposes of the Plan, "change of control" shall be deemed to have occurred if (i) any person (other than Participant or the Company) including a "group" as determined in accordance with Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of the Company having 40% or more of the total number of votes that may be cast for the election of directors; or (ii) as a result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a "Transaction"), the persons who were directors before the Transaction shall cease to constitute a majority of the Board or any successor thereto. The determinations of whether a change of control has occurred, whether such change of control was not approved, recommended or supported by the Directors in actions taken prior to, and with respect to, such change of control and whether any Participant ceased to be a director of the Company as a result of or in connection with such change of control shall be made by the Committee as existing at least six months prior to the occurrence of such change of control and its determination shall be final. (e) Conversion of Plan Accounts for Purposes of Payment. (1) If a Participant has elected to receive payment of his Plan Account in a lump sum pursuant to Paragraph (a) above, the value of his Plan Account shall be determined as of the last day of the month preceding the time that he has elected to receive such payment and an amount equal to such value shall be paid to the Participant. (2) If a Participant has elected to receive payment of his Plan Account in any mode other than lump sum pursuant to Paragraph (a) above, the value of his Plan Account shall be determined as of the last day of the month preceding the date of any such payment and each subsequent interval thereafter, and an amount equal to the value of such Plan Account multiplied by a fraction, the numerator of which is one and the denominator of which is the remaining number of payments that the Participant elected, shall be paid as of each interval such Participant elected. (3) If Paragraphs (b), (c) or (d) above apply, the value of a Participant's Plan Account shall be determined as of the date specified in the applicable Paragraph and an amount equal to such value shall be paid to the Participant or his designated beneficiary. (f) Form of Payment. Payments under the Plan shall be in the form of cash, except that if any portion of a Participant's Plan Account is deemed invested in an OEI Stock Fund, any payment with respect to such portion shall be in the form of shares of Company Stock. Without limiting the generality of the foregoing, nothing in the Plan shall be construed as giving any Participant any rights as a holder of common stock or any other equity security of the Company as a result of such Participant's participation in this Plan or his designation of an OEI Stock Fund for the deemed investment of amounts credited to his Plan Account. (g) Debiting of Plan Accounts. Once an amount has been paid to a Participant or his beneficiary, such amount shall be debited from the Participant's Plan Account. 6. Distributions for Unforseeable Emergency In the event the Rule 16b-3 Committee, in its sole discretion, determines that a Participant has an unforseeable emergency, the Rule 16b-3 Committee may direct that such portion of the amounts credited to a Participant's Plan Account as it determines is reasonably needed to satisfy such unforseeable emergency be paid to the Participant in one lump sum payment as soon as practicable following the Rule 16b-3 Committee's determination of the existence and extent of such unforseeable emergency. For purposes of this Paragraph 6, an unforseeable emergency shall mean severe financial hardship to a Participant that arises from a sudden and unexpected illness or accident of the Participant or of a dependent of a Participant, loss of the Participant's property due to casualty, or similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of such Participant. Further, no payment may be made pursuant to this Paragraph 6 to the extent such severe financial hardship may be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or (iii) by cessation of deferrals under the Plan. For purposes of this Paragraph 6, the purchase of a house or education expenses for children, shall not be considered to be unforseeable emergencies. The decision of the Rule 16b-3 Committee regarding the existence or nonexistence of an unforseeable emergency of a Participant shall be final and binding. The Rule 16b-3 Committee shall have the authority to require a Participant to provide such proof as it deems necessary to establish the existence and nature of the Participant's unforseeable emergency. The foregoing notwithstanding, a Participant who is a member of the Rule 16b-3 Committee shall not participate in the deliberations or decision of the Rule16b-3 Committee regarding a hardship distribution to such Participant. 7. Prohibition Against Assignment or Encumbrance No right, title, interest or benefit hereunder shall ever be liable for or charged with any of the torts or obligations of a Participant or a person claiming under a Participant, or be subject to seizure by any creditor of a Participant or any person claiming under a Participant. No Participant or any person claiming under a Participant shall have the power to anticipate or dispose of any right, title, interest or benefit hereunder in any manner until same shall have been actually distributed free and clear of the terms of the Plan. The preceding notwithstanding, the Committee shall comply with the terms and provisions of an order that satisfies the requirements for a "qualified domestic relations order" as defined in section 206(d) of ERISA, including an order that requires distributions to an alternate payee prior to a Participant's "earliest retirement age" as such term is defined in section 206(d)(3)(E)(ii) of ERISA. 8. Nature of the Plan The Plan and any election agreements executed thereunder constitute an unfunded, unsecured liability of the Company to make payments in accordance with the provisions hereof, and neither a Participant nor any person claiming under the Participant shall have any security or other interest in any specific assets of the Company by virtue of this Plan. Neither the establishment of the Plan, the crediting of amounts to Plan Accounts nor the setting aside of any funds shall be deemed to create a trust. The Company at its election may fund the payment of benefits under the Plan by setting aside and investing, in an account on the Company's books, such funds as the Company may from time to time determine. Legal and equitable title to any funds so set aside shall remain in the Company, and no Participant shall have any security or other interest in such funds. Any funds so set aside shall remain subject to the claims of the creditors of the Company, present and future. The preceding paragraph to the contrary notwithstanding, the Company may fund all or part of its obligations hereunder by transferring assets to a trust if the provisions of the trust agreement creating such trust require the use of such trust's assets to satisfy claims of the Company's general unsecured creditors in the event of the Company's insolvency or bankruptcy and provide that no Participant shall at any time have a prior claim to such assets and that such trust shall not cause the Plan to be other than "unfunded" for the Internal Revenue Code of 1986, as amended. The assets of such trust shall not be deemed to be assets of this Plan. 9. Amendment and Termination of Plan The Company shall have the right to alter or amend the Plan or any part thereof from time to time, except the Company shall not make any alteration or amendment that would impair the rights of a Participant with respect to amounts theretofore credited to that Participant's Plan Account. The Company may terminate the Plan at any time. If not sooner terminated under the provisions of this paragraph, the Plan shall terminate as of the date on which all amounts theretofore credited to Plan Accounts have been paid. 10. Indemnification The Company shall indemnify and hold harmless each member of the Committee and each employee who is a delegate of the Committee against any and all expenses and liabilities arising out of his administrative functions or fiduciary responsibilities, including any expenses and liabilities that are caused by or result from an act or omission constituting the negligence of such individual in the performance of such functions or responsibilities, but excluding expenses and liabilities that are caused by or result from such individual's own gross negligence or willful misconduct. Expenses against which such individual shall be indemnified hereunder shall include, without limitation, the amounts of any settlement or judgment, costs, counsel fees, and related charges reasonably incurred in connection with a claim asserted or a proceeding brought or settlement thereof. 11. No Tax Guarantee Neither the Plan nor any representation made in connection with it shall be construed to be an assurance or guarantee of a deferral of income for income tax purposes of any amount to be paid pursuant to the Plan. 12. Number and Gender Wherever appropriate herein, words used in the singular shall be considered to include the plural, and words used in the plural shall be considered to include the singular. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender. 13. Laws Governing The Plan and any documents executed in connection therewith shall be construed in accordance with and governed by the laws of the State of Texas. EXECUTED this _________ day of _______________, 2001. OCEAN ENERGY, INC. By: ______________________________ Name: ________________________ Title: ________________________

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.19 TERMINATION OF LEASE AGREEMENT     THIS TERMINATION OF LEASE AGREEMENT ("Agreement") is made and entered into this 29th day of June, 2001, by and between MARTIN CBP ASSOCIATES, L.P., a Delaware limited partnership ("Landlord") and HEARME, a Delaware corporation, formerly known as Mpath Interactive, Inc. ("Tenant"). R E C I T A L S:     This Agreement is entered into on the basis of the following facts, understandings and intentions of the parties:     A.  The Prudential Insurance Company of America, a New Jersey corporation (Landlord's predecessor-in-interest) and Tenant entered into that certain lease dated December 24, 1996 (the "Lease") which demised those certain premises designated as 665 Clyde Avenue located in Mountain View, California, as more particularly described in the Lease (the "Premises").     B.  Landlord and Tenant desire to terminate and cancel the Lease on and as of June 30, 2001 (the "Effective Date") and release each other from their respective obligations under the Lease arising after the Effective Date.     NOW, THEREFORE, in good consideration of the mutual covenants set forth below and other good and valuable consideration, the parties agree as follows:     1.  Termination of the Lease.  The Lease is hereby terminated and canceled on and as of the Effective Date with the same force and effect as if the term of the Lease were fixed to expire on the Effective Date. The rights of Tenant to occupy the Premises, and the rights of Tenant under the Lease, shall automatically and without further action on the part of Landlord terminate at 11:59 p.m. on the Effective Date. Not later than 5:00 p.m. on the Effective Date, Tenant shall surrender possession of the Premises, and shall deliver exclusive possession and occupancy thereof and all keys thereto, to Landlord. The Premises shall be surrendered in broom clean and otherwise as-is condition. Landlord acknowledges that Tenant shall not be required to remove any of the initial improvements constructed pursuant to Exhibit B to the Lease nor any alterations made by Tenant pursuant to Section 9 of the Lease. Tenant shall remove the personal property to which it is entitled pursuant to the provisions of the Lease prior to 5:00 p.m. on the Effective Date. Notwithstanding the foregoing sentence, Landlord acknowledges that Tenant shall not be obligated to remove any furniture that Caliper Technologies Corporation has agreed to purchase from Tenant, provided that Tenant delivers to Landlord evidence of such agreement including an itemized list of the furniture prior to June 30, 2001. All rent and other amounts payable by Tenant under the Lease, including, without limitation, rent and Tenant's share of taxes, utility costs and other operating expenses, shall be prorated through the Effective Date and paid by Tenant within thirty (30) days after receipt of a statement from Landlord which sets out in reasonable detail such outstanding prorated amounts. Any overpayment by Tenant of Adjustment Rent (as defined in the Lease) shall be reconciled in accordance with the terms of Section 2(b)(ii) of the Lease.     2.  No Termination Fee or Payment.  No termination fee or payment shall be made by or due from Landlord or Tenant in connection with the termination of the Lease provided for in this Agreement.     3.  Performance of Obligations.  Each of Landlord and Tenant shall comply with all of its obligations under the Lease through the Effective Date.     4.  Remedies.  Tenant acknowledges and agrees that Landlord has entered into an agreement to lease the Premises to a new tenant as of July 1, 2001 (the "New Lease"). In connection with the New 1 -------------------------------------------------------------------------------- Lease, Landlord is obligated to perform certain work to prepare the Premises for the new tenant. In order to complete such work in a timely manner, it is necessary for Landlord to obtain possession of the Premises no later than the Effective Date. If Landlord is not able to obtain exclusive possession of the Premises on or before the Effective Date, then Landlord shall incur substantial damages, costs and losses. Tenant further acknowledges and agrees that the termination rights set forth in this Agreement are designed to permit Landlord to deliver possession of the Premises to the new tenant in a timely manner in accordance with the terms of the New Lease. Tenant understands and agrees that Tenant's failure to deliver possession of the Premises as provided in this Agreement and to perform its other obligations under this Agreement may cause Landlord to be unable to fulfill its obligations under the New Lease, which failure would cause material damage to Landlord and the new tenant. Tenant also understands and agrees that Landlord is relying on Tenant's performance of the terms and conditions of the Lease and this Agreement and that Tenant's failure to strictly perform in accordance with the terms and conditions of the Lease and this Agreement may cause Landlord to be unable to fulfill its obligations under the New Lease. In accordance with the foregoing understandings, as of the Effective Date, Landlord shall have the right to prosecute any proceeding at law or equity, in the event of any default or breach of the obligations of Tenant contained in this Agreement. If Tenant does not vacate the Premises or perform Tenant's obligations under the other terms of this Agreement on the Effective Date, then in addition to all other rights and remedies of Landlord under applicable law or in equity, Landlord shall be entitled to receive from Tenant all direct and consequential damages resulting from or arising out of Tenant's failure to vacate the Premises or perform Tenant's obligations under the terms of this Agreement, including, without limitation, loss of income, damages owed to a prospective tenant, loss of prospective tenants or financing arrangements for the Premises, costs or other damages from any expiration or termination of a lease or financing commitment related to Tenant's failure to surrender the Premises or perform Tenant's obligations under the terms of this Agreement. All rights, privileges and elections of remedies set forth in this Paragraph 6 are cumulative and not alternative to the extent permitted by law or equity.     5.  Holding Over.  If Tenant remains in possession of the Premises after the Effective Date, with Landlord's consent, such possession by Tenant shall be deemed to be a month-to-month tenancy terminable on 30 days' notice given at any time by either party. Tenant acknowledges that Landlord's cost of owning and carrying the Premises is substantially in excess of the rent payable by Tenant under this Lease. Accordingly, during such month-to-month tenancy the total rent payable pursuant to the terms of the Lease for the Premises shall be Ninety-Three Thousand Six Hundred and 00/100 Dollars ($93,600.00) per month. Tenant shall pay such monthly rental and all other sums required to be paid under the Lease monthly on or before the first day of each month. All other provisions of the Lease, except those pertaining to the term, shall apply to the month-to-month tenancy.     6.  Amendment to Lease.  This Agreement is and shall constitute an amendment to the Lease and shall be effective as of the date of this Agreement. Except as modified hereby, all of the terms and conditions of the Lease shall remain in full force and effect and Landlord and Tenant hereby ratify the same.     7.  Representations and Warranties.  As of the date of this Agreement:     7.1.  Authority.  Each of Landlord and Tenant represents and warrants to the other that it has full right, power and authority to enter into this Agreement, and has obtained all necessary consents and resolutions from its members required under the documents governing its affairs in order to consummate this transaction, and the persons executing this Agreement have been duly authorized to do so. The Agreement and the Lease are binding obligations of such party, enforceable in accordance with their terms. 2 --------------------------------------------------------------------------------     7.2  No Assignments.  Tenant represents and warrants to Landlord that Tenant is the sole tenant under the Lease, and Tenant has not sublet, assigned, conveyed, encumbered or otherwise transferred any of the right, title or interest of Tenant under the Lease.     7.3  Lender Consent.  Landlord represents and warrants to Tenant that Landlord has received approval from its lender for Landlord to enter into this Agreement.     8.  Attorneys' Fees.  If either party should bring an action to enforce the terms of this Agreement or declare rights under this Agreement, the prevailing party in such action shall be entitled to reasonable attorneys' fees, costs and expenses to be paid by the losing party in such action.     9.  Security Deposit.  Landlord currently holds, as a security deposit, cash in the amount of $36,302.40, and a letter of credit in the amount of $165,136.00 (collectively the "Security Deposit"). Within thirty (30) days after the Effective Date, Landlord shall return the Security Deposit pursuant to and subject to the terms and conditions of Section 17 of the Lease to Tenant at the following address: HearMe, 685 Clyde Avenue, Mountain View, California 94043, Attn: John Alexander.     10.  Construction.  Counsel for all parties have read and approved the language of this Agreement. The provisions of this Agreement shall be construed as a whole according to their common meaning and not strictly for or against Tenant or Landlord.     11.  Miscellaneous.  This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective successors and permitted assigns. This Agreement may not be amended, changed or waived except by a writing signed by the parties hereto, and shall be construed and enforced in accordance with the laws of the State of California. This Agreement supersedes any prior oral agreements between the parties with respect to the subject matter hereof, and the parties acknowledge that there are no oral agreements between them with regard to such subject matter. This Agreement may be executed in multiple counterparts, each of which shall be deemed a duplicate original, but all of which taken together shall constitute one and the same instrument.     IN WITNESS WHEREOF, the parties have duly executed this Agreement on the date first written above. 3 -------------------------------------------------------------------------------- LANDLORD: MARTIN CBP ASSOCIATES, L.P., a Delaware limited partnership By:   Martin/Cypress, LLC, a California limited liability company Its: General Partner         By:   TMG Partners, a California corporation Its: Managing Member             By:                     -------------------------------------------------------------------------------- Cathy Greenwold Its: Executive Vice President     TENANT:     HEARME, a Delaware corporation     By:                     --------------------------------------------------------------------------------         Its:                     --------------------------------------------------------------------------------     4 -------------------------------------------------------------------------------- QuickLinks Exhibit 10.19

THIRD MODIFICATION OF AMENDED AND RESTATED SECURED REVOLVING LINE OF CREDIT AND SECURITY AGREEMENT AND OTHER LOAN DOCUMENTS          THIS THIRD MODIFICATION OF AMENDED AND RESTATED SECURED REVOLVING LINE OF CREDIT AND SECURITY AGREEMENT AND OTHER LOAN DOCUMENTS (the “Modification”) is effective as of the 1st day of April, 2001, by and between COMMERCIAL NET LEASE REALTY, INC., a Maryland corporation (“Lender”), whose address is 450 South Orange Avenue, Suite 900, Orlando, Florida 32801, and COMMERCIAL NET LEASE REALTY SERVICES, INC., a Maryland corporation (“Borrower”), whose address is 450 South Orange Avenue, Suite 900, Orlando, Florida 32801; W I T N E S S E T H:          WHEREAS, Borrower is indebted to Lender as evidenced by that certain Replacement Promissory Note by Borrower in favor of Lender, in the original principal amount of THIRTY MILLION AND NO/100 DOLLARS ($30,000,000.00), effective as of May 1, 1999, as such debt was renewed and increased under that certain Renewal Promissory Note, in the original principal amount of FIFTY MILLION AND NO/100 DOLLARS ($50,000,000.00), effective as of April 1, 2000, and further renewed and increased under that certain Second Renewal Promissory Note, in the original principal amount of SIXTY FIVE MILLION AND NO/100 DOLLARS ($65,000,000.00), effective as of October 1, 2000 (the “Second Renewal Note”), and otherwise, pursuant to that certain Amended and Restated Secured Revolving Line of Credit and Security Agreement, effective as of May 1, 1999, as modified by that certain Modification of Amended and Restated Secured Revolving Line of Credit and Security Agreement and Other Loan Documents, effective as of April 1, 2000, and that certain Second Modification of Amended and Restated Secured Revolving Line of Credit and Security Agreement and Other Loan Documents, effective as of October 1, 2000 (collectively, the “Agreement”);         WHEREAS, the Second Renewal Note is secured by certain properties of Borrower under certain other Loan Documents, as defined under the Agreement (the “Loan Documents”);         WHEREAS, Borrower has requested a renewal of its debt under that certain Second Renewal Note and an increase in the line of credit available to Borrower to up to EIGHTY FIVE MILLION AND NO/100 DOLLARS ($85,000,000.00), as evidenced by that certain Third Renewal Promissory Note by Borrower in favor of Lender, effective as of April 1, 2001 (the “Third Renewal Note”); and         WHEREAS, Borrower and Lender have agreed to modify the Agreement and the Loan Documents upon the terms and conditions hereinafter set forth.         NOW THEREFORE, in consideration of the premises hereof, and the mutual covenants contained herein, and of the sum of TEN AND NO/100 DOLLARS ($10.00) in hand paid by Borrower to Lender, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1 1.         Recitals. All of the foregoing recitations are true and correct and are hereby incorporated herein and made a part hereof. 2.         Obligations Secured. Borrower hereby covenants, stipulates, agrees and acknowledges that the obligation of Borrower to repay to Lender the Second Renewal Note is hereby declared to be secured by the Agreement and the Loan Documents, in the same manner and to the same extent as if the Third Renewal Note was made and executed on the date that the Agreement was originally executed and delivered. 3.         Maturity Date. The Revolving Credit Maturity Date as defined under Section 1.1 of the Agreement is hereby changed to July 30, 2001. 4.         Commitment Amount. The Revolving Credit Commitment Amount as defined under Section 1.1 of the Agreement, is hereby increased to $85,000,000.00. 5.         Definition of Note. The term "Note" contained in each of the Loan Documents and the Agreement shall take the meaning of the term "Third Renewal Note" as defined by this Modification. 6.        Loan Origination Fee. Section 2.8(c) of the Agreement is hereby deleted in its entirety. 7.        Miscellaneous. Except as expressly set forth by this Modification, the Agreement and the Loan Documents shall remain in full force and effect, in strict accordance with the terms thereof. The Agreement, as modified by this Modification, shall bind and inure to the benefit of, the representatives, successors and assigns of the parties of this Modification. [SIGNATURES ON NEXT PAGE] 2         IN WITNESS WHEREOF, the parties to this Modification have executed this Modification in a manner and form sufficient to bind them as of the day and year first above written.         COMMERCIAL NET LEASE REALTY,       INC., a Maryland corporation       By: ______________________________       Kevin B. Habicht,       Executive Vice President (Corporate Seal)         COMMERCIAL NET LEASE REALTY,       SERVICES, INC., a Maryland corporation       By: ______________________________       Kevin B. Habicht,       Executive Vice President (Corporate Seal) 3 STATE OF _________________ COUNTY OF _______________           The foregoing Third Modification of Amended and Restated Secured Revolving Line of Credit and Security Agreement and Other Loan Documents, effective as of April 1, 2001, by and between Commercial Net Lease Realty Services, Inc., a Maryland corporation and Commercial Net Lease Realty, Inc., a Maryland corporation (“CNLR”)was acknowledged before me this _____ day of __________, 2001, by Kevin B. Habicht, as Executive Vice President of CNLR, who is personally known to me.   NOTARY PUBLIC Print Name: ______________________________ Commission No.:__________________________ My Commission Expires:____________________ STATE OF _________________ COUNTY OF _______________           The foregoing Third Modification of Amended and Restated Secured Revolving Line of Credit and Security Agreement and Other Loan Documents, effective as of April 1, 2001, by and between Commercial Net Lease Realty Services, Inc., a Maryland corporation (“CNLRS”) and Commercial Net Lease Realty, Inc., a Maryland corporation was acknowledged before me this _____ day of __________, 2001, by Kevin B. Habicht, as Executive Vice President of CNLRS, who is personally known to me or who has produced ________________________________ as identification.   NOTARY PUBLIC Print Name: ______________________________ Commission No.:__________________________ My Commission Expires:____________________ 4

Exhibit 10.7      SENIOR EXECUTIVE RETENTION AGREEMENT     THIS AGREEMENT ("Agreement"), by and between ALADDIN GAMING, LLC a Nevada limited liability company (the "Company"), and Patricia Becker (the "Executive"). WITNESSETH:     WHEREAS, the Company and Executive entered into that certain employment agreement dated July 27, 2000 ("Employment Agreement"), and has determined that the Executive is a key executive of the Company and it is the desire of the Company to assure itself of the availability of the services of the Executive and to provide assurances to the Executive of employment in the event of the commencement of a Chapter 11 case for the Company or in the event of a Change of Control (collectively an "Event");     WHEREAS, in the event that there occurs an Event, the Company believes it imperative that the Company be able to rely upon the Executive to continue in her position and, if required, to assess any proposal or transaction which would cause an Event and advise management and the Company as to whether such proposal or transaction would be in the best interest of the Company and its members, free from concern that her recommendations may adversely affect her continued employment:     NOW, THEREFORE, to assure the Company that it will have the continued dedication of the Executive and the availability of her advice and counsel notwithstanding the possibility, threat or occurrence of an Event and to induce the Executive to remain in the employ of the Company, and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows:     1.  Services During Certain Events. The Executive agrees that she will not voluntarily leave the employ of the Company and will continue to render services to the Company as provided in the Employment Agreement until the later of 18 months from the date of this Agreement or an Event Completion, as hereinafter defined ("Expiration Date"), provided, however, if no Event occurs within 18 months from the date of this Agreement, the Expiration Date shall be 18 months from the date of this Agreement. In the event the Employment Agreement terminates prior to the Expiration Date, then the Employment Agreement shall be extended through the Expiration Date unless otherwise terminated as provided therein.     2.  Incentive Bonus Payments. From the date of this Agreement until the earlier of (a) the Expiration Date, (b) the date the Company terminates the Executive with Cause or (c) the Executive quits the employ of the Company without Good Reason, the Company shall pay Executive, in addition to the Base Salary pursuant to the Employment Agreement, less customary payroll deductions, the following bonus(es): (i)If, for the calendar year 2001, the Company achieves $63 million in EBITDA (as defined and computed in accordance with the Company's Credit Agreement, dated February 26, 1998, (collectively, as amended, "Credit Agreement")), Executive shall be paid a bonus equal to 15% of the Executive's then-existing annual base salary, payable on or before March 31, 2002; (ii)For the calendar year 2002, a.If, for the First Quarter 2002, the Company achieves "EBITDA" equal to or greater than the Company's "fixed charges" (both terms as defined and computed in accordance with the Credit Agreement) for that quarter, then the Company shall pay Executive a bonus equal to 5% of Executive's then-existing annual base salary, payable on or before 45 days after the end of that calendar quarter; b.If, for the Second Quarter 2002, the Company achieves "EBITDA" equal to or greater than the Company's "fixed charges" (both terms as defined and computed in accordance -------------------------------------------------------------------------------- with the Credit Agreement) for that quarter, then the Company shall pay Executive a bonus equal to 10% of Executive's then-existing annual base salary, payable on or before 45 days after the end of that calendar quarter; c.If, for the Third Quarter 2002, the Company achieves "EBITDA" equal to or greater than the Company's "fixed charges" (both terms as defined and computed in accordance with the Credit Agreement) for that quarter, then the Company shall pay Executive a bonus equal to 15% of Executive's then-existing annual base salary, payable on or before 45 days after the end of that calendar quarter; and d.If, for the entire Year 2002, the Company achieves "EBITDA" for the entire Year 2002 equal to or greater than the Company's "fixed charges" (both terms as defined and computed in accordance with the Credit Agreement) for the entire Year 2002, then the Company shall pay Executive a bonus equal to 50% of Executive's then-existing annual base salary, less the amounts, if any, previously paid to the Executive pursuant to Sections 2(ii)(a), (b) and/or (c), such net amount to be paid on or before 90 days after the end of that calendar quarter.     3.  Retention Bonus Payment. If there is an Event prior to the Expiration Date, then upon the Payment Date, the Company shall pay to the Executive as compensation for services rendered to the Company cash in an amount equal to three (3) times her then-existing aggregate annual base salary, (excluding bonus or options) less customary payroll deductions; provided, however, the foregoing shall not apply if the Executive has quit without Good Reason or has been terminated by the Company with Cause prior to the Event's occurrence.     4.  Definitions. (a)"Cause" shall mean (i) conviction of a felony, (ii) embezzlement or misappropriation of money or property of the Company, (iii) denial, rejection, suspension or revocation of any gaming license or permit, (iv) Executive's material breach of Section 6 of the Employment Agreement which material breach has an adverse impact on the Company or (v) Executive quits without Good Reason, as defined herein. (b)"Change of Control" means either: (i) if collectively the Trust under Article Sixth u/w/o Sigmund Sommer and London Clubs International, plc ("London Clubs"), through their respective subsidiaries own less than 50% of the equity of either the Company and/or Aladdin Gaming Holdings, LLC (for purposes of this section, collectively and/or individually hereinafter "Aladdin"); or (ii) if a third party acquires, directly or indirectly, control of Aladdin or substantially all of its assets. (c)"Event Completion" means the effective date of a plan of reorganization for the Company or 90 days after a Change of Control. (d)"Good Reason" shall mean (i) a material reduction in Executive's duties, authorities and responsibilities without her consent provided Executive gives the Company written notice specifying such action and the Company has not cured or abated such action within twenty (20) days thereafter, provided that a change in Executive's direct report shall not in and of itself constitute evidence of a material reduction in duties, authorities and responsibilities; or (ii) a reduction by the Company in the Executive's base salary, in effect immediately prior to such reduction, without her consent, provided Executive gives the Company written notice specifying such action and the Company has not cured or abated such action within twenty (20) days thereafter; and (iii) the failure of the Company to cause this Agreement to be assumed as provided for in paragraph 11 below. 2 -------------------------------------------------------------------------------- (e)"Payment Date" shall mean the earlier of (i) the Event Completion, (ii) the date the Company terminates the Executive without Cause or (iii) the date the Executive quits with Good Reason. (f)"Person" shall have the same meaning as such term has under section 13(d) of the Act and the regulations promulgated thereunder.     5.  Indemnification. If litigation shall be brought to enforce or interpret any provision contained herein or to recover from the Executive any moneys paid pursuant to this Agreement, the Company, to the extent permitted by applicable law and the Company's Articles of Organization, hereby agrees to indemnify the Executive for her or her reasonable attorneys' fees and disbursements incurred in such litigation, and hereby agrees to pay any money judgment obtained from the Executive and prejudgment interest on any money judgment obtained from the Executive.     6.  Payment Obligations Absolute. The Company's obligation to pay the Executive the payment and to make the arrangements provided for herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against him or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company will not seek to recover all or any part of such payment from the Executive or from whosoever may be entitled thereto, for any reason whatsoever. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement.     7.  Continuing Obligations. The Executive shall retain in confidence any confidential information known to him concerning the Company and its respective businesses so long as such information is not publicly disclosed and otherwise comply with Section 6(a) of the Employment Agreement in all respects.     8.  Successors. This Agreement shall be binding upon and inure to the benefit of the Executive and her estate and the Company and any successor of the Company, but neither this Agreement nor any rights arising hereunder may be assigned or pledged by the Executive.     9.  Severability. Any provision in this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating or affecting the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.     10. Prior Agreements. This Agreement supersedes any prior severance and retention agreement between the Executive and the Company. Notwithstanding the prior sentence, this Agreement does not supersede or amend the Employment Agreement except as to those provisions relating to retention and severance, and is a separate and independent contract between the Company and the Executive. [Balance of Page Intentionally Left Blank] 3 --------------------------------------------------------------------------------     11. Chapter 11 Case. In the event the Company commences a Chapter 11 case prior to the Expiration Date, the company shall file a motion within two (2) business days of the petition date for the Chapter 11 Case to assume this Agreement pursuant to Section 365 of the Bankruptcy Code. In the event an order is not entered by the Bankruptcy Court approving the assumption of this Agreement within thirty (30) days of the petition date, which order does not become a final, non-appealable order within fifteen (15) days thereof, Executive has the right to terminate her employment with the Company with good reason.     12. Controlling Law. This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of Nevada.     13. Termination. This Agreement shall terminate on the Expiration Date; however, the Company's obligations pursuant to Section 3, 5, 6 and 8 above and the Executive's obligations pursuant to Sections 6, 7 and 9(j) of the Employment Agreement, shall survive termination.     IN WITNESS WHEREOF, the parties have executed this Agreement on the 11th day of June, 2001.     ALADDIN GAMING, LLC     By:   --------------------------------------------------------------------------------     Its:             EXECUTIVE     By:   -------------------------------------------------------------------------------- Patricia Becker 4 --------------------------------------------------------------------------------

Exhibit 10 (c)   RETENTION AGREEMENT                     This Retention Agreement ("Agreement") is entered into and effective as of March 31, 2001 (“Effective Date”), between The Newhall Land and Farming Company (a California Limited Partnership) ("NLF") and Stuart R. Mork ("Employee").  NLF's ultimate managing general partner is Newhall Management Corporation ("NMC") and where appropriate will be referred together with NLF as the "Company."  The Company and Employee are referred to in this Agreement as the "Parties."   RECITALS                 WHEREAS, Employee is employed as NLF’s and NMC's Senior Vice President and Chief Financial Officer;                   WHEREAS, the retention of Employee in such management position is consistent with the Company's policy of establishing and maintaining a sound and vital management to protect and enhance the best interests of the Company and the holders of its depository units;                   NOW, THEREFORE, the Parties, in consideration of the mutual covenants contained herein, and for other valuable consideration received, hereby agree as follows:   1)     Retention and Responsibilities:   a)     The Company will continue to retain Employee as Senior Vice President and Chief Financial Officer of NLF and NMC during the term of this Agreement.   Employee agrees to serve in such capacity as well as on such standing committees and in such other capacities as the Board may determine.   Employee will have duties, responsibilities and authorities commensurate with those capacities and/or as the Board may determine.   Employee will use his best efforts to promote the interests of the Company and its unit holders and will devote his working time to the business and affairs of the Company.   Employee will effectively and competently perform his duties and responsibilities to enhance the Company's profitability and the value of the depository units held by the Company's unit holders.   2)     Compensation:   a)     Except as otherwise provided in this Agreement, Employee will continue to receive his current salary, subject to adjustments by the Board, medical, dental, life, disability insurance, retirement plan benefits, 401(k) plan benefits, employee savings plan benefits, expense reimbursement benefits, Company automobile benefits and bonuses, including those benefits provided under the NLF Executive Incentive Compensation Plan, Unit options or Unit based rights agreements under the Company's 1995 Option/Award Plan or the Company’s Option, Appreciation Rights and Restricted Plan, the NLF Retirement Plan, the NLF Pension Restoration Plan, the NLF Employee Savings Plans, the NLF Employee Savings Restoration Plan, the Change of Control Severance Program, as amended, the NLF Retention Incentive Program (adopted in March 2001) and any other fringe benefits as described in the Company Employee Handbook in accordance with the eligibility participation requirements and the terms set forth therein and/or the applicable benefit policies or plans ("Company Benefits"). 3)     Term of Agreement and Termination:   a)     Term:  Unless earlier terminated as provided in (b) through (f) of this Paragraph 3, this Agreement shall be for a term of three (3) years.  On the first anniversary of the Effective Date and on each anniversary date thereafter, this Agreement will be automatically extended for an additional year, unless either Party gives the other Party at least thirty (30) days advance written notice of his or its desire not to extend this Agreement for an additional year.  So as to avoid any doubt, at the time such a notice is effective, the remaining term on this Agreement will be two years.   b)    Death:  This Agreement, including the severance compensation provided for in Paragraph 5, and Employee's employment will terminate upon the death of Employee.  In such event, the Company will pay to Employee's estate or other authorized representative, his salary for the month in which he dies, as well as any other Company Benefits, including bonuses, retirement payments, medical benefits, and accrued but unused vacation due him or his spouse through the date of his death in accordance with the terms and conditions of applicable Company policies and/or plans.  Thereafter, the Company will have no further obligation whatsoever to his estate or other authorized representative.   c)     Disability:  This Agreement, including the severance compensation provided for in Paragraph 5, will terminate upon Employee's disability.  Unless otherwise prohibited by any State or Federal law, this Agreement and Employee's employment hereunder will terminate on the date that he, is determined, as defined by reference to the Company's Long-Term Disability Plan ("LTD Plan"), then in effect, to be "disabled" from performing any material portion of his current duties, due to physical or mental illness or injury.  In such event, Employee will be solely compensated in accordance with the LTD Plan and any other applicable Company policies and/or plans.   d)    Termination for Cause:  This Agreement, including the severance compensation provided for in Paragraph 5, and Employee's employment may be immediately terminated if any of the following events occur during the term of his employment hereunder ("Termination for Cause"):   (1) Employee is convicted of any misdemeanor involving moral turpitude, any felony, is engaged in any willful conduct for which the Company could incur civil liability to any other employee or third party or commits any act of fraud, forgery, intentional misrepresentation, embezzlement or dishonesty;  (2) Employee commits gross negligence in the performance or nonperformance of his duties, habitually neglects to perform those duties or otherwise breaches any of his obligations under this Agreement; (3) Employee breaches his duty of loyalty to the Company; (4) Employee engages in unethical conduct or conduct injurious to the reputation of the Company; or (5) Employee fails or refuses to perform the services called for by this Agreement or assignments given to him by the Board.  If Termination for Cause occurs, then the Company will pay Employee his salary for the month in which termination occurs, any accrued but unused vacation and any other Company Benefits that are due him under applicable Company policies or plans through the end of the month of his termination.  Thereafter, the Company will have no further obligations whatsoever to Employee. e)     Termination Without Cause:  The Company shall have the right, at any time, to terminate this Agreement and Employee's employment, without cause, by written notice to Employee ("Termination Without Cause").  Employee's Termination Without Cause will be effective on the date specified in the written notice ("Termination Date").  In the event of a Termination Without Cause, the Company will pay Employee the severance benefits provided in Paragraph 5 of this Agreement.   Additionally, Employee will be paid all earned but unused vacation as of the Termination Date.   f)     Change of Control:  Neither (b), (c), (d) or (e) of this Paragraph 3 shall apply to a change of control as defined in the Change of Control and Severance Program executed between Employee and the Company, dated November 19, 1997 ("Change of Control Program").  In the event of such a change of control, the Change of Control Program shall become effective, as provided therein, this Agreement shall be terminated and superceded, and Employee shall be solely compensated as provided therein.   4)     Execution of Addendums A, B and C:  In the event that Employee is Terminated Without Cause under Paragraph 3 (e) of this Agreement, Employee must fully comply with all of the requirements of this Paragraph 4 to be entitled to the severance benefits provided in Paragraph 5, including specifically the payment of the Lump Sum provided in Paragraph 5(a).   a)     Resignation:  Employee agrees to tender the resignation of his employment with the Company along with all of the positions that he holds at that time with the Company or any of its affiliated entities, partnerships or divisions, including specifically:  Senior Vice President and Chief Financial Officer of NLF and NMC, and Member of the Company's Management Committee.  In addition, if Employee is a partner or member of a Company affiliate or subsidiary on the Termination Date, Employee will sell or exchange all partnership and membership interests that he may have, as the case may be, under the terms of the respective shareholder agreements, partnership agreements or other governing documents.  Employee agrees to execute whatever documents are necessary to effect his resignation from all of those positions as well as any other positions that he holds with the Company or any affiliated entities, partnerships, or divisions as of the Termination Date under Paragraph 3(e).  Employee's letter of resignation, which is attached hereto as Addendum A and by this reference incorporated herein, will be accepted by the Company effective the close of business on his Termination Date.   b)    Mutual General Releases:  In further consideration for the compensation provided for in Paragraph 5 of this Agreement and as a condition precedent to receipt of the Lump Sum Payment provided for therein, Employee agrees to execute a document that conforms to Addendum B which is attached hereto and by this reference incorporated herein ("Mutual General Releases").  The Company reserves, the right within its sole discretion, to amend, delete or otherwise revise the Mutual General Releases to comply with any changes in applicable laws and/or to make the Mutual General Releases fully effective in releasing and forever discharging Company Releases from the Claims as defined therein.  If Employee fails to execute the Mutual General Releases on the Termination Date, or any other subsequent date mutually agreed to by the Parties, then this Agreement and the Consulting Agreement shall become null and void and non-enforceable and Employee shall not be entitled to nor shall he be paid any of the benefits provided for in this Agreement, including specifically, the Lump Sum Payment provided in Paragraph 5(a) of this Agreement. 5)     Severance Compensation:  If Employee is Terminated Without Cause and he fully complies with all of the requirements of Paragraph 4 of this Agreement, then he shall be entitled to receive the following severance benefits:   a)     Lump Sum Payment.  Within five (5) business days of the lapse of the seven (7) day revocation period provided in Paragraph 11 of the Mutual General Releases, the Company shall pay Employee a lump sum payment equal to two times:  (i) the yearly base salary Employee is making on the Termination Date; plus (ii) an amount equal to the average of the bonuses paid to Employee pursuant to the NLF Executive Incentive Compensation Plan ("Bonus Plan") for the three Company fiscal years preceding the Termination Date, less applicable withholding taxes ("Lump Sum Payment").  The Lump Sum Payment shall be deemed to have been made under this Paragraph 5 on the date the payment is tendered to Employee.  The Company and Employee shall mutually agree on the method and timing of the Lump Sum Payment delivery to Employee.   b)    Additional Services Payment:  In the event the Termination Date occurs during the third or fourth calendar quarter, then Employee will be paid a pro-rated bonus under the Bonus Plan in effect for the fiscal year in which the Termination Date occurs.  The pro-rated amount will be calculated by using the number of calendar days from January 1 of the year in which the Termination Date occurs through the Termination Date as the numerator and 360 as the denominator, multiplied by the amount of the bonus that would have been paid as determined under the Bonus Plan.  The determination of the amount will be made at the same time as the bonuses are determined under the Bonus Plan for Company employees.  The payment ("Additional Services Payment") will be made to Employee within the same month that payment is made to Company employees; provided, however, that Employee, as a condition precedent to payment of the Additional Services Payment executes and returns to the Company a document that conforms to Addendum C, which is by this reference incorporated herein ("Acknowledgement of Payment").  The Additional Services Payment will be made to Employee coincident with the execution and delivery of Acknowledgment of Payment to the Company.   In the event Termination Date occurs during the first two calendar quarters, then Employee will not be eligible to receive an Additional Services Payment for the Company's fiscal year during which the Termination Date occurs. c)     Unit Options and other Unit-Based Rights:  Employee will not be granted any additional Unit options or Unit-based rights beyond those granted through the Termination Date.  Any existing options or Unit-based rights, including any granted to Employee prior to the Termination Date, will be exercisable or distributed as the case may be, in accordance with the respective Unit options or Unit-based rights agreements and the Company's respective Plans under which the options or rights were granted.  Any Unit options or Unit-based rights granted to Employee prior to the Termination Date that are not 100% vested on that date, shall become 100% vested upon the fifth business day following the seven day revocation period in Paragraph 11 of the Mutual General Releases.   d)    Retirement/Savings Plans:  Any benefits or payments due Employee under the NLF Retirement Plan, the NLF Pension Restoration Plan, the NLF Employee Savings Restoration Plan, the NLF Employee Savings Plan and any employee benefit plans qualified under Section 401(a) of the Internal Revenue Code will be paid in accordance with the provisions contained in each of those plans.   e)     Purchase of Car:  Employee will have the option to purchase the Company car assigned to him on the Termination Date at the low wholesale bluebook price for that car.  If Employee chooses not to exercise that option, then he shall return the car and his keys to the car to the Company on or before the Termination Date.   f)     No Other Payments or Benefits:  Except as otherwise provided in this Paragraph 5, Employee shall not earn or be entitled to receive any other wages and/or benefits whatsoever after the Termination Date.  Benefits payable under this Paragraph 5 will terminate, supersede and be in lieu of any severance pay benefits, Change of Control Program benefits or any other wage and/or benefits provided for in any employment agreement, the Change of Control Program, severance policy or benefit agreement between Employee and the Company or any other policy, agreement, practice or plan (including the NLF Retention Incentive Program adopted in March 2001) of the Company.   g)    Medical Benefits:  As part of Company's early retirement benefits, the Company's medical and dental HMO plans will be provided at no cost to Employee and his eligible dependents until Employee's sixty-fifth (65th) birthday, provided that Employee is eligible for those benefits on and after the Termination Date.  If Employee selects a medical plan other than the HMO plan, he and his eligible dependents will pay the difference between the amount of the premiums charged for the coverage selected and the premiums for the same coverage under the Company's HMO plan.  Should Employee die before age 65, his surviving spouse and eligible dependents will continue to receive the medical benefits until the date Employee would have reached age sixty-five (65).   6)     Recitals:  The Recital's stated above are incorporated herein by this reference as part of the Agreement.   7)     Indemnification Agreement:  The Mutual General Releases, when executed by Employee, as provided in Paragraph 4(b) of this Agreement shall not in any manner amend the terms of, or affect NLF's obligations, under that certain amended Indemnification Agreement dated November 14, 1990 between Employee and NLF. 8)     Attorney Consultation:  Employee acknowledges that he has been advised to consult with an attorney before signing this Agreement and the Mutual General Releases incorporated herein as Addendum B, and that he has voluntarily and knowingly executed this Agreement after having had the opportunity to consult with an attorney.  Employee further acknowledges that he has had an adequate opportunity to consult with an attorney and that he has had an adequate opportunity to make whatever investigation or inquiry he or his counsel may deem necessary or desirable in conjunction with the subject matter of this Agreement prior to signing it.  Employee further acknowledges that he has been advised that he may consider the terms of this Agreement for twenty-one (21) days before signing it.  This Agreement was provided to Employee on August 31, 2001.  Accordingly, Employee has until September 21, 2001 to decide whether he will sign the Agreement.  To the extent that Employee takes less than twenty-one (21) days to consider this Agreement prior to signing it, he acknowledges that he has had sufficient time to consult with an attorney and that he does not desire additional time.   9)     Revocation Period:  This Agreement is revocable by Employee for a period of seven (7) days following execution and return of the Agreement to the Company.  The revocation must be in writing, must specifically revoke this Agreement, and must be delivered to Trude Tsujimoto, Corporate Secretary, at The Newhall Land and Farming Company, 23823 Valencia Boulevard, Valencia, California, 91355, prior to the end of the seventh (7th) day following execution and delivery of this Agreement to the Company.  Upon expiration of the seven (7) day period, this Agreement becomes effective, enforceable and irrevocable.   10)   Mediation/Arbitration:   a)     Employee and the Company agree that any Arbitrable Claims that arise between them will be submitted first to mediation and then to binding arbitration.  Employee and the Company further agree that neither of them will commence any demand for arbitration without first submitting a formal written demand to the other Party for mediation of the dispute.  When such a demand is made, the dispute will be submitted to mediation before a mutually agreeable mediator in the Los Angeles area.  The cost of the mediation shall be borne equally by the Parties.   b)    Any controversy, dispute or claim between the Parties which may arise from, out of, or relate to this Agreement, or its subject matter or the Addendums, including the validity, enforceability, construction or application of any of the terms, provisions, or conditions of this Agreement or the arbitrability of any such matter (collectively referred to herein as "Arbitrable Claims") shall be submitted:  (i) first to Mediation under Paragraph 10(a), and if it is not resolved through Mediation, then (ii) to  final and binding arbitration in Los Angeles, California, or such other location as the Parties shall mutually agree in writing under the auspices of the American Arbitration Association ("AAA").  The Parties agree that neither of them may initiate in any way or prosecute any claim, charge, lien, demand, right of action or cause of action of any nature whatsoever arising out of or related to this Agreement before any court, tribunal, or administrative agency against the other Party, and that they each acknowledge that their agreement to the mediation/arbitration provisions under this Paragraph 10 shall constitute an effective waiver of any right to have any Arbitrable Claims determined by judge or jury.  The Parties further agree to be bound by the Employment Dispute Resolution Rules of AAA ("Rules") and that all Arbitrable Claims will be heard by the AAA pursuant to those Rules.  The Parties further agree that in the event this Agreement, or any part thereof is not enforceable, all other provisions shall remain in force. c)     The arbitrator shall have jurisdiction to determine all Arbitrable Claims and may grant any relief authorized in law or equity for such claim.  However, the arbitrator may not modify or change the terms of this Agreement or the Addendums.  The Parties agree that the decision of the arbitrator shall not be appealable and that judgment upon an award rendered by the arbitrator may be entered for enforcement in any court of competent jurisdiction.  All Arbitrable Claims must be submitted to mediation within thirty (30) days of the date such claim first arose to be arbitrable.   d)    Except as otherwise stated above, neither Party may initiate in any way or prosecute any claim, charge, lien, demand, right of action or cause of action of any nature whatsoever arising out of or related to this Agreement or the Addendums before any court, tribunal or administrative agency against the other Party.  A Party who initiates litigation or asserts Arbitrable Claims in any court or before any tribunal or administrative body, shall pay all reasonable attorneys' fees and costs incurred by the opposing Party in defending such litigation and/or claims.   11)   Confidential Information:   a)     Employee shall not (nor will Employee assist any other person to do so) during or after the termination of his employment with the Company, directly or indirectly reveal, report, publish or disclose Confidential Information to any person, firm or corporation not expressly authorized by the Company to receive such Confidential Information, or use (or assist any person to use) such Confidential Information except for the benefit of the Company.  This provision shall not preclude disclosures required by law, nor shall it apply to information which has entered the public domain other than by reason of the action of Employee.  The term "Confidential Information," as used herein, means all information or material not generally known by non-Company personnel which (i) gives the Company some competitive business advantage or the opportunity of obtaining such advantage or the disclosure of which could be detrimental to the interests of the Company; (ii) which is owned by the Company or in which the Company has an interest in; and (iii) which is either marked "Confidential Information," "Proprietary Information," or other similar marking, known by Employee to be considered confidential and proprietary by the Company or from all the relevant circumstances should reasonably be assumed by Employee to be confidential and proprietary to the Company.  Confidential Information includes, but is not limited to, the following types of information and other information of a similar nature (whether or not reduced to writing):  trade secrets, inventions, drawings, file data, documentation, diagrams, specifications, know how, processes, formulas, models, flow charts, software in various stages of development, source codes, object codes, research and development procedures, research or development and test results, marketing techniques and materials, marketing and development plans, price lists, pricing policies, business plans, information relating to customers and/or suppliers' identities, characteristics and agreements, financial information and projections, and employee files.  Confidential Information also includes any information described above which the Company obtains from another party and which the Company treats as proprietary information or designates as Confidential Information, whether or not owned or developed by the Company.   Notwithstanding the above, however, no information constitutes Confidential Information if it is generic information or general knowledge which Employee would have learned in the course of similar employment elsewhere in the trade or if it is otherwise publicly known and in the public domain. b)    Employee agrees on or before the last date of his employment under this Agreement to surrender to the Company all notes, data, sketches, drawings, manuals, documents, records, data bases, programs, blueprints, memoranda, specifications, customer lists, financial reports, equipment and all other physical forms of expression incorporating or containing any Confidential Information, it being distinctly understood that all such writings, physical forms of expression and other things are the exclusive property of the Company.   Employee acknowledges that the unauthorized taking of any of the Company's trade secrets is a crime under California Penal Code Section 499(c) and is punishable by imprisonment.  Employee further acknowledges that such unauthorized taking of the Company's trade secrets could also result in civil liability under California Civil Code Section 3426, and that willful misappropriation may result in an award against him for triple the amount of the Company's damages and the Company's attorneys fees in collecting such damages.   c)     If Employee breaches, or threatens to commit a breach of, any of these non-disclosure provisions (collectively, the "Restrictive Covenants"), the Company shall have the following rights and remedies, each of which shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity:  the right and remedy to have the Restrictive Covenants specifically enforced or to have any actual or threatened breach thereof enjoined by any court having equity jurisdiction, all without the need to prove any amount of actual damage or that monetary damages would not provide an adequate remedy, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company and that monetary damages will not provide an adequate remedy to the Company; and the right and remedy to require Employee to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by him or any associated party deriving such benefits as a result of any such breach of the Restrictive Covenants.   d)    Nothing in this Agreement or any other agreement between Employee and the Company shall prohibit or impede or be construed to prohibit or impede Employee from lawfully competing with the Company, lawfully working for any competitor of the Company or otherwise lawfully pursuing his career in the residential and commercial development industry, so long as Employee complies with these non-disclosure provisions.  The Parties agree that these non-disclosure provisions shall continue in effect after Employee's employment with the Company has terminated and notwithstanding any termination of this Agreement. 12)   Non-Solicitation of Employees or Customers:  For a period of one (1) year following the last date of Employee's employment with the Company, Employee agrees not to solicit or induce any employee or supplier of the Company to terminate his/her employment or relationship with the Company or to, directly or indirectly, solicit the trade of or otherwise do business with any customer or supplier of the Company and/or any one of its affiliated entities so as to offer or sell any product or service which would be competitive with any product or service sold by the Company or its affiliates during that period.   13)   Employee Benefit Plans:  Except as otherwise specifically provided in this Agreement to the contrary, all of the health and other employee benefit or compensation plans or programs referred to and contemplated by this Agreement (collectively referred to as "Plans") shall be governed solely by the terms of the underlying plan documents and by applicable law.  Except as otherwise specifically provided in this Agreement to the contrary, nothing in this Agreement shall impair the Company's right to amend, modify, replace, and/or terminate any and all such Plans in its sole discretion or in accordance with the terms thereof.  This Agreement is for the sole benefit of Employee and the Company, and is not intended to create a Plan, or, except as otherwise provided herein, to modify the terms of existing Plans.  Also, any payments made pursuant to this Agreement shall not be taken into account (i.e., as "compensation") for purposes of determining the amount of benefits payable under any other Plans.   14)   Entire Agreement:  This Agreement is the only agreement and understanding between the Parties pertaining to the subject matter hereof, and supercedes and nullifies all prior agreements, summaries of agreement, descriptions of compensation packages, discussions, negotiations, understandings, representations or warranties, whether verbal or written between the Parties pertaining to such subject matter.  This Agreement is binding on Employee's heirs and shall not be assignable by Employee for any purpose.  This Agreement will be binding on any successors and assigns of the Company.   15)   Severability:  If any provision of this Agreement or any portion of such provision is held to be invalid or unenforceable, the remaining provisions or portions shall nevertheless be given effect.  It is the intent of the Parties that all provisions shall be construed so as to be valid and enforceable, and if it should be determined that any provision is not valid and enforceable, a provision which would effectuate the intent of the Parties and would be valid and enforceable shall be substituted for the invalid and unenforceable provision.   16)   Amendment and Waiver:  This Agreement may be amended, modified or supplemented only by a writing executed by Employee and a designee of the Board.  Either Party may, in writing, waive any provision of this Agreement to the extent that such provision is for the benefit of the waiving Party.  No waiver by either Party of a breach of any provision of this Agreement shall be construed as a waiver of any subsequent or different breach, and no forbearance by a Party to seek a remedy for non-compliance or breach by the other Party shall be construed as a waiver of any right or remedy with respect to such non-compliance and/or breach. 17)   Construction and Applicable Law:  The language of this Agreement and the Addendums have been approved by the Parties after the opportunity to consult with legal counsel and the language of these documents shall be construed as a whole according to their fair meaning and not strictly for or against either Party.  This Agreement and the Addendums shall in all respects be interpreted, enforced and governed by and under the laws of the State of California.   18)   Notice:  Except as otherwise provided in this Agreement or any amendments subsequently executed between the Parties, any notice required or permitted to be given hereunder shall be in writing and shall be deemed to have been given upon personal delivery, or on the date it is postmarked, by certified or registered mail, postage pre-paid, addressed to Employee at the address on file with the Company and to the Company at its corporate headquarters.  The Company's current corporate headquarters is located at The Newhall Land and Farming Company, 23823 Valencia Boulevard, Valencia, CA 91355, Attention:  Secretary.  It shall be Employee's responsibility to keep the Company advised in writing of any change in his address under this Paragraph of the Agreement.           (signature page to follow)         WHEREFORE, the Parties have executed this Agreement on the dates provided hereinafter.   DATED:  September 5, 2001 EMPLOYEE:                 /s/  Stuart R. Mork     Stuart R. Mork                   DATED:  August 30, 2001 THE NEWHALL LAND AND FARMING COMPANY (a California Limited Partnership)   By: Newhall Management Limited Partnership, its Managing General Partner   By: Newhall Management Corporation, its Managing General Partner         By: /s/  Gary M. Cusumano   Name: Gary M. Cusumano   Title: Chief Executive Officer         By: /s/  Trude A. Tsujimoto   Name: Trude A. Tsujimoto   Title: Secretary   [NEWHALL LAND LETTERHEAD]     ADDENDUM A     Date_________       PERSONAL AND CONFIDENTIAL   The Board of Directors The Newhall Land and Farming Company and Newhall Management Corporation 23823 Valencia Boulevard Valencia, California 91355                                   Re:  Resignation   Dear Ladies and Gentlemen:                                   I hereby tender to you my resignation of employment along with my resignation of all positions that I hold effective the close of business on ____________.                                   Should you need me to sign any additional documents or paperwork to cause the foregoing to be completed, I will be happy to do so.   Very truly yours,       Stuart R. Mork   ADDENDUM B   MUTUAL GENERAL RELEASES                     This Addendum to the Retention Agreement of Stuart R. Mork ("Agreement") is made and entered into this ____ day of _____________ by and between Stuart R. Mork ("Employee"), and The Newhall Land and Farming Company (a California Limited Partnership) ("Company") and by this reference the Agreement is incorporated herein.  Employee and the Company are hereinafter sometimes referred to collectively as "the Parties."  This agreement ("Mutual General Releases") is made for the purpose of settling and compromising all of the claims, disputes and controversies between the Parties arising from any cause whatsoever on or prior to the date of Employee's execution of the Mutual General Releases.  So as to avoid any doubt, the mutual releases contained herein, do not in any manner amend the terms of, or affect the Company's obligations, under that certain amended Indemnification Agreement dated November 14, 1990 between Employee and the Company.                   NOW, THEREFORE, the Parties hereto for the consideration set forth in the Agreement, which is by this reference incorporated herein, mutually agree as follows:   1.     Consideration.  In consideration of the benefits provided for in the Agreement as well as the Mutual General Releases and, for other good and valuable consideration, the Parties give the releases, promises and commitments contained herein.   2.     Scope of Settlement.  The compensation and benefits provided for in the Agreement are in full and complete settlement of all of Employee's Claims against Company Releasees and fully compensates Employee for any and all such Claims.  Employee further acknowledges that he has received all wages and benefits due him through the last date of his employment with the Company, except as otherwise provided in Paragraph 5 of the Agreement.  Employee specifically acknowledges that he has received the Lump Sum Payment and that the Company has fully complied with the provisions of Paragraph 5(a) of the Agreement.   3.     General Release of Company Releasees.  Employee, for himself and for his heirs, spouse, executors, administrators and assigns, acknowledges complete satisfaction of and unconditionally releases and forever discharges the Company, Newhall Management Corporation, and any and all of its respective affiliated companies, subsidiaries, divisions, affiliated entities, shareholders, partnerships, successors and assigns, and any and all of its past, present and/or future officers, directors, members, partners, unit holders, agents, employees, administrators and assigns (hereinafter collectively referred to as "Company Releasees"), from any and all claims, demands, causes of action, costs, charges, fees and liabilities of any kind whatsoever, whether known or unknown, unsuspected or latent, which Employee or any of his heirs, guardians, administrators, executors, successors in interest, and/or assigns have incurred or expect to incur, or now own or hold or have at any time heretofore owned or held, or may at any time own, hold or claim by reason of any matter or thing against Company Releasees, and each of them, arising from or by reason of any actual or alleged act, omission, transaction, practice, conduct or occurrence, or any other matter whatsoever on or prior to the date of Employee's execution of the Mutual General Releases.  Without limiting the generality of the foregoing, Employee specifically waives and fully releases Company Releasees, and each of them, from any and all claims arising out of Employee's employment with the Company and/or the termination of that employment, any positions Employee held or services Employee rendered as well as Employee's resignation of all positions held with the Company, including but not limited to:  (a) any claim under the Americans with Disabilities Act, the California Fair Employment and Housing Act, the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967 or the Older Workers Benefit Protection Act; Employee Retirement Income Security Act of 1974; (b) any other claim of employment discrimination (whether based on federal, state or local, statutory or decisional law; (c) any claim arising out of the terms and conditions of Employee's employment and/or any of the events relating directly or indirectly to or surrounding the termination of his employment; (d) any claims for severance, pension, bonuses, profit sharing or severance/termination payments; (e) any claim regarding any claimed employment or benefit agreement or contract whether written or oral; (f) any claim for any alleged injuries incurred during Employee's employment with the Company including any claims for rehabilitation; and (g) any other matter or claim whatsoever between the Parties (jointly "Claims").  These releases do not include or release Company Releases or any of them, from providing the benefits or making the payments provided for in Paragraph 5 (b), (c), (d), and (g) of the Agreement. 4.     General Release of Employee's Releasees.  The Company fully releases and discharges forever Employee and his spouse, children, agents, heirs and administrators and assigns ("Employee Releasees") from any and all liabilities, claims, causes of action, charges, complaints, obligations, costs, losses, damages, injuries and attorneys' fees, of any form whatsoever, whether known or unknown, unsuspected or latent, which the Company or any of its officers, employees, agents, administrators, successors in interest, and/or assigns have incurred or expect to incur, or now own or hold, or have at any time heretofore owned or held, or may at any time own, hold, or claim to hold by reason of any matter or thing, arising from any cause whatsoever on or prior to the date of Company's execution of the Mutual General Releases.  Without limiting the generality of the foregoing, the Company fully releases and discharges each and all of Employee's Releasees from any and all claims, demands and causes of action in connection with any and all matters pertaining to Employee's employment by the Company, including, but not limited to, any and all damages of every kind whatsoever, express or implied duties or obligations, express or implied covenants, and promises on any and all of the above, any other matter between the Parties, and any claims relating to and arising out of Employee's performance of his duties as an officer of the Company.   5.     Non-Admission of Liability.  This Agreement shall not in any way be construed as an admission by either Party of any liability whatsoever, or as an admission by either Party of any illegal or improper act or acts, of any kind or nature whatsoever, against the other Party. 6.     Releases Include Unknown Claims.  It is the intention of the Parties in executing the Mutual General Releases and in paying and receiving the monetary and other consideration called for by the Agreement that the Mutual General Releases shall be effective as a full and final accord and satisfaction and general release of and from all liabilities, disputes, claims and matters, known or unknown, suspected or unsuspected arising from any cause whatsoever on or prior to the date of Employee's execution of the Mutual General Releases.  In furtherance of this intention, the Parties, and each of them, acknowledge that they are familiar with Section 1542 of the Civil Code of the State of California, which provides as follows:   "A general release does not extend to claims which the creditor does now 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 Parties, and each of them, waive and relinquish any right or benefit which they have or may have under Section 1542 of the Civil Code of the State of California or any similar provision of statutory or non-statutory law of this or any other jurisdiction to the full extent that they may lawfully waive all such rights and benefits pertaining to the subject matter of the Agreement and the Mutual General Releases.  In connection with such waiver and relinquishment, the Parties, and each of them, acknowledge that they are aware that any legal counsel that they may retain may hereafter discover claims or facts in addition to or different from those which they now know or believe to exist with respect to the subject matter of the Mutual General Releases, but that it is their intention hereby to fully, finally and forever settle and release all the released matters, disputes and differences, known and unknown, suspected or unsuspected, which now exist, may exist, or heretofore has existed, between them.  In furtherance of this intention, the releases herein given shall be and remain in effect as full and complete general releases notwithstanding the discovery and existence of any such additional or different claims or facts.   7.     Successors and Assigns.  This Agreement shall bind, and inure to the benefit of, the respective heirs, legal representatives, successors, and assigns of the Parties hereto.   8.     Covenant Not to Sue.  The Parties, and each of them, represent and warrant that they have no action, claim, charge or lawsuit intended, filed, prepared or pending against the other Party or their respective released parties and that they will not individually or as a member of any class file any action, claim, charge or lawsuit against the other Party, or any of their respective released parties, concerning the subject matter of the Agreement, the Mutual General Releases and/or any of the claims released under the Mutual General Releases.   9.     Construction.  The language of the Mutual General Releases has been approved by all Parties after the opportunity to consult with legal counsel and the language of the Mutual General Releases shall be construed as a whole according to its fair meaning and not strictly for or against either Party.   10.   Entire Agreement and Governing Law.  The Mutual General Releases shall in all respects be interpreted, enforced, and governed by and under the laws of the State of California.  The Mutual General Releases constitutes the entire agreement between the Parties and supercedes all prior agreements, whether verbal or written, between the Parties pertaining to the subject matter hereof. 11.   Legal Consultation and Revocability Periods:  The Parties expressly intend, and Employee acknowledges and agrees, that as part of the potential claims released in Paragraphs 3 and 4 of the Mutual General Releases, Employee is herein releasing the Company Releasees from any claims that he has or may have under the Age Discrimination in Employment Act of 1967,  29 U.S.. § 621 et seq.  Accordingly, Employee has been advised to review the Mutual General Releases and represents and agrees:   (a) that he has been advised to consult with an attorney prior to executing the Mutual General Releases;  (b) that he has had up to twenty-one (21) days to consider executing the Mutual General Releases and that he is knowingly and voluntarily entering into the Mutual General Releases;  (c) that he received a copy of the Mutual General Releases on                      , 2001; (d)  that he has seven (7) days from the date of execution of the Mutual General Releases to rescind it by doing so in writing addressed to the General Counsel and/or Secretary of the Company,  at its corporate headquarters located at The Newhall Land and Farming Company, 23823 Valencia Boulevard, Valencia, California  91355; and (e) that the Mutual General Releases will not be effective until the end of the seven (7) day revocation period.   DATED:     EMPLOYEE:                       Stuart R. Mork                   DATED:     THE NEWHALL LAND AND FARMING COMPANY   (a California Limited Partnership)   By: Newhall Management Limited Partnership, its Managing General Partner   By: Newhall Management Corporation, its Managing General Partner         By:     Name:     Title:           By:     Name:     Title:     ADDENDUM C   ACKNOWLEDGMENT OF PAYMENT                     This Addendum to the Retention Agreement of Stuart R. Mork dated March 31, 2001 ("Agreement") is made and entered into this ____ day of ______________ by and between Stuart R. Mork ("Employee"), and The Newhall Land and Farming Company (a California Limited Partnership) ("Company") and by this reference the Agreement is incorporated herein.  Employee and the Company are hereinafter sometimes referred to collectively as "the Parties."  This Acknowledgment of Payment ("Acknowledgment") is made and entered into on the date set forth above.                   NOW, THEREFORE, the Parties hereto for the consideration set forth in the Agreement initially agree as follows:                   1.  Receipt of Payment.  Employee hereby acknowledges that he has been paid the Additional Services Payment provided for in paragraph 5(b) of the Agreement and that the Company has fully complied with all the requirements of Paragraph 5(b) of the Agreement.                   2.  Successors and Assigns.  This Acknowledgment shall bind, inure to the benefit of, the respective heirs, legal representatives, successors, and assigns of the Parties hereto.                   3. Covenant Not To Sue.  The Parties, and each of them, represent and warrant that they have no action, claim, charge or lawsuit intended, filed, prepared or pending against the other Party or their respective released parties and that they will not individually or as a member of any class file any action, claim, charge or lawsuit against the other Party, or any of their respective released parties, concerning the subject matter of the Agreement, the Acknowledgment and/or any of the claims released under the Mutual General Releases.                   4.  Construction.  The language of the Acknowledgment has been approved by all Parties after the opportunity to consult with legal counsel and the language of the Acknowledgment shall be construed as a whole according to its fair meaning and not strictly for or against either Party.                   5.  Entire Agreement and Governing Law.  The Acknowledgment shall in all respects be interpreted, enforced, and governed by and under the laws of the State of California.  The Acknowledgment constitutes the entire agreement between the Parties and supersedes all prior agreements, whether verbal or written, between the Parties pertaining to the subject matter hereof.   DATED:    , 2001 EMPLOYEE:                   Stuart R. Mork                   DATED:    , 2001 THE NEWHALL LAND AND FARMING COMPANY   (a California Limited Partnership)   By: Newhall Management Limited Partnership, its Managing General Partner   By: Newhall Management Corporation, its Managing General Partner         By:     Name:     Title:           By:     Name:     Title:      

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT AND AMENDMENT NO. 1 TO CHANGE OF CONTROL AGREEMENT                     This Amendment No. 1 to Employment Agreement and Amendment No. 1 to Change of Control Agreement is made as of the 31st day of October, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Everett N. Kendrick (the "Employee"). W I T N E S S E T H:                     WHEREAS, the Company has entered into an Employment Agreement with the Employee dated as of January 31, 2000 (the "Employment Agreement");                     WHEREAS, the Company has entered into a Change of Control Agreement with the Employee dated as of January 31, 2000 (the "Change of Control Agreement"); and                     WHEREAS, the Company and the Employee have agreed to an extension of the terms of the Employment Agreement and the Change of Control Agreement, as set forth herein.                     NOW, THEREFORE, for and in consideration of the continued employment of Employee by the Company and the payment of wages, salary and other compensation to Employee by the Company, the parties hereto agree as follows, effective October 31, 2000:                     Section 1.     Except as expressly amended herein, all of the terms and provisions of the Employment Agreement and Change of Control Agreement shall remain in full force and effect.                     Section 2.     Article I, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: > >             Employment Term.     The term of this Agreement (the "Employment > > Term") shall commence on the Agreement Date and shall continue through > > October 31, 2001, subject to any earlier termination of Employee's status as > > an employee pursuant to this Agreement.                     Section 3.     Article II, Section 2.1(a) of the Change of Control Agreement is hereby amended to read in its entirety as follows: > >             2.1    Employment Term and Capacity after Change of Control. (a) > > If a Change of Control occurs on or before October 31, 2001, then the > > Employee's employment term (the "Employment Term") shall continue through > > the second anniversary of the Change of Control, subject to any earlier > > termination of Employee's status as an employee pursuant to this Agreement.                     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above.   STEWART ENTERPRISES, INC. By:  /s/ James W. McFarland                               James W. McFarland             Compensation Committee Chairman     EMPLOYEE:      /s/   Everett N. Kendrick                                     Everett N. Kendrick

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.17 FIRST AMENDMENT TO COLLABORATION AGREEMENT     THIS FIRST AMENDMENT TO THE COLLABORATION AGREEMENT (the "Amendment") is made and entered into effective as of May 18, 2001 (the "Amendment Effective Date"), by and between RIGEL PHARMACEUTICALS, INC., a Delaware corporation ("Rigel") having its principal place of business at 240 East Grand Avenue, South San Francisco, CA 94080 and NOVARTIS PHARMA AG, a Swiss corporation ("Novartis"), having its principal place of business at Lichtstrasse 35, CH-4002 Basel, Switzerland.     WHEREAS, Rigel and Novartis entered into a Collaboration Agreement, made effective between such Parties as of 26th May, 1999 (the "Collaboration Agreement") regarding a collaborative research and commercialisation program for intracellular target molecules useful for treating or preventing human diseases; and     WHEREAS, Rigel and Novartis desire to amend Section 2.3 of the Collaboration Agreement.     NOW THEREFORE, in consideration of the premises and of the covenants contained herein and in the Agreement, the parties hereto mutually agree as follows:     1.  The parties agree to amend the terms of the Collaboration Agreement as provided below. To the extent that the Collaboration Agreement is explicitly amended by this Amendment, the terms of the Amendment will control where the terms of the Collaboration Agreement are contrary to or conflict with the following provisions. Where the Collaboration Agreement is not explicitly amended, the terms of the Collaboration Agreement will remain in force. Capitalized terms used in this Amendment that are not otherwise defined herein shall have the same meanings as such terms are defined in the Collaboration Agreement.     2.  Section 2.3 of the Agreement is hereby replaced and superseded in its entirety by the following:     "2.3 Number and Kind of Additional Programs of Research. The parties hereby acknowledge that the Commencement Date of the T-Cell Project, designated as a Joint Project, is the Effective Date of this Agreement. Novartis and Rigel further acknowledge that they have added to this Agreement two (2) additional Programs of Research prior to the first (1st) anniversary of the Effective Date: the B-Cell Project, designated as a Joint Project, and the Epithelial Cell Project, designated as an At-Novartis Project, respectively. Subject to Section 2.2, the parties will add to the Agreement: (A) one (1) additional Program of Research, being either (i) a Joint Project in the area of endothelial cell function in angiogenesis, if such Joint Project has a Commencement Date prior to July 31, 2001; or, in the event that such Joint Project does not have a Commencement Date prior to July 31, 2001, then (ii) another Program of Research, such other Program of Research to have its Commencement Date prior to November 30, 2001; and (B) a second additional Program of Research to the Agreement prior to November 30, 2001."     3.  This Amendment will form an integral part of, and is governed by all other terms of, the Collaboration Agreement.     4.  Except as expressly amended hereby, all terms and conditions of the Collaboration Agreement shall remain unchanged and in full force and effect.     5.  This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment by their authorised officers as of the date and year first above written. RIGEL PHARMACEUTICALS, INC.   NOVARTIS PHARMA AG By: /s/ Raul Rodriguez --------------------------------------------------------------------------------   By: /s/ C. Asseo /s/ S. Stubs -------------------------------------------------------------------------------- Name: Raul Rodriguez --------------------------------------------------------------------------------   Name: Capucine Asseo S. Stubs -------------------------------------------------------------------------------- Title: VP Business Dev. --------------------------------------------------------------------------------   Title: Legal Counsel BD&L -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- QuickLinks FIRST AMENDMENT TO COLLABORATION AGREEMENT

EXHIBIT 10.6 AMENDMENT TO STOCK OPTION AGREEMENT Company:                      Gardenburger, Inc., formerly known as Wholesome & Hearty Foods, Inc., an Oregon corporation Optionee:                       Paul F. Wenner Original Agreement:    That Paul F. Wenner Stock Option Agreement dated effective as of January 20, 1992 AGREEMENT                            In consideration of the mutual covenants set forth in this Amendment, Company and Optionee mutually agree as follows:                            1.          Section 3(a) of the Original Agreement is amended to read as follows:                            "The Option shall expire January 31, 2004."                            2.          Section 4(d) of the Original Agreement is amended to read as follows:              "In no event (including death of Optionee) may this Option be exercised after January 31, 2004."                            3.          Except as expressly provided in this Amendment, the Original Agreement will remain in full force and effect.                            Dated _______________, 2001.   GARDENBURGER, INC.           By:     --------------------------------------------------------------------------------             --------------------------------------------------------------------------------     Paul F. Wenner  

QuickLinks -- Click here to rapidly navigate through this document DATED 4th January 1993 OPENMEN LIMITED –to– MUIRHEAD VACTRIC COMPONENTS LIMITED -------------------------------------------------------------------------------- COUNTERPART UNDERLEASE -------------------------------------------------------------------------------- of premises at Oakfield Road, Penge in the London Borough of Bromley -------------------------------------------------------------------------------- COUNTERPART UNDERLEASE: DATED 4th January 1993      [Illegible SEAL] 1 Particulars   1.1 Parties:   1.1.1 the Landlord OPENMEN LIMITED (registered in England and Wales No. 2124564 whose registered office is at Pentagon House Sir Frank Whittle Road Derov DE2 4XA 1.1.2 the Tenant MUIRHEAD VACTRIC COMPONENTS LIMITED (registered in England and Wales Number 560015) whose registered office is at Oakfield Road Penge London SE20 8EW 1.2 the Premises ALL THAT land and buildings situate at Oakfield Road Penge in the London Borough of Bromley demised by the Headlease 1.3 Contractual Term 15 years from and including the first day of December 1992 1.4 Rent Commencement Date the first day of December 1992 1.5 Initial Rent £200,000 (two hundred thousand pounds) per year 1.6 Interest Rate Four percent per year above the base lending rate ("Base Rate") of Barclays Bank PLC or such other bank (being a member of the Committee of London and Scottish Bankers) as the Landlord may from time to time nominate in writing 1.7 Permitted User Use as a factory and workshop and offices with ancillary storage within Classes III and IV of the Town and Country Planning (Use Classes) Order 1972 or such other use as the Landlord may from time to time in its absolute discretion approve 1.8 Review Dates 1st December 1997 and 1st December 2003 and 'Review Date' means any one of the Review Dates 2 Definitions   2.1 For all purposes of this lease the terms defined in clauses 1 and 2 have the meanings specified 2.2 'Additional Rent' means sums equal to the amounts paid from time to time during the term of this lease by the Landlord to the Superior Landlord pursuant to sub-clauses 2(iii) 2(x) 2(xi) and 2(xii) of the Headlease 2.3 'Building' means the building or buildings now or at any time during the Term erected on the whole or part of the Premises 2.4 'the Headlease' means the superior lease under which the Landlord holds the Premises made the 28th day of September 1976 between (1) Real Estate and Commercial Trust Limited ('the Superior Landlord') and (2) Londex Limited for a term of 125 years less the last 3 days thereof from the 5th May 1975 (the interest of Londex Limited being now vested in the Landlord) and any lease or leases superior to the Headlease       1 -------------------------------------------------------------------------------- 2.5 'the Insurance Rent' means the sums which the Landlord shall from time to time pay by way of premium:   2.5.1 for insuring the Premises in accordance with its obligations contained in this lease   2.5.2 and for insuring in such reasonable amount and on such terms as the Landlord shall consider appropriate against all liability of the Landlord to third parties arising out of or in connection with any matter including or relating to the Premises 2.6 'Insured Risks' means fire and such other risks as the Landlord from time to time in its absolute discretion may think fit to insure against 2.7 'Interest' means interest during the period from the date on which the payment is due to the date of payment both before and after any judgment at the Interest Rate then prevailing or should the Base Rate cease to exist such other rate of interest as is most closely comparable with the Interest Rate to be agreed between the parties or in default of agreement to be determined by the Surveyor acting as an expert and not as an arbitrator 2.8 'the 1954 Act' means the Landlord and Tenant Act 1954 2.9 'Pipes' means all pipes sewers drains mains ducts conduits gutters watercourses wires cables channels flues and all other conducting media and includes any fixings louvres cowls and any other ancillary apparatus which are in on or under or which serve the Premises 2.10 'the Plan' means the plan annexed to this lease 2.11 'the Planning Acts' means the Town and Country Planning Act 1990 2.12 'Rent' means the Initial Rent and rent ascertained in accordance with the second schedule and such term does not include the Insurance Rent or the Additional Rent but the term 'rents' includes both the Rent the Insurance Rent and the Additional Rent 2.13 'Surveyor' means any person or firm appointed by the Landlord to perform any of the functions of the Surveyor under this lease (including an employee of the Landlord or a company that is a member of the same group as the Landlord within the meaning of Section 42 of the 1954 Act and including also the person or firm appointed by the Landlord to collect the rents) 2.14 'VAT' means Value Added Tax or any tax of a similar nature that may be substituted for it or levied in addition to it 2.15 'this lease' means this underlease 3 Interpretation   3.1 The expressions 'the Landlord' and 'the Tenant' wherever the context so admits include the person for the time being entitled to the reversion immediately expectant on the determination of the Term and the Tenant's successors in title respectively 3.2 References to the Superior Landlord shall include its successors in title and shall include all superior landlords however remote 3.3 Where the Landlord the Tenant or the Guarantor for the time being are two or more persons obligations expressed or implied to be made by or with such party are deemed to be made by or with such persons jointly and severally 3.4 Words importing one gender include all other genders and words importing the singular include the plural and vice versa       2 -------------------------------------------------------------------------------- 3.5 The expression 'Guarantor' includes not only the person referred to in clause 1.1.3 (if any) but also any person who enters into the Guarantor's covenants with the Landlord pursuant to the provisions of this lease 3.6 The expression 'the Premises' includes:   3.6.1 the Building   3.6.2 all additions and improvements to the Premises   3.6.3 all the Landlord's fixtures and fittings and fixtures of every kind which shall from time to time be in or upon the Premises (whether originally affixed or fastened to or upon the Premises or otherwise) except any such fixtures installed by the Tenant that can be removed from the Premises without defacing the Premises and   3.6.4 all Pipes in on under or over the Premises   and references to 'the Premises' in the absence of any provision to the contrary include any part of the Premises 3.7 The expression 'the Term' includes the Contractual Term and any period of holding-over or continuance of the Contractual Term whether by statute or common law 3.8 References to 'the last year of the Term' include the last year of the Term if the Term shall determine otherwise than by effluxion of time and references to "the expiration of the Term" include such other determination of the Term 3.9 References to any right of the Landlord to have access to the Premises shall be construed as extending to the Superior Landlord and any mortgagee of the Premises and to all persons authorised by the Landlord and the Superior Landlord or mortgagee (including agents professional advisers contractors workmen and others) 3.10 Any convenant by the Tenant not 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 by another person 3.11 Any provisions in this lease referring to the consent or approval of the Landlord shall be construed as also requiring the consent or approval of the Superior Landlord where such consent shall be required but nothing in this lease shall be construed as implying that any obligation is imposed upon the Superior Landlord not unreasonably to refuse any such consent or approval 3.12 References to 'consent of the Landlord' or words to similar effect mean a consent in writing signed by or on behalf of the Landlord and to 'approved' and 'authorised' or words to similar effect mean (as the case may be) approved or authorised in writing by or on behalf of the Landlord 3.13 The terms 'the parties' or 'party' mean the Landlord and/or the Tenant but except where there is an express indication to the contrary exclude the Guarantor 3.14 'Development' has the meaning given by Section 55 of the Planning Acts 3.15 With the exception of clause 1.7 any references to a specific statute include any statutory extension or modification amendment or re-enactment of such statute and any regulations or orders made under such statute and any general reference to 'statute' or 'statutes' includes any regulations or orders made under such statute or statutes 3.16 References in this lease to any clause sub-clause or schedule without further designation shall be construed as a reference to the clause sub-clause or schedule to this lease so numbered 3.17 The clause paragraph and schedule headings and any table of contents do not form part of this lease and shall not be taken into account in its construction or interpretation       3 -------------------------------------------------------------------------------- 4 Demise   The Landlord demises to the Tenant the Premises TOGETHER WITH the rights set out in Part 1 of the first schedule (but provided that as mentioned therein) EXCEPTING AND RESERVING to the Landlord the rights specified in Part 2 of the first schedule TO HOLD the Premises to the Tenant for the Contractual Term SUBJECT to all matters contained or referred to in the Property and Charges registers of Title Number SGL229515 at H M Land Registry as at the 12 October 1992 YIELDING AND PAYING to the Landlord: 4.1 The Rent payable without any deduction by equal quarterly payments in advance on the usual quarter days in every year and proportionately for any period of less than a year the first such payment being a proportionate sum in respect of the period from and including the Rent Commencement Date to and including the day before the quarter day next after the date of this lease to be paid on the date of this lease and 4.2 by way of further rent the Insurance Rent payable on demand in accordance with the Insurance Provisions and 4.3 by way of further rent payable on demand the Additional Rent 5 The Tenant's covenants   The Tenant covenants with the Landlord: 5.1 Rent   To pay the rents on the days and in the manner set out in this lease and not to exercise or seek to exercise any right or claim to withhold rent or any right or claim to legal or equitable set-off 5.2 Outgoings and VAT   To pay and to indemnify the Landlord against   5.2.1 all rates taxes assessments duties charges impositions and outgoings which are now or during the Term shall be charged assessed or imposed upon the Premises or upon the owner or occupier of them excluding (save in respect of VAT) any payable by the Landlord occasioned by receipt of the rents or by any interest reversionary to the interest created by this lease and if the landlord shall suffer any loss of rating relief which may be applicable to empty premises after the end of the Term by reason of such relief being allowed to the Tenant in respect of any period before the end of the Term to make good such loss to the Landlord and   5.2.2 VAT chargeable in respect of any payment made by the Tenant under any of the terms of or in connection with this lease or in respect of any payment properly made by the Landlord where the Tenant agrees in this lease to reimburse the Landlord for such payment but where the Landlord is unable to recover the same 5.3 Electricity, gas and other services consumed   To pay to the suppliers and to indemnify the Landlord against all charges for electricity gas and other services consumed or used at or in relation to the Premises (including meter rents) 5.4 Repair, cleaning, decoration etc   5.4.1 To repair the Premises and keep them in repair excepting damage caused by an Insured Risk (other than where the insurance money is irrecoverable in consequence of any act or default of the Tenant or anyone at the Premises expressly or by implication with the Tenant's authority) 4 --------------------------------------------------------------------------------   5.4.2 To replace from time to time the Landlord's fixtures and fittings in the Premises which may be or become beyond repair at any time during or at the expiration of the Term   5.4.3 To clean the Premises and keep them in a clean condition   5.4.4 Not to cause any land roads or pavements abutting the Premises to be untidy or in a dirty condition and in particular (but without prejudice to the generality of the above) not to deposit on them refuse or other materials   5.4.5 In every third year and in the last year of the Term to redecorate the exterior of the Building and in every fifth year and in the last year of the Term to redecorate the interior of the Building in both instances in a good and workmanlike manner and with appropriate materials of good quality any change in the tints colours and patterns of such external decoration to be approved by the Landlord provided that the covenants relating to the last year of the Term shall not apply where the Tenant shall have performed the obligation in question less than 18 months prior to the expiry of the Term   5.4.6 Where the use of Pipes boundary structures or other things is common to the Premises and other property to be responsible for and to indemnify the Landlord against all sums due from and to undertake all work that is the responsibility of the owner lessee or occupier of the Premises in relation to those Pipes or other things   5.4.7 To keep any part of the Premises which may not be built upon ('the Open Land') adequately surfaced in good condition and free from weeds   5.4.8 Not to deposit or permit to be deposited any waste rubbish or refuse on the Open Land   5.4.9 Not to keep or store on the Open Land any caravan or movable dwelling   5.4.10 Without prejudice to the above provisions of this clause 5.4 to keep the Premises together with the fences marked 'T' on the Plan in such repair and condition as shall not in any way be a nuisance or cause damage to the Superior Landlord or its tenants or occupiers of any of the neighbouring property or which tend to depreciate or lessen the value of any of the Superior Landlord's land or properties in the neighbourhood 5.5 Waste and alterations   5.5.1 Not to:     5.5.1.1 commit any waste     5.5.1.2 make any addition to the Premises     5.5.1.3 unite the Premises with any adjoining premises     5.5.1.4 make any external or structural alteration to the Premises save as permitted by the following provisions of this clause   5.5.2 Not to make external or structural alterations to the Building without:     5.5.2.1 obtaining and complying with all necessary consents of any competent authority and paying all charges of any such authority in respect of such consents     5.5.2.2 making an application supported by drawings and where appropriate a specification in duplicate       5 --------------------------------------------------------------------------------     5.5.2.3 paying the fees of the Landlord any superior landlord any mortgagee and their respective professional advisers and     5.5.2.4 entering into such covenants as the Landlord may require as to the execution and reinstatement of the alterations     and in the case of any works of a substantial nature the Landlord may require prior to the commencement of such works the provision by the Tenant of adequate security in the form of a deposit of money or the provision of a bond as assurance to the Landlord that any works which may from time to time be permitted by the Landlord shall be fully completed   5.5.3 Subject to the provisions of clause 5.5.2 not to make any external or structural alterations to the Building without the consent of the Landlord which shall not unreasonably be withheld or delayed   5.5.4 To remove any additional buildings additions alterations or improvements made to the Premises at the expiration of the Term if reasonably so requested by the Landlord and to make good any part or parts of the Premises which may be damaged by such removal   5.5.5 Not to make connection with the Pipes that serve the Premises otherwise than in accordance with the plans and specifications approved by the Landlord subject to consent to make such connection having previously been obtained from the competent statutory authority or undertaker 5.6 Aerials, signs and advertisements   5.6.1 Not to erect any pole mast or wire (whether in connection with telegraphic telephonic radio or television communication or otherwise) upon the Premises   5.6.2 Not to affix to or exhibit on the outside of the Building or to or through any window of the Building nor display anywhere on the Premises any new placard sign notice fascia board or advertisement except any sign permitted by virtue of any consent given by the Landlord pursuant to a covenant contained in this lease (such consent not to be unreasonably withheld or delayed) 5.7 Statutory Obligations   5.7.1 At the Tenant's own expense to execute all works and provide and maintain all arrangements upon or in respect of the Premises or the use to which the Premises are being put that are required in order to comply with the requirements of any statute (already or in the future to be passed) or any government department, local authority other public or competent authority or court of competent jurisdiction regardless of whether such requirements are imposed on the lessor the lessee or the occupier   5.7.2 Not to do in or near the Premises any act or thing by reason of which the Landlord may under any statute incur have imposed upon it or become liable to pay any penalty damages compensation costs charges or expenses   5.7.3 Without prejudice to the generality of the above to comply in all respects with the provisions of any statutes and any other obligations imposed by law or by any byelaws applicable to the Premises or in regard to carrying on the trade or business for the time being carried on on the Premises       6 -------------------------------------------------------------------------------- 5.8 Access of Landlord and notice to repair   5.8.1 To permit the Landlord:     5.8.1.1 to enter upon the Premises for the purposes of ascertaining that the covenants and conditions of this lease have been observed and performed     5.8.1.2 to view the state of repair and condition of the Premises and     5.8.1.3 to give the Tenant (or leave upon the Premises) a notice specifying any repairs cleaning maintenance or painting that the Tenant has failed to execute in breach of the terms of this lease and to request the Tenant to immediately execute the same including the making good of such opening up (if any)   5.8.2 As soon as reasonably practicable to repair cleanse maintain and paint the Premises as required by such notice   5.8.3 If within one month of the service of such a notice the Tenant shall not have commenced and be proceeding diligently with the execution of the work referred to in the notice or shall fail to complete the work within three months or if in the Landlord's reasonable opinion the Tenant is unlikely to have completed the work within such period to permit the Landlord to enter the Premises to execute such work as may be necessary to comply with the notice and to pay to the Landlord the cost of so doing and all expenses incurred by the Landlord (including legal costs and surveyor's fees) within fourteen days of a written demand 5.9 Alienation   Definitions   5.9.1 'Permitted Part' means any part or parts of the Premises but so that there shall at no time be more than four separate occupancies of the Premises   5.9.2 Not to hold on trust for another or (save pursuant to a transaction permitted by and effected in accordance with the provisions of this lease) part with the possession of the whole or any part of the Premises or permit another to occupy the whole or any part of the Premises   5.9.3 Not to assign or charge part only of the Premises   5.9.4 Not to assign charge or underlet the whole of the Premises without the prior consent of the Landlord such consent not to be unreasonably withheld or delayed   5.9.5 Not to underlet any part of the Premises without the prior consent of the Landlord such consent not to be unreasonably withheld or delayed and otherwise than by means of an underlease of a Permitted Part   5.9.6 Not any time during the Term to underlet the whole or any part of the Premises without having obtained and produced to the Landlord before the grant of such underlease an order of the court authorising an agreement between the parties to such underlease excluding the operation of sections 24 to 28 (inclusive) of the 1954 Act in relation to the tenancy created by such underlease and without recording such agreement in the provisions of the underlease   5.9.7 Prior to any permitted assignment to procure that the assignee enters into direct covenants with the Landlord to perform and observe all the Tenant's covenants and all other provisions this lease during the residue of the Term       7 --------------------------------------------------------------------------------   5.9.8 On a permitted assignment to a private limited company and if the Landlord shall reasonably so require to procure that at least two directors of the company or some other guarantor or guarantors acceptable to the Landlord enter into direct covenants with the Landlord in the form of the Guarantor's covenants contained in this lease with 'the Assignee' substituted for 'the Tenant'   5.9.9 Not without the consent in writing of the Landlord to underlet the whole or any part of the Premises otherwise than by means of an underlease granted at a full open market rent without any fine or premium being taken and which complies with the following provisions:     5.9.9.1 such underlease shall contain the same provisions as those contained in this lease with such amendments as may be approved in writing by the Landlord     5.9.9.2 the rent reserved by such underlease shall be payable in advance on the days on which Rent is payable under this lease     5.9.9.3 if the term of such underlease shall extend beyond a date upon which the Rent payable under this lease is to be reviewed such underlease shall contain provisions for the upwards only review of the rent reserved by such underlease to take effect at the same intervals on the same dates basis and terms as those provided in this lease for the review of the Rent     5.9.9.4 such underlease shall provide provisions for the upwards only review of the rent reserved by such underlease on the basis and on the dates on which the Rent is to be reviewed in this lease     5.9.9.5 such underlease shall contain provisions prohibiting the undertenant from doing or allowing any act or thing in relation to the underlet premises inconsistent with or in breach of the provisions of this lease     5.9.9.6 such underlease shall contain a provision for reentry by the underlandlord on breach of any covenant by the undertenant     5.9.9.7 such underlease shall contain provisions imposing an absolute prohibition against all dispositions of or other dealings whatever with the underlet premises other than an assignment or charge of the whole and prohibiting any assignment or charge of the whole without the prior consent of the Landlord under this lease     5.9.9.8 such underlease shall contain provisions prohibiting the undertenant from permitting another to occupy the whole or any part of the underlet premises with similar exceptions to those in clause 5.9.13 and     5.9.9.9 such underlease shall impose in relation to any permitted assignment or charge the same obligations for registration with the Landlord as are contained in this lease in relation to dispositions by the Tenant   5.9.10 Prior to any permitted underletting to procure that the undertenant enters into direct covenants with the Landlord that the undertenant shall:     5.9.10.1 pay the rents and other sums reserved by and observe and perform the covenants on the lessee's part and conditions contained in the underlease and not suffer or permit at or in relation to the Premises any act or thing which would or might constitute a breach of such covenants or conditions       8 --------------------------------------------------------------------------------     5.9.10.2 not to omit suffer of permit at or in relation to the Premises any act or thing which would or might cause the Tenant to be in breach of or which if done ommitted suffered or permitted by the Tenant would or might constitute a breach of the covenants on the lessee's part and the conditions contained in this lease   5.9.11 To enforce the performance and observance by every such undertenant of the provisions of the underlease and not at any time either expressly or by implication to waive any breach of the covenants or conditions on the part of any undertenant or assignee of any underlease nor (without the consent of the Landlord such consent not to be unreasonably withheld or delayed) vary the terms or accept a surrender of any permitted underlease   5.9.12 In relation to any permitted underlease:     5.9.12.1 to ensure that the rent is reviewed in accordance with the terms of the underlease     5.9.12.2 to give notice to the Landlord of the details of the determination of every rent review within twenty-eight days   5.9.13 Notwithstanding clause 5.9.2 the Tenant may share the occupation of the whole or any part of the Premises with a company which is a member of the same group as the Tenant (within the meaning of Section 42 of the 1954 Act) for so long as both companies shall remain members of that group and otherwise than in a manner that transfers or creates a legal estate   5.9.14 To give notice to the Landlord and Superior Landlord of all dispositions devolutions assignments underleases mortgages or charges of the Premises or any part thereof within one month thereafter such notice to contain the name and place of abode of the person or company to whom the same shall have devolved or been assigned or underlet and to produce the probate letters of administration or other instrument evidencing the devolution or assignment counterpart underlease mortgage charge or other disposition to the Landlord's solicitor and to the Superior Landlord's solicitor and deposit with him a copy and pay to him his registration fee with every such notice 5.10 Nuisance etc and residential restrictions   5.10.1 Not to do nor allow to remain upon the Premises anything which may be or become or cause a nuisance annoyance disturbance inconvenience injury or damage to the Landlord or its tenants or the owners or occupiers of adjacent or neighbouring premises   5.10.2 Not to use the Premises for a sale by auction or for any dangerous noxious noisy or offensive trade business manufacture or occupation nor for any illegal or immoral act or purpose   5.10.3 Not to use the Premises as sleeping accommodation or for residential purposes nor keep any animal fish reptile or bird anywhere on the Premises 5.11 Landlord's costs   To pay to the Landlord on an indemnity basis all costs fees charges disbursements and expenses (including without prejudice to the generality of the above those payable to counsel solicitors surveyors and bailiffs) incurred by the Landlord in relation to or incidental to:       9 --------------------------------------------------------------------------------   5.11.1 every application made by the Tenant for a consent or licence required by the provisions of this lease whether such consent or licence is granted or refused or proffered subject to any qualification or condition or whether the application is withdrawn   5.11.2 the preparation and service of a notice under the Law of Property Act 1925 Section 146 or incurred by or in contemplation of proceedings under Sections 146 or 147 of the Act nowithstanding that forfeiture is avoided otherwise than by relief granted by the court   5.11.3 the recovery or attempted recovery of arrears of rent or other sums due from the Tenant and   5.11.4 any steps taken in contemplation of or in connection with the preparation and service of a schedule of dilapidations during or within six months after the expiration of the Term (but in relation to dilapidations arising during the Term) 5.12 The Planning Acts   5.12.1 Not to commit any breach of planning control (such term to be construed as it is used in the Planning Acts) and to comply with the provisions and requirements of the Planning Acts that affect the Premises whether as to the Permitted User or otherwise and to indemnify (both during or following the expiration of the Term) and keep the Landlord indemnified against all liability whatsoever including costs and expenses in respect of any contravention   5.12.2 At the expense of the Tenant to obtain all planning permissions and to serve all such notices as may be required for the carrying out of any operations or user on the Premises which may constitute Development provided that no application for planning permission shall be made without the previous consent of the Landlord such consent not to be unreasonably withheld or delayed   5.12.3 Subject only to any statutory direction to the contrary to pay and satisfy any charge or levy that may subsequently be imposed under the Planning Acts in respect of the carrying out or maintenance of any such operations or the commencement or continuance of any such user   5.12.4 Notwithstanding any consent which may be granted by the Landlord under this lease not to carry out or make any alteration or addition to the Premises or any change of use until:     5.12.4.1 all necessary notices under the Planning Acts have been served and copies produced to the Landlord     5.12.4.2 all necessary permissions under the Planning Acts have been obtained and produced to the Landlord and     5.12.4.3 the Landlord has acknowledged (such acknowledgement not to be unreasonably withheld or delayed) that every necessary planning permission is acceptable to it the Landlord being entitled to refuse to acknowledge its acceptance of a planning permission on the grounds that any condition contained in it or anything omitted from it or the period referred to in it would be (or be likely to be) prejudicial to the Landlord's interest in the Premises whether during or following the expiration of the Term 10 --------------------------------------------------------------------------------   5.12.5 Unless the Landlord shall otherwise direct to carry out and complete before the expiration of the Term:     5.12.5.1 any works stipulated to be carried out to the Premises by a date subsequent to such expiration as a condition of any planning permission granted for any Development begun before the expiration of the Term and     5.12.5.2 any Development begun upon the Premises in respect of which the Landlord shall or may be or become liable for any charge or levy under the Planning Acts   5.12.6 In any case where a planning permission is granted subject to conditions and if the Landlord reasonably so requires to provide security for the compliance with such conditions and not to implement the planning permission until security has been provided   5.12.7 If reasonably required by the Landlord but at the cost of the Tenant to appeal against any refusal of planning permission or the imposition of any conditions on a planning permission relating to the Premises following an application by the Tenant 5.13 Plans, documents and information   5.13.1 If called upon to do so to produce to the Landlord or the Surveyor all plans documents and other evidence as the Landlord may require in order to satisfy itself that the provisions of this lease have been complied with   5.13.2 If called upon so to do to furnish to the Landlord or the Surveyor such information as may reasonably be requested in writing in relation to any pending or intended step under the 1954 Act   5.13.3 If called upon to do so to furnish to the Landlord or the Surveyor or any person acting as the third party determining the Rent in default of agreement between the parties under any provisions for rent review contained in this lease such information as may reasonably be requested in writing in relation to the implementation of any provisions for rent review 5.14 Indemnities   To be responsible for and to keep the Landlord fully indemnified against:—   5.14.1 all damage damages losses costs expenses actions demands proceedings claims and liabilities made against or suffered or incurred by the Landlord arising directly or indirectly out of:—     5.14.1.1 any act or omission or negligence of the Tenant or any persons at the Premises expressly or impliedly with the Tenant's authority or     5.14.1.2 any breach or non-observance by the Tenant of the covenants conditions or other provisions of this lease or any of the matters to which this demise is subject   5.14.2 any tax or imposition relating to the Premises which becomes payable either during the Term or after its ending by reason of any act or default of the Tenant or any person deriving title under the Tenant or their respective agents servants and licensees       11 -------------------------------------------------------------------------------- 5.15 Reletting boards   To permit the Landlord upon reasonable notice at any time during the Term to enter upon the Premises and affix and retain anywhere upon the Premises a notice for reletting the Premises and during such period to permit persons with the written authority of the Landlord or its agent at reasonable times of the day to view the Premises 5.16 Encroachments   5.16.1 Not to stop up darken or obstruct any windows or light belonging to the Building   5.16.2 To take all steps to prevent any new window light opening doorway path passage pipe or other encroachment or easement being made or acquired in against out of or upon the Premises and to notify the Landlord immediately if any such encroachment or easement shall be made or acquired (or attempted to be made or acquired) and at the request of the Landlord to adopt such means as shall be required to prevent such encroachment or the acquisition of any such easement 5.17 Yield up   At the expiration of the Term:   5.17.1 to yield up the Premises in repair and in accordance with the terms of this lease   5.17.2 to give up all keys of the Premises to the Landlord and   5.17.3 to remove all signs erected by the Tenant in upon or near the Premises and immediately to make good any damage caused by such removal 5.18 Interest on arrears   5.18.1 If the Tenant shall fail to pay the rents or any other sum due under this lease whether formally demanded or not within 21 days of the date on which the same fall due for payment the Tenant shall pay to the Landlord Interest on the rents or other sum from the date when they were due to the date on which they are paid and such Interest shall be deemed to be rents due to the Landlord   5.18.2 Nothing in the preceding clause shall entitle the Tenant to withhold or delay any payment of the rents or any other sum due under this lease after the date upon which they fall due or in any way prejudice affect or derogate from the rights of the Landlord in relation to such non-payment including (but without prejudice to the generality of the above) under the proviso for re-entry contained in this lease 5.19 Statutory notices etc   To give full particulars to the Landlord of any notice direction order or proposal for the Premises made given or issued to the Tenant by any local or public authority within seven days of receipt and if so required by the Landlord to produce it to the Landlord and without delay to take all necessary steps to comply with the notice direction or order or at the request of the Landlord but at the cost of the Tenant to make or join with the Landlord in making such objection or representation against or in respect of any notice direction order or proposal as the Landlord shall deem expedient 5.20 Keyholders   To ensure that at all times the Landlord has and the local Police force has written notice of the name home address and home telephone number of at least two keyholders of the Premises       12 -------------------------------------------------------------------------------- 5.21 Sale of reversion etc   To permit upon reasonable notice at any time during the Term prospective purchasers of or agents instructed in connection with the sale of the Landlord's reversion or of any other interest superior to the Term to view the Premises without interruption provided they are authorised in writing by the Landlord or its agents 5.22 Defective premises   To give notice to the Landlord of any defect in the Premises which might give rise to an obligation on the Landlord to do or refrain from doing any act or thing in order to comply with the provisions of this lease or the duty of care imposed on the Landlord pursuant to the Defective Premises Act 1972 or otherwise and at all times to display and maintain all notices which the Landlord may from time to time reasonably require to be displayed at the Premises 5.23 New guarantor   Within fourteen days of the death during the Term of any Guarantor or of such person becoming bankrupt having a receiving order made against him having an interim receiver appointed in respect of his property or having a receiver appointed under the Mental Health Act 1983 or being a company passing a resolution to wind up or entering into liquidation having a receiver appointed having an administration order made or upon any person becoming entitled to exercise in respect of it the powers of an administrative receiver to give notice of this fact to the Landlord and if so required by the Landlord at the expense of the Tenant within twenty-eight days to procure some other person acceptable to the Landlord to execute a guarantee in respect of the Tenant's obligations contained in this lease in the form of the Guarantor's covenants contained in this lease 5.24 Landlord's rights   To permit the Landlord at all times during the Term to exercise without interruption or interference any of the rights granted to it by virtue of the provisions of this lease 5.25 User       5.25.1 Not to use the Premises for any purpose other than the Permitted User and (without prejudice to the generality thereof) not to use any part of the Premises at any time for the purpose of an hotel club billiard saloon dance hall funfair or amusement arcade but so that this provision shall not be deemed to preclude the holding of dances for or the playing of billiards by the employees of the Tenant so long as no nuisance or annoyance is caused to the Superior Landlord its tenants or residents in the neighbourhood   5.25.2 Not to cease carrying on business in the Premises or leave the Premises continuously unoccupied for more than one month without:     5.25.2.1 notifying the Landlord and     5.25.2.2 providing such caretaking or security arrangements as the Landlord shall require and the insurers shall require in order to protect the Premises from vandalism theft damage or unlawful occupation 5.26 Smoke abatement   5.26.1 To ensure that every new furnace boiler or heater at the Premises (whether using solid liquid or gaseous fuel) is constructed and used so as substantially to consume or burn the smoke arising from it       13 --------------------------------------------------------------------------------   5.26.2 Not to cause or permit any grit or noxious or offensive effluvia to be emitted from any engine furnace chimney or other apparatus on the Premises without using all reasonable means for preventing or counteracting such emission   5.26.3 To comply with the provisions of the Clean Air Acts 1956 and 1968 the Control of Pollution Act 1974 and the Environmental Protection Act 1990 and with the requirements of any notice of the local authority served under them 5.27 Pollution   Not to permit to be discharged into any Pipes serving the Premises:   5.27.1 any oil or grease or any deleterious objectionable dangerous poisonous or explosive matter or substance and to take all measures to ensure that any effluent discharged into the Pipes will not be corrosive or otherwise harmful to the Pipes or cause obstruction or deposit in them or   5.27.2 any fluid of a poisonous or noxious nature or of a kind likely to or that does in fact destroy sicken or injure the fish or contaminate or pollute the water of any stream or river 5.28 Roof and floor weighting   5.28.1 Not to bring or permit to remain upon the Building any safes machinery goods or other articles which shall or may strain or damage the Building or any part of it   5.28.2 Not without the consent of the Landlord to suspend any weight from the portal frames stanchions or roof purlins of the Building or use the same for the storage of goods or place any weight on them   5.28.3 On any application by the Tenant for the Landlord's consent under this clause the Landlord shall be entitled to consult and obtain the advice of an engineer or other person in relation to the roof or floor loading proposed by the Tenant and the Tenant shall repay to the Landlord on demand the fee of such engineer or other person 5.29 Machinery   5.29.1 To keep all landlords' plant apparatus and machinery (including any boilers and furnaces) upon the Premises properly maintained and in good working order and for that purpose to employ reputable contractors for the regular periodic inspection and maintenance of the same   5.29.2 To renew all working and other parts as and when necessary or when recommended by such contractors   5.29.3 To ensure by directions to the Tenant's staff and otherwise that such plant apparatus and machinery are properly operated and   5.29.4 To avoid damage to the Premises by vibration or otherwise 5.30 Covenants and conditions contained in the Headlease   Except for the obligation to pay the rent reserved by clause 2(i) thereof to observe and perform the covenants and conditions on the part of the lessee contained in the Headlease and to indemnify the Landlord from and against any actions proceedings claims damages costs expenses or losses arising from any breach non-observance or non-performance of such covenants and conditions 14 -------------------------------------------------------------------------------- 5.31 Not to commit a breach of the terms of the Headlease   Not to do omit suffer or permit in relation to the Premises any act or thing which would or might cause the Landlord to be in breach of the Headlease or which if done omitted or suffered or permitted by the Landlord would or might constitute a breach of the covenants on the part of the lessee and the conditions contained in the Headlease 5.32 To permit access   To permit the Landlord and all persons authorised by the Landlord (including agents professional advisers contractors workmen and others) upon reasonable notice (except in the case of emergency) to enter upon the Premises for any purpose that is in the opinion of the Landlord necessary to enable it to comply with the covenants on the part of the lessee and the conditions contained in the Headlease 6 The Landlord's covenants   The Landlord covenants with the Tenant: 6.1 Quiet enjoyment   To permit the Tenant peaceably and quietly to hold and enjoy the Premises without any interruption or disturbance from or by the Landlord or any person claiming under or in trust for the Landlord or by title paramount 6.2 Headlease rent   Provided that the Tenant shall have performed its obligations under this lease to pay the rent reserved by the Headlease and to perform the covenants and conditions on the part of the lessee contained in the Headlease 6.3 To obtain consents under the Headlease   To take all reasonable steps at the Tenant's expense to obtain the consent of the Superior Landlord wherever the Tenant makes application for any consent required under this lease where the consent of both the Landlord and the Superior Landlord is needed by virtue of this Lease and the Headlease 7 Insurance   The term "Insurance Provisions" shall mean the provisions contained in this clause 7.1 Landlord to insure   The Landlord covenants with the Tenant to insure the Premises unless such insurance shall be vitiated by any act of the Tenant or by anyone at the Premises expressly or by implication with the Tenant's authority 7.2 Details of the insurance   Insurance shall be effected:   7.2.1 in such insurance office or with such underwriters and through such agency as the Landlord may from time to time decide       15 --------------------------------------------------------------------------------   7.2.2 for the following sums:     7.2.2.1 such sum as the Landlord shall from time to time be advised or the Tenant shall reasonably require as being the full cost of rebuilding and reinstatement including architects' surveyors' and other professional fees payable upon any applications for planning permission or other permits or consents that may be required in relation to the rebuilding or reinstatement of the Premises the cost of debris removal demolition site clearance accommodation works any works that may be required by statute and incidental expenses and     7.2.2.2 the loss of Rent payable under this lease from time to time (having regard to any review of rent which may become due under this lease) for three years   7.2.3 against damage or destruction by the Insured Risks to the extent that such insurance may ordinarily be arranged for properties such as the Premises with an insurer of repute and subject to such excesses exclusions or limitations as the insurer may require 7.3 Payment of Insurance Rent   The Tenant shall pay the Insurance Rent on demand for the period from and including the Rent Commencement Date to the day before the next policy renewal date following the date of this lease and subsequently the Tenant shall pay the Insurance Rent on demand 7.4 Suspension of Rent   7.4.1 If and whenever during the Term:     7.4.1.1 the Premises or any part of them are damaged or destroyed by any of the Insured Risks (except one against which insurance may not ordinarily be arranged with an insurer of repute for properties such as the Premises unless the Landlord has in fact insured against that risk) so that the Premises or any part of them are unfit for occupation or use and     7.4.1.2 payment of the insurance money is not refused in whole or in part     the provisions of clause 7.4.2 shall have effect   7.4.2 When the circumstances contemplated in clause 7.4.1 arise the Rent or a fair proportion of the Rent according to the nature and the extent of the damage sustained shall cease to be payable until the Premises or the affected parts shall have been rebuilt or reinstated so that the Premises or the affected part are made fit for occupation or use or until the expiration of three years from the destruction or damage whichever period is the shorter (the amount of such proportion and the period during which the Rent shall cease to be payable to be determined by the Surveyor acting as an expert and not as an arbitrator) 7.5 Reinstatement and termination if prevented   7.5.1 If and whenever during the Term:     7.5.1.1 the Premises or any part of them are damaged or destroyed by any of the Insured Risks (except one against which insurance may not ordinarily be arranged with an insurer of repute for properties such as the Premises unless the Landlord has in fact insured against that risk) and       16 --------------------------------------------------------------------------------     7.5.1.2 the payment of the insurance money is not refused in whole or in part by reason of any act or default of the Tenant or anyone at the Premises expressly or by implication with the Tenant's authority     the Landlord shall use its best endeavours to obtain all planning permissions or other permits and consents that may be required under the Planning Acts or other statutes (if any) to enable the Landlord to rebuild and reinstate ("Permissions")   7.5.2 Subject to the provisions of clauses 7.5.3 and 7.5.4 the Landlord shall as soon as the Permissions have been obtained or immediately where no Permissions are required apply all money received in respect of such insurance (except sums in respect of loss of Rent) in rebuilding or reinstating the Premises so destroyed or damaged PROVIDED that in the event of substantial damage to or destruction of the Premises by an Insured Risk the above provisions shall have effect as if they obliged the Landlord (subject as provided above) to rebuild and reinstate the Premises either in the form in which they were immediately before the occurrence of the destruction or damage or with such modifications as:     7.5.2.1 may be required by any competent authority as a condition of the grant of any of the Permissions and/or     7.5.2.2 the Landlord may make to reflect then current good building practice and/or     7.5.2.3 the Landlord may otherwise reasonably require     but so that the Landlord shall in any event provide in the Premises as rebuilt and reinstated accommodation for the Tenant no less convenient and commodious than those which existed immediately before the occurrence of the destruction or damage   7.5.3 For the purposes of this clause the expression 'Supervening Events' means:     7.5.3.1 the Landlord has failed despite using its best endeavours to obtain the Permissions     7.5.3.2 any of the Permissions have been granted subject to a lawful condition with which in all the circumstances it would be unreasonable to expect the Landlord to comply     7.5.3.3 some defect or deficiency in the site upon which the rebuilding or reinstatement is to take place would mean that the same could only be undertaken at a cost that would be unreasonable in all circumstances     7.5.3.4 the Landlord is unable to obtain access to the site for the purposes of rebuilding or reinstating     7.5.3.5 the cost of rebuilding or reinstating would exceed the amount received in respect of the insurance effected by the Landlord pursuant to this clause (except sums in respect of loss of Rent)     7.5.3.6 the rebuilding or reinstating is prevented by war act of God Government action strike lock-out or     7.5.3.7 any other circumstances reasonably beyond the control of the Landlord   7.5.4 the Landlord shall not be liable to rebuild or reinstate the Premises if and for so long as such rebuilding or reinstating is prevented by Supervening Events       17 --------------------------------------------------------------------------------   7.5.5 If upon the expiry of a period of thirty months commencing on the date of the damage or destruction the Premises have not been rebuilt or reinstated so as to be fit for the Tenant's occupation and use either party may by notice served at any time within six months of the expiry of such period invoke the provisions of clause 7.5.6   7.5.6 Upon service of a notice in accordance with clause 7.5.5:     7.5.6.1 the Term will absolutely cease but without prejudice to any rights or remedies that may have accrued to either party against the other and     7.5.6.2 all money received in respect of the insurance effected by the Landlord pursuant to this clause shall belong to the Landlord 7.6 Tenant's insurance covenants   The Tenant covenants with the Landlord   7.6.1 to comply with all the reasonable requirements and recommendations of the insurers   7.6.2 not to do or omit anything that could cause any policy of insurance on or in relation to the Premises to become void or voidable wholly or in part nor (unless the Tenant shall have previously notified the Landlord and have agreed to pay the increased premium) anything by which additional insurance premiums may become payable   7.6.3 to keep the Premises supplied with such fire fighting equipment as the insurers and the fire authority may require and as the Landlord may reasonably require and to maintain such equipment to their satisfaction and in efficient working order and at least once in every six months to cause any sprinkler system and other fire fighting equipment to be inspected by a competent person   7.6.4 not to store or bring onto the Premises any article substance or liquid of a specially combustible inflammable or explosive nature and to comply with the requirements and recommendations of the fire authority and the reasonable requirements of the Landlord as to fire precautions relating to the Premises.   7.6.5 not to obstruct the access to any fire equipment or the means of escape from the Premises nor to lock any fire door while the Premises are occupied   7.6.6 to give notice to the Landlord immediately upon the happening of any event which might affect any insurance policy on or relating to the Premises or upon the happening of any event against which the Landlord may have insured under this lease   7.6.7 immediately to inform the Landlord in writing of any conviction judgment or finding of any court or tribunal relating to the Tenant (or any director other officer or major shareholder of the Tenant) of such a nature as to be likely to affect the decision of any insurer or underwriter to grant or to continue any such insurance   7.6.8 if at any time the Tenant shall be entitled to the benefit of any insurance on the Premises (which is not effected or maintained in pursuance of any obligation contained in this lease) to apply all money received by virtue of such insurance in making good the loss or damage in respect of which such money shall have been received       18 --------------------------------------------------------------------------------   7.6.9 if and whenever during the Term the Premises or any part of them are damaged or destroyed by an Insured Risk and the insurance money under the policy of insurance effected by the Landlord pursuant to its obligations contained in this lease is by reason of any act or default of the Tenant or anyone at the Premises expressly or by implication with the Tenant's authority wholly or partially irrecoverable immediately in every such case (at the option of the Landlord) either:     7.6.9.1 to rebuild and reinstate at its own expense the Premises or the part destroyed or damaged to the reasonable satisfaction and under the supervision of the Surveyor the Tenant being allowed towards the expenses of so doing upon such rebuilding and reinstatement being completed the amount (if any) actually received in respect of such destruction or damage under any such insurance policy or     7.6.9.2 to pay to the Landlord on demand with Interest the amount of such insurance money so irrecoverable in which event the provisions of clauses 7.4 and 7.5 shall apply 7.7 Landlord's insurance covenants   The Landlord covenants with the Tenant in relation to the policy of insurance effected by the Landlord pursuant to its obligations contained in this lease to produce to the Tenant on demand reasonable evidence of the terms of the policy and the fact that the last premium has been paid. 8 The Guarantor's covenants   The expression "the Guarantor's covenants" shall mean the following covenants by the Guarantor   The Guarantor covenants with the person named in clause 1.1.1. and without the need for any express assignment with all its successors in title that: 8.1 To pay observe and perform   During the Term the Tenant shall punctually pay the rents and observe and perform the covenants and other terms of this lease and if at any time during the Term the Tenant shall make any default in payment of the rents or in observing or performing any of the covenants or other terms of this lease the Guarantor will pay the rents and observe or perform the covenants or terms in respect of which the Tenant shall be in default and make good to the Landlord on demand and indemnify the Landlord against all losses damages costs and expenses arising or incurred by the Landlord as a result of such non-payment non-performance or non-observance notwithstanding:   8.1.1 any time or indulgence granted by the Landlord to the Tenant or any neglect or forbearance of the Landlord in enforcing the payment of the rents or the observance or performance of the covenants or other terms of this lease or any refusal by the Landlord to accept rents tendered by or on behalf of the Tenant at a time when the Landlord was entitled (or would after service of a notice under the Law of Property Act 1925 Section 146 have been entitled) to re-enter the Premises   8.1.2 that the terms of this lease may have been varied by agreement between the parties   8.1.3 that the Tenant shall have surrendered part of the Premises in which event the liability of the Guarantor under this lease shall continue in respect of the part of the Premises not so surrendered after making any necessary apportionments under the Law of Property Act 1925 Section 140 and 19 --------------------------------------------------------------------------------   8.1.4 any other act or thing by which but for this provision the Guarantor would have been released 8.2 To take lease following disclaimer   If at any time during the Term the Tenant (being an individual) shall become bankrupt or (being a company) shall enter into liquidation and the trustee in bankruptcy or liquidator shall disclaim this lease the Guarantor shall if the Landlord shall by notice within sixty days after such disclaimer so require take from the Landlord a lease of the Premises for the residue of the Contractual Term which would have remained had there been no disclaimer at the Rent then being paid under this lease and subject to the same covenants and terms as in this lease (except that the Guarantor shall not be required to procure that any other person is made a party to that lease as guarantor) such new lease to take effect from the date of such disclaimer and in such case the Guarantor shall pay the costs of such new lease and execute and deliver to the Landlord a counterpart of it 8.3 To make payments following disclaimer   If this lease shall be disclaimed and for any reason the Landlord does not require the Guarantor to accept a new lease of the Premises the Guarantor shall pay to the Landlord on demand an amount equal to the rents for the period commencing with the date of such disclaimer and ending on whichever is the earlier of the following dates:   8.3.1 the date three months after such disclaimer and   8.3.2 the date (if any) upon which the Premises are relet 9 Provisos 9.1 Re-entry   If and whenever during the Term:   9.1.1 the rents (or any of them or any part of them) under this lease are outstanding for 21 days after becoming due whether formally demanded or not or   9.1.2 there is a breach by the Tenant or any Guarantor of any covenant or other term of this lease or any document supplemental to this lease or   9.1.3 the Tenant or any Guarantor being an individual:     9.1.3.1 becomes bankrupt or     9.1.3.2 has an interim receiver appointed in respect of its property or   9.1.4 the Tenant or any Guarantor being a company:     9.1.4.1 enters into liquidation whether compulsory or voluntary (but not if the liquidation is for amalgamation or reconstruction of a solvent company) or     9.1.4.2 has a receiver appointed or     9.1.4.3 has an administration order made or     9.1.4.4 any person becomes entitled to exercise in respect of it the powers of an administrative receiver or   9.1.5 the Tenant enters into an arrangement for the benefit of its creditors       20 --------------------------------------------------------------------------------   the Landlord may re-enter the Premises (or any part of them in the name of the whole) at any time (and even if any previous right of re-entry has been waived) and then the Term will absolutely cease but without prejudice to any rights or remedies which may have accrued to the Landlord against the Tenant or any Guarantor in respect of any breach of covenant or other term of this lease (including the breach in respect of which the re-entry is made) 9.2 Exclusion of use warranty   Nothing in this lease or in any consent granted by the Landlord under this lease shall imply or warrant that the Premises may lawfully be used under the Planning Acts for the purpose authorised in this lease (or any purpose subsequently authorised) 9.3 Entire understanding   This lease embodies the entire understanding of the parties relating to the Premises and to all the matters dealt with by any of the provisions of this lease 9.4 Representations   The Tenant acknowledges that this lease has not been entered into in reliance wholly or partly on any statement or representation made by or on behalf of the Landlord except any such statement or representation that is expressly set out in this lease 9.5 Licences etc under hand   Whilst the Landlord is a limited company or other corporation all licences consents approvals and notices required to be given by the Landlord shall be sufficiently given if given under the hand of a director the secretary or other duly authorised officer of the Landlord 9.6 Tenant's property   If after the Tenant has vacated the Premises on the expiry of the Term any property of the Tenant remains in or on the Premises and the Tenant fails to remove it within seven days after being requested in writing by the Landlord to do so or if after using its best endeavours the Landlord is unable to make such a request to the Tenant within fourteen days after the expiry of the Term:   9.6.1 in so far as such property is annexed to the Premises the Landlord may treat it as having reverted to the Landlord or   9.6.2 the Landlord may as the agent of the Tenant sell such property and the Tenant will indemnify the Landlord against any liability incurred by it to any third party whose property shall have been sold by the Landlord in the mistaken belief held in good faith (which shall be presumed unless the contrary is proved) that such property belonged to the Tenant and   9.6.3 if the Landlord having made reasonable efforts is unable to locate the Tenant the Landlord shall be entitled to retain the net proceeds of sale of such property absolutely unless the Tenant shall claim them within six months of the date upon which the Tenant vacated the Premises and   9.6.4 the Tenant shall indemnify the Landlord against any damage occasioned to the Premises and any actions claims proceedings costs expenses and demands made against the Landlord caused by or related to the presence of the property in or on the Premises       21 -------------------------------------------------------------------------------- 9.7 Compensation on vacating   Any statutory right of the Tenant to claim compensation from the Landlord on vacating the Premises shall be excluded to the extent that the law allows 9.8 Service of notices   The provisions of the Law of Property Act 1925 Section 196 as amended by the Recorded Delivery Service Act 1962 shall apply to the giving and service of all notices and documents under or in connection with this lease except that Section 196 shall be deemed to be amended as follows:   9.8.1 the final words of Section 196(4) .... "and that service ....... be delivered" shall be deleted and there shall be substituted ".... and that service shall be deemed to be made on the third Working Day after the registered letter has been posted "Working Day" meaning any day from Monday to Friday (inclusive) other than Christmas Day Good Friday and any statutory bank or public holiday and the day immediately following such statutory bank or public holiday"   9.8.2 any notice or document shall also be sufficiently served on a party if served on solicitors who have acted for that party in relation to this lease or the Premises at any time within the year preceding the service of the notice or document   9.8.3 any notice or document shall also be sufficiently served if sent by telex telephonic facsimile transmission or any other means of electronic transmission to the person to be served and that service shall be deemed to be made on the day of transmission if transmitted before 4pm on a Working Day but otherwise on the next following Working Day (as defined above)   and in this clause 'party' includes any Guarantor 10 Tenant's option to purchase reversion   10.1 If the Tenant wishes to purchase the leasehold reversion of the Premises as held by the Landlord at the date hereof pursuant to the terms of the superior lease dated 28th September 1976 ("the Landlord's Interest") then if the Tenant shall at any time during the first five years of the Contractual Term give to the Landlord notice in writing referring to this clause 10.1 ("the Tenant's Option Notice") of its desire to acquire the Landlord's Interest then the Landlord shall at the date specified in clause 10.4 and upon payment of the higher of   10.1.1 £3,200,000 (three million two hundred thousand pounds) and   10.1.2 the Market Value to be ascertained in accordance with the provisions of clause 10.2   (the said higher sum in this clause 10 referred to as "the Sale Price") together with any Value Added Tax thereon and together also with the rents reserved by and all other sums payable under this Lease up to the date of actual completion transfer the Landlord's interest to the Tenant PROVIDED that until the sums payable in accordance with this clause shall have actually been paid this lease shall continue in full force and effect and provided also that no more than one Tenant's Option Notice may be served in any calendar year       22 -------------------------------------------------------------------------------- 10.2 The Landlord and the Tenant shall attempt to reach agreement on the Market Value of the Landlord's interest as at the date of service of the Tenant's Option Notice and if such agreement has not been reached within two months from the service of the Tenant's Option Notice then an Expert shall be appointed (on the application of either party but not more than six months from the service of the Tenant's Option Notice) to determine the Market Value (as defined in clause 10.9) of the Premises and the Expert shall act in accordance with the terms of clause 10.8 10.3 If within one month of the agreement or determination of the Market Value in accordance with the above provisions of this Clause 10 the Tenant serves on the Landlord a further notice in writing ("the Tenant's Completion Notice") referring to this clause 10.3 of its desire to complete the purchase of the Landlord's Interest an unconditional binding contract for the sale of the Landlord's Interest an unconditional binding contract for the sale of the Landlord's Interest by the Landlord to the Tenant for the Sale Price (together with any Value Added Tax thereon) subject only to (and with the benefit of) this Lease but otherwise free from encumbrances (other than such as may exist on the date hereof) shall forthwith arise between the Landlord and the Tenant provided however that the sale of the Landlord's Interest shall be subject to all local land charges (if any) affecting the Premises whether registered or not 10.4 Completion of the sale of the Landlord's Interest by the Landlord to the Tenant shall take place on the first working day after the expiration of four weeks after the service on the Landlord of the Tenant's Completion Notice and on completion the Tenant shall pay to the Landlord the Sale Price together with any Value Added Tax thereon and also together with all rents and other sums due to the Landlord under the provisions of this lease up to the date of actual completion and the transfer to the Tenant shall provide that this lease shall forthwith merge and be extinguished in the Landlord's Interest 10.5 The Tenant having investigated the Landlord's title to the Landlord's Interest up to the date of this Lease shall be deemed to have accepted such title and shall not be entitled to raise objections and requisitions in respect thereof or in respect of any local land charges or to investigate the said title in respect of any period prior to the date hereof 10.6 The unconditional binding contract for the sale and purchase of the Landlord's Interest referred to in clause 10.3 shall incorporate the above provisions of this clause 10 and in all respects other than as mentioned in the above provisions of this clause 10 incorporate the conditions contained in the edition of the Standard Conditions of Sale current at the date such contract arises insofar as they are not inconsistent with the provisions of this clause 10 and the prescribed rate of interest for the purposes of such conditions shall be the Interest Rate 10.7 This option shall be of no effect if the Tenant fails to protect it by notice caution or other appropriate entry under the Land Registration Act 1925 within three months from the date of this Lease 10.8 Expert   10.8.1 "Expert" means (for the purpose only of this clause 10) a chartered surveyor having the requisite experience appointed by agreement between the parties or in default of agreement within 14 days of one party giving notice to the other of its nomination or nominations nominated by the President of the Royal Institution of Chartered Surveyors on the application of either party       23 --------------------------------------------------------------------------------   10.8.2 The Expert shall act in the following manner:   10.8.3 he will be allowed reasonable facilities to inspect the Premises will be given all relevant information in the possession or under the control of either party and will allow each party to make representations to him and to make written counter-representations but will not in any way be fettered by the representations and counter-representations and will rely on his own judgment and inspection   10.8.4 he shall be requested to use all reasonable endeavours to give his decision as speedily as possible   10.8.5 he shall act as an expert and not as an arbitrator   10.8.6 the decision of the Expert shall be final and binding on the parties hereto in respect of all matters referred to him hereunder   10.8.7 the fees of the Expert and the costs of his appointment shall be payable by the Tenant 10.9 Market Value   10.9.1 "Market Value" means the consideration for which the sale of the Landlord's Interest might be reasonably be expected to have been completed unconditionally for cash consideration on the date of valuation assuming:   10.9.2 that the Premises are sold with vacant possession or (if such assumption would result in a higher valuation) that the Premises remain subject to this Lease   10.9.3 that the Premises are not subject to any other contractual agreement between the Landlord and the Tenant   10.9.4 that the Tenant will acquire the Landlord's fixtures and fittings and that the same are in reasonable repair at the date of valuation   10.9.5 a willing seller and a willing purchaser   10.9.6 that prior to the date of valuation there has been a reasonable period (having regard to the nature of the Premises and the state of the market) for the proper marketing of the Landlord's Interest for the agreement of price and terms and for the completion of the sale of the Landlord's Interest   10.9.7 that the state of the market level of values and other circumstances were on any earlier assumed date of exchange of agreements for sale and purchase the same as on the date of valuation   10.9.8 that no account is taken of any additional bid by a buyer or lessee with a special interest   10.9.9 that no work has been carried out on the Premises by the Tenant its subtenants or their predecessors in title during the Term which has diminished the value of the Premises   10.9.10 that the covenants contained in this lease on the part of the Tenant have been reasonably performed and observed 11 Tenant's Right of Pre-Emption 11.1 Except in accordance with the provisions of clause 11.2 the Landlord shall not during the Pre-Emption Period make any Disposal other than to the Tenant or the tenant's nominee       24 -------------------------------------------------------------------------------- 11.2 The Landlord may make a Disposal during a Disposal Period on the Relevant Terms provided that no Disposal may be made:   11.2.1 to a connected person (as determined in accordance with the provisions of the Income and Corporation Taxes Act 1988) of the Landlord or any directors or former directors of the Landlord or   11.2.2 as part of a larger transaction or series of transactions 11.3 In this clause 11:   11.3.1 "Pre-Emption Period" means the period commencing on the fifth anniversary of the commencement of the Contractual Term and expiring on the determination of the Term   11.3.2 "Disposal" means the creation grant surrender or transfer of any legal or equitable estate right or interest in the Premises or any part of them   11.3.3 "Relevant Terms" in respect of a Disposal has the meaning defined in sub-clause 11.4.2 which comprises (to the exclusion of any other) all material terms and (without prejudice to the generality of the above) all elements of any consideration and any other terms which might have an effect on such consideration   11.3.4 "Disposal Period" means the period of six months commencing on a Rejection Date   11.3.5 "Relevant Offer" means the service by the Landlord on the Tenant of a written notice that the Landlord proposes to effect a Disposal of the Landlord's Interest (as defined in clause 10.1) at a premium the amount of which is specified in such notice   11.3.6 "Provisional Acceptance" means the service by the Tenant on the Landlord of a written notice that the Tenant is minded to acquire the Landlord's Interest on terms to be agreed   11.3.7 the "Completion Provisions" are:     11.3.7.1 the Landlord shall at the date specified in sub-clause 11.3.7.2 and upon payment by the Tenant to the Landlord of the Sale Price together with any Value Added Tax thereon and together also with the rents reserved by and all other sums payable under this lease up to the date of completion transfer the Landlord's Interest to the Tenant or (at the Tenant's request) the tenant's nominee provided that until the sums payable in accordance with this clause shall have actually been paid this lease shall continue in full force and effect     11.3.7.2 completion of the sale of the Landlord's Interest by the Landlord so the Tenant or the tenant's nominee (as appropriate) shall take place on the tenth working day after the date of the Tenant's Completion Notice where clause 11.4.1.2.1 applies and on the tenth working day after the date of agreement between the Landlord and the Tenant of the Market Value where clause 11.4.1.2.2 applies and the transfer shall provide that this lease shall forthwith merge and be extinguished in the Landlord's Interest   11.3.8 the "Acceptance Period" in respect of any notice of the Expert's decision served pursuant in the provisions of clause 11.4.1.2 or immediately following the date of the Relevant Offer referred to in clause 11.4 means the period of 20 working days commencing with the date on which the notice to which it relates is served or the date of the said Relevant Offer (as appropriate) 25 --------------------------------------------------------------------------------   11.3.9 "Rejection Date" means the date of the day next following the last day of an Acceptance Period during which the Tenant has not given Provisional Acceptance or a Tenant's Completion Notice other than an Acceptance Period during which the Landlord has given a Landlord's Withdrawal Notice   11.3.10 "Landlord's Withdrawal Notice" means a written notice by the Landlord to the Tenant that the Landlord wishes to withdraw the Relevant Offer 11.4 If the Landlord makes a Relevant Offer during the Pre-Emption Period then:—   11.4.1 if the Tenant gives Provisional Acceptance during the Acceptance Period immediately following the date of the Relevant Offer then:—     11.4.1.1 the Landlord and the Tenant shall attempt to reach agreement on the Market Value (as defined in clause 10.9) as at the date of the Relevant Offer and if such agreement has not been reached within 20 working days of the date of Provisional Acceptance then an Expert shall be appointed to determine the Market Value and the Expert shall act in accordance with the terms of clause 10.8     11.4.1.2 forthwith upon the earlier of:—       11.4.1.2.1 the service of notice ("Tenant's Completion Notice") by the Tenant upon the Landlord at any time during the Acceptance Period commencing with the date of receipt by the Tenant of notice of the Expert's decision as to the Market Value that the Tenant wishes to acquire the Landlord's Interest at the Market Value (provided that the Landlord does not at any time during the said Acceptance Period whether before or after the service of any Tenant's Completion Notice serve a Landlord's Withdrawal Notice) and       11.4.1.2.2 the agreement by the Landlord and the Tenant in accordance with clause 11.4.1.1 of the Market Value       the Landlord shall be deemed to have made a further offer specifying the said amount of the Market Value as the premium for the Landlord's Interest and an unconditional binding contract for the sale of the Landlord's Interest by the Landlord to the Tenant or the tenant's nominee as appropriate for a premium which shall be the Market Value ascertained pursuant to the provisions of sub clause 11.4.1.1 (in the Completion Provisions referred to as "the Sale Price") incorporating the Completion Provisions subject only to (and with the benefit of) this Lease but otherwise free from encumbrances (other than such as may exist on the date hereof) shall forthwith arise between the Landlord and the Tenant provided however that the sale of the Landlord's Interest shall be subject to all local land charges (if any) affecting the Premises at the date of completion whether registered or not   11.4.2 If a Rejection Date immediately follows an Acceptance Period referred to in this sub clause 11.4 then the Relevant Terms during the Disposal Period commencing on the said Rejection Date shall be such terms as the Landlord shall in its absolute discretion decide         26 --------------------------------------------------------------------------------   11.4.3 If the Landlord has given a Landlord's Withdrawal Notice then notwithstanding any other provisions of this Clause 11 the Landlord shall not make a further Relevant Offer for a period of six months from the relevant Rejection Date IN WITNESS whereof this Deed has been executed but remains undelivered until the day and year first before written FIRST SCHEDULE Part 1 Rights Granted Full right and liberty for the Tenant its servants and licensees 1. in common with the Landlord the Superior Landlord and all other persons having the like right with or without vehicles at all times for all purposes connected with the Premises but not for any other purpose to pass and repass to and from the Premises over and along the part of the roads or ways shown coloured brown on the Plan 2. to the free right of passage and running of water soil gas and electricity to and from the demised premises through all sewers drains pipes cables and watercourses now or within 80 years hereafter to be made or passing under or along the adjoining land of the Superior Landlord 3. at all reasonable times having given 7 days prior notice in writing (except in cases of emergency) to enter upon the adjoining and neighbouring land of the Superior Landlord to repair and maintain the Premises the works upon which shall not otherwise be reasonably practicable subject to making good all damage and disturbance so caused PROVIDED that in exercising such right the Tenant its agents servants lessees and licensees shall not impede the use and enjoyment of such land by the Superior Landlord or the tenants or other occupiers thereof Part 2 Rights Reserved 1. The right at any time during the Term at reasonable times having (except in cases of emergency) given 7 days prior notice in writing to enter the Premises 1.1 to inspect the condition and state of repair of the Premises 1.2 to take schedules or inventories of fixtures and other items to be yielded up on the expiry of the Term and 1.3 to exercise any of the rights granted to the Landlord elsewhere in this lease 2 The right with the Surveyor and the third party determining the Rent in default of agreement between the parties under any provisions for rent review contained in this lease on reasonable prior notice to enter and inspect and measure the Premises for all purposes connected with any pending or intended step under the 1954 Act or the implementation of any provisions for rent review       27 -------------------------------------------------------------------------------- 3 Full right and liberty (in common with all other persons granted the like right by the Superior Landlord or its successors in title or other persons so entitled to grant the right) with or without vehicles at all times for all purposes (subject as hereinafter provided) to pass and repass over the part of the roads or ways shown coloured blue and hatched green on the Plan but in the case of the roads or ways hatched green for the purposes of the Electricity Company only 4 to the Superior Landlord the free right of passage and running of water and soil gas and electricity from the adjoining and neighbouring land and the buildings now or within the period of 80 years from the date of the Headlease erected thereon through the sewers drains pipes channels mains and cables laid or within the like period hereafter to be laid upon or under the Premises with power to enter upon the same having given 7 days prior notice in writing (except in cases of emergency) and in such positions as they may reasonably choose to lay and make connections with such sewers drains pipes channels mains and cables or any of them for the purpose of exercising the said right of passage aforementioned 5 to the Superior Landlord full right and liberty at any time hereafter and from time to time to execute works and erections upon the Superior Landlord's adjoining and neighbouring land and to use the said adjoining and neighbouring land and buildings in such manner as it may think fit notwithstanding that the access of light and air to the Premises may thereby be interfered with 6 to the Superior Landlord full right and liberty at all reasonable times to enter upon the Premises having given 7 days prior notice in writing (except in cases of emergency) to view the state and condition of and to repair and maintain adjoining premises or adjoining roadways the works upon which shall not otherwise be reasonably practicable subject to making good all damage and disturbance so caused PROVIDED that in exercising such rights the Superior Landlord its agents servants lessees and licensees shall not impede the Tenants use and enjoyment of the Premises SECOND SCHEDULE Rent and Rent Review 1 Definitions 1.1 The terms defined in this paragraph shall for all purposes of this schedule have the meanings specified 1.2 'Review Period' means the period between any Review Date and the day prior to the next Review Date (inclusive) or between the last Review Date and the expiry of the Term (inclusive) 1.3 'the Assumptions' means the following assumptions at the relevant Review Date:   1.3.1 that no work has been carried out on the Premises by the Tenant its subtenants or their predecessors in title during the Term which has diminished the rental value of the Premises   1.3.2 that if the Premises have been destroyed or damaged by any of the Insured Risks they have been fully restored   1.3.3 that the covenants contained in this lease on the part of the Tenant have been fully performed and observed       28 --------------------------------------------------------------------------------   1.3.4 that the Premises are available to let by a willing landlord to a willing tenant by one lease ('the Hypothetical Lease') without a premium being paid by either party and with vacant possession   1.3.5 that the Premises are ready for immediate occupation and use for the purpose or purposes required by the willing tenant referred to in the previous provisions of this schedule and that all the services required for such occupation and use are connected to the Premises   1.3.6 that the Hypothetical Lease contains the same terms as this lease including the provisions for rent review on the Review Dates and at similar intervals after the last Review Date but except:     1.3.6.1 the amount of the Initial Rent     1.3.6.2 that the term of the Hypothetical Lease is ten years     1.3.6.3 that such term begins on the relevant Review Date and     1.3.6.4 that the rent shall commence to be payable from that date and     1.3.6.5 the provisions relating to VAT contained in this schedule and     1.3.6.6 that the years during which the tenant covenants to decorate the Premises are at similar intervals after the beginning of the term of the Hypothetical Lease as those specified in this lease   1.3.7 that the Hypothetical Lease will be renewed at the expiry of its term under the provisions of the 1954 Act   1.3.8 that the Tenant is entitled by reason of the Tenant's own supplies to recover the full amount of all VAT chargeable in respect of any payment made by the Tenant under any of the terms of or in connection with this lease or in respect of any payment made by the Landlord where the Tenant agrees in this Lease to reimburse the Landlord for such payment 1.4 'the Disregarded Matters' means:   1.4.1 any effect on rent of the fact that the Tenant its subtenants or their respective predecessors in title have been in occupation of the Premises   1.4.2 any goodwill attached to the Premises by reason of the carrying on at the Premises of the business of the Tenant its subtenants or their predecessors in title in their respective businesses   1.4.3 any increase in rental value of the Premises attributable to the existence at the relevant Review Date of any improvement to the Premises carried out with consent where required by the Tenant during the Term otherwise than in pursuance of an obligation to the Landlord or its predecessors in title   1.4.4 any effect on rent of the fact that VAT is or may be chargeable in respect of any payment made by the Tenant under any of the terms of or in connection with this lease   1.4.5 the existence of the Second Rent and the amount thereof 1.5 'the President' means the President for the time being of the Royal Institution of Chartered Surveyors the duly appointed deputy of the President or any person authorised by the President to make appointments on his behalf 29 -------------------------------------------------------------------------------- 1.6 'the Arbitrator' means a person appointed by agreement between the parties or in the absence of agreement within fourteen days of one party giving notice to the other of its nomination or nominations nominated by the President on the application of either party made not earlier than six months before the relevant Review Date or at any time afterwards and any person appointed by the President in his place 2 Ascertaining the Rent 2.1 The Rent shall be:   2.1.1 until and including 30 November 1993 the Initial Rent and thereafter   2.1.2 until but excluding the first Review Date the sum of £315,000 (three hundred and fifteen thousand pounds) per year ("the Second Rent") and thereafter   2.1.3 during each successive Review Period a rent equal to the greater of:     2.1.3.1 the Rent payable immediately prior to the relevant Review Date or if payment of Rent has been suspended pursuant to the proviso to that effect contained in this lease the Rent which would have been payable had there been no such suspension or     2.1.3.2 such Rent as may be ascertained in accordance with this schedule 2.2 Such revised Rent for any Review Period may be agreed in writing at any time between the parties or (in the absence of agreement) will be determined not earlier than the relevant Review Date by the Arbitrator 2.3 The revised Rent to be determined by the Arbitrator shall be such as he shall decide acting as an arbitrator and not as an expert to be the rent at which the Premises might reasonably be expected to be let on the open market at the relevant Review Date making the Assumptions but disregarding the Disregarded Matters 2.4 The arbitration shall be conducted in accordance with the Arbitration Acts 1950 to 1979 except that if the Arbitrator shall die or decline to act the President may on the application of either party discharge the Arbitrator and appoint another in his place 2.5 Whenever the Rent shall have been ascertained in accordance with this schedule memoranda to this effect shall be signed by or on behalf of the parties and annexed to this lease and its counterpart and the parties shall bear their own costs in this respect and for any period VAT is chargeable in respect of the rents under this lease the amount of the Rent referred to in such memorandum shall be exclusive of VAT unless the contrary is expressly stated therein 3 Arrangements pending ascertainment of revised Rent 3.1 If the revised Rent payable during any Review Period has not been ascertained by the relevant Review Date Rent shall continue to be payable at the rate previously payable such payments being on account of the Rent for that Review Period 3.2 If one party shall upon publication of the Arbitrator's award pay all the Arbitrator's fees and expenses such party shall be entitled to recover (in default of payment within twenty-one days of a demand to that effect in the case of the Landlord as Rent in arrears or in the case of the Tenant by deduction from Rent) such proportion of them (if any) as the Arbitrator shall award against the other party       30 -------------------------------------------------------------------------------- 4 Payment of revised Rent 4.1 If the revised Rent shall be ascertained on or before the relevant Review Date and that date is not a quarter day the Tenant shall on that Review Date pay to the Landlord the amount by which one quarter's Rent at the rate payable on the immediately preceding quarter day is less than one quarter's Rent at the rate of the revised rent apportioned on a daily basis for that part of the quarter during which the revised Rent is payable 4.2 If the revised Rent payable during any Review Period has not been ascertained by the relevant Review Date then immediately after the date when the same has been agreed between the parties or the date upon which the Arbitrator's award shall be received by one party the Tenant shall pay to the Landlord:   4.2.1 any shortfall between the rent which would have been paid on the Review Date and on any subsequent quarter days had the revised rent been ascertained on or before the relevant Review Date and the payments made by the Tenant on account and   4.2.2 interest at Base Rate prevailing on the day upon which the shortfall is paid in respect of each instalment of Rent due on or after the Review Date on the amount by which the instalment of revised Rent which would have been paid on the relevant Review Date or such quarter day exceeds the amount paid on account and such interest shall be payable for the period from the date upon which the instalment was due up to the date of payment of the shortfall 5 Arrangements when increasing Rent prevented etc 5.1 If at any of the Review Dates there shall be in force a statute which shall prevent restrict or modify the Landlord's right to review the Rent in accordance with this lease and/or to recover any increase in the Rent the Landlord shall when such restriction or modification is removed relaxed or modified be entitled (but without prejudice to its rights (if any) to recover any Rent the payment of which has only been deferred by law) on giving not less than one month's nor more than three months' notice in writing to the Tenant to invoke the provisions of paragraph 5.2 5.2 Upon the service of a notice pursuant to paragraph 5.1 the Landlord shall be entitled:   5.2.1 to proceed with any review of the Rent which may have been prevented or further to review the Rent in respect of any review where the Landlord's right was restricted or modified and the date of expiry of such notice shall be deemed for the purposes of this lease to be a Review Date (provided that without prejudice to the operation of this paragraph nothing in this paragraph shall be construed as varying any subsequent Review Dates)   5.2.2 to recover any increase in Rent with effect from the earliest date permitted by law THE COMMON SEAL of MUIRHEAD VACTRIC COMPONENTS LIMITED was hereunto affixed in the presence of:— [SEAL] /s/ [ILLEGIBLE] Director /s/ [ILLEGIBLE] Director/Secretary 31 -------------------------------------------------------------------------------- [DIAGRAM OMITTED] 32 -------------------------------------------------------------------------------- [OPENMEN LETTERHEAD] Our ref: MW/ns/5334 5 July 1996 Muirhead Vactric Components Ltd 33 Oakfield Road Penge London SE20 8EW Dear Sirs OPENMEN LIMITED Please note that with effect from 2 July 1996, Openmen Limited has changed its name to Williams Properties Limited (a copy of the Change of Name Certificate is enclosed), therefore all future rent and other demands will be sent in the new name of the company. Yours faithfully /s/ Martin Way M Way BA (Hons) Dip Surv Group Property Administrator -------------------------------------------------------------------------------- [SEAL] CERTIFICATE OF INCORPORATION ON CHANGE OF NAME Company No. 2124564 The Registrar of Companies for England and Wales hereby certifies that OPENMEN LIMITED having by special resolution changed its name, is now incorporated under the name of WILLIAMS PROPERTIES LIMITED Given at Companies House, Cardiff, the 2nd July 1996 /s/ A.F. Fletcher A.F. FLETCHER For the Registrar of Companies [LOGO] COMPANIES HOUSE -------------------------------------------------------------------------------- QuickLinks COUNTERPART UNDERLEASE: DATED 4th January 1993 FIRST SCHEDULE Part 1 Rights Granted Part 2 Rights Reserved SECOND SCHEDULE Rent and Rent Review [DIAGRAM OMITTED]

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.72 WELLS FARGO BANK REVOLVING LINE OF CREDIT NOTE -------------------------------------------------------------------------------- $7,000,000.00 West Covina, California October 31, 2000     FOR VALUE RECEIVED, the undersigned Staar Surgical Company ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at San Gabriel Valley RCBO, 1000 Lakes Drive, Suite 250, West Covina, CA 91790, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of $7,000,000.00, or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein. INTEREST:     (a)  Interest.  The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) at a rate per annum equal to the Prime Rate in effect from time to time. The "Prime Rate" is a base rate that Bank from time to time establishes and which serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto. Each change in the rate of interest hereunder shall become effective on the date each Prime Rate change is announced within Bank.     (b)  Payment of Interest.  Interest accrued on this Note shall be payable on the 1st day of each month, commencing November 1, 2000.     (c)  Default Interest.  From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to 4% above the rate of interest from time to time applicable to this Note. BORROWING AND REPAYMENT:     (a)  Borrowing and Repayment.  Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above. The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for any Borrower, which balance may be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note shall be due and payable in full on April 1, 2001.     (b)  Advances.  Advances hereunder, to the total amount of the principal sum available hereunder, may be made by the holder at the oral or written request of (i) John Santos, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any deposit account of any Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of each Borrower regardless of the fact that persons other than those authorized to 1 -------------------------------------------------------------------------------- request advances may have authority to draw against such account. The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by any Borrower.     (c)  Application of Payments.  Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof.     (d)  Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of California.     IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.     STAAR SURGICAL COMPANY     By:   /s/ JOHN SANTOS    -------------------------------------------------------------------------------- John Santos, Chief Financial Officer 2 -------------------------------------------------------------------------------- EXHIBIT "A" WELLS FARGO BANK REVOLVING LINE OF CREDIT NOTE -------------------------------------------------------------------------------- $7,000,000.00 West Covina, California October 31, 2000     FOR VALUE RECEIVED, the undersigned Staar Surgical Company ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at San Gabriel Valley RCBO, 1000 Lakes Drive, Suite 250, West Covina, CA 91790, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of $7,000,000.00, or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein. INTEREST:     (a)  Interest.  The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) at a rate per annum equal to the Prime Rate in effect from time to time. The "Prime Rate" is a base rate that Bank from time to time establishes and which serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto. Each change in the rate of interest hereunder shall become effective on the date each Prime Rate change is announced within Bank.     (b)  Payment of Interest.  Interest accrued on this Note shall be payable on the 1st day of each month, commencing November 1, 2000.     (c)  Default Interest.  From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to 4% above the rate of interest from time to time applicable to this Note. BORROWING AND REPAYMENT:     (a)  Borrowing and Repayment.  Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above. The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for any Borrower, which balance may be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note shall be due and payable in full on April 1, 2001.     (b)  Advances.  Advances hereunder, to the total amount of the principal sum available hereunder, may be made by the holder at the oral or written request of (i) John Santos, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any deposit account of any Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of each Borrower regardless of the fact that persons other than those authorized to 3 -------------------------------------------------------------------------------- request advances may have authority to draw against such account. The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by any Borrower.     (c)  Application of Payments.  Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof. EVENTS OF DEFAULT:     The occurrence of any of the following shall constitute an "Event of Default" under this Note:     (a) The failure to pay any principal, interest, fees or other charges when due hereunder or under any contract, instrument or document executed in connection with this Note.     (b) The filing of a petition by or against any Borrower, any guarantor of this Note or any general partner or joint venturer in any Borrower which is a partnership or a joint venture (with each such guarantor, general partner and/or joint venturer referred to herein as a "Third Party Obligor") under any provisions of the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time, or under any similar or other law relating to bankruptcy, insolvency, reorganization or other relief for debtors; the appointment of a receiver, trustee, custodian or liquidator of or for any part of the assets or property of any Borrower or Third Party Obligor; any Borrower or Third Party Obligor becomes insolvent, makes a general assignment for the benefit of creditors or is generally not paying its debts as they become due; or any attachment or like levy on any property of any Borrower or Third Party Obligor.     (c) The death or incapacity of any individual Borrower or Third Party Obligor, or the dissolution or liquidation of any Borrower or Third Party Obligor which is a corporation, partnership, joint venture or other type of entity.     (d) Any default in the payment or performance of any obligation, or any defined event of default, under any provisions of any contract, instrument or document pursuant to which any Borrower or Third Party Obligor has incurred any obligation for borrowed money, any purchase obligation, or any other liability of any kind to any person or entity, including the holder.     (e) Any financial statement provided by any Borrower or Third Party Obligor to Bank proves to be incorrect, false or misleading in any material respect.     (f)  Any sale or transfer of all or a substantial or material part of the assets of any Borrower or Third Party Obligor other than in the ordinary course of its business.     (g) Any violation or breach of any provision of, or any defined event of default under, any addendum to this Note or any loan agreement, guaranty, security agreement, deed of trust, mortgage or other document executed in connection with or securing this Note. MISCELLANEOUS:     (a)  Remedies.  Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by each Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate. Each Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, 4 -------------------------------------------------------------------------------- including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity.     (b)  Obligations Joint and Several.  Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.     (c)  Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of California.     IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.     STAAR SURGICAL COMPANY     By:   /s/ JOHN SANTOS    -------------------------------------------------------------------------------- John Santos, Chief Financial Officer 5 -------------------------------------------------------------------------------- San Gabriel Valley RCBO 1000 Lakes Drive, Suite 250 West Covina, CA 91790 WELLS FARGO October 31, 2000 John Santos, Chief Financial Officer Staar Surgical Company 1911 Walker Avenue Monrovia, CA 91016 Dear Mr. Santos:     This letter is to confirm that WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"), subject to all terms and conditions contained herein, has agreed to make available the credit accommodation described below to STAAR SURGICAL COMPANY ("Borrower"). This letter shall be deemed to amend and restate the prior letter loan agreement between Borrower and Bank dated as of June 1, 1998, as amended (the "Prior Letter Agreement"), and any credit accommodation under the Prior Letter Agreement which is not continued hereunder shall be deemed cancelled hereby.     Borrower shall continue to have a revolving line of credit under which Bank will make advances to Borrower from time to time up to and including April 1, 2001, not to exceed at any time the maximum principal amount of Seven Million Dollars ($7,000,000.00) ("Line of Credit"), the proceeds of which shall be used to finance Borrower's working capital requirements. Outstanding advances under the "Line of Credit" under the Prior Letter Agreement shall be deemed outstanding hereunder. I.CREDIT TERMS: 1.LINE OF CREDIT:     (a)  Line of Credit Note.  Borrower's obligation to repay advances under the Line of Credit shall be evidenced by a promissory note substantially in the form of Exhibit A attached hereto ("Line of Credit Note"), all terms of which are incorporated herein by this reference. The line of credit note that had been executed by Borrower and delivered to Bank to evidence advances under the "Line of Credit" under the Prior Letter Agreement shall be deemed amended and restated by the Line of Credit Note hereunder.     (b)  Letter of Credit Subfeature.  As a subfeature under the Line of Credit, Bank agrees from time to time during the term thereof to issue standby letters of credit for the account of Borrower to finance performance requirements (each, a "Letter of Credit" and collectively, "Letters of Credit"); provided however, that the form and substance of each Letter of Credit shall be subject to approval by Bank, in its sole discretion; and provided further, that the aggregate undrawn amount of all outstanding Letters of Credit shall not at any time exceed Five Million Dollars ($5,000,000.00). Each Letter of Credit shall be issued for a term not to exceed three hundred sixty-five (365) days, as designated by Borrower; provided however, that no Letter of Credit shall have an expiration date subsequent to the maturity date of the Line of Credit. The undrawn amount of all Letters of Credit shall be reserved under the Line of Credit and shall not be available for borrowings thereunder. Outstanding standby letters of credit issued for the account of Borrower under the Prior Letter Agreement, if any, shall be deemed outstanding Letters of Credit hereunder. Each 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 Bank in connection with the issuance thereof. Each draft paid by Bank under a Letter of Credit shall be deemed an advance under the Line of Credit and shall be repaid by Borrower in accordance with the terms and conditions of this letter applicable to such advances; provided however, that if advances -------------------------------------------------------------------------------- under the Line of Credit are not available, for any reason, at the time any draft is paid by Bank, then Borrower shall immediately pay to Bank the full amount of such draft, together with interest thereon from the date such amount is paid by Bank to the date such amount is fully repaid by Borrower, at the rate of interest applicable to advance under the Line of Credit. In such event Borrower agrees that Bank, in its sole discretion, may debit any deposit account maintained by Borrower with Bank for the amount of any such draft.     (c)  Borrowing and Repayment.  Borrower may from time to time during the term of the Line of Credit borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions contained herein or in the Line of Credit Note; provided however, that the total outstanding borrowings under the Line of Credit shall not at any time exceed the maximum principal amount available thereunder, as set forth above. 2.COLLATERAL:     As security for all indebtedness of Borrower to Bank subject hereto, Borrower hereby grants to Bank security interest of first priority in all Borrower's accounts receivable, rights to payment, general intangibles, patents, copyrights, trademarks, deposit accounts, chattel paper, instruments, documents, inventory and equipment. All of the foregoing shall be evidenced by and subject to the terms of such security agreements, financing statements and other documents as Bank shall reasonably require, all in form and substance satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand for all costs and expenses incurred by Bank in connection with any of the foregoing security, including without limitation, filing and recording fees and costs of appraisals, audits and title insurance.     Borrower acknowledges that it is obligated to reimburse Bank for all fees, costs, expenses and charges incurred by Bank in connection with Bank's prior engagement of Ernst & Young LLP in connection with Borrower's patent portfolio.     Borrower acknowledges that notwithstanding the fact that Bank is suspending Ernst & Young's work for Bank in connection with Borrower's patent portfolio, such patents continue to be part of Bank's collateral and Borrower continues to be obligated to furnish Bank with such security agreements and other documents as Bank may require to obtain a perfected security of first priority therein. 3.COLLATERAL EXAM AND BORROWING BASE EXAM:     At Bank's request, Nigro, Karlin & Segal ("NKS") conducted a collateral examination. Bank desires to have NKS conduct a supplemental borrowing base examination hereafter and make recommendations to Bank with respect to the use of Borrower's accounts receivable and inventory as a borrowing base to support advances under the Line of Credit. Such examination and recommendations are to be set forth in a written report by NKS to Bank which is to be in form, detail and substance satisfactory to Bank (such report, when completed in form, detail and substance satisfactory to Bank, is referred to herein as the "Borrowing Base Report"). The Borrowing Base Report shall include, without limitation, recommendations regarding what to include as eligible accounts receivable and inventory and what advance rates to use against such eligible collateral, and a calculation of, or such information as will allow Bank to calculate, the value of such eligible collateral at those advance rates as of a date on or after 09-29-00, 2000 (the "Borrowing Base Collateral Value"). Borrower agrees to provide Bank and NKS such information and access to Borrower's property as may be required for the completion of the Borrowing Base Report prior to December 1, 2000 or such later date as may be approved by Bank. Borrower shall reimburse Bank for all fees, costs, expenses and charges incurred by Bank in connection with the collateral examination heretofore conducted by NKS and with the preparation and review of the Borrowing Base Report. 1 --------------------------------------------------------------------------------     Promptly after its receipt and review of the Borrowing Base Report, Bank shall notify Borrower of the Borrowing Base Collateral Value. Borrower agrees that an Event of Default shall exist hereunder if the Borrowing Base Collateral Value is less than Five Million Dollars ($5,000,000.00). II.INTEREST/FEES:     1.  Interest.  The outstanding principal balance of the Line of Credit shall bear interest at the rate of interest set forth in the Line of Credit Note.     2.  Computation and Payment.  Interest shall be computed on the basis of a 360-day year, actual days elapsed. Interest shall be payable at the times and place set forth in each promissory or other instrument required hereby.     3.  Letter of Credit Fees.  Borrower shall pay to Bank (a) fees upon the issuance of each Letter of Credit equal to one percent (1%) per annum (computed on the basis of a 360-day year, actual days elapsed) of the face amount thereof, and (b) fees upon the payment or negotiation by Bank of each draft under any Letter of Credit and fees upon the occurrence of any other activity with respect to any Letter of Credit (including without limitation, the transfer, amendment or cancellation of any Letter of Credit) determined in accordance with Bank's standard fees and charges then in effect for such activity.     4.  Collection of Payments.  Borrower authorizes Bank to collect all principal, interest and fees due under each credit subject hereto by charging Borrower's deposit account number 4159-251172 with Bank, or any other deposit account maintained by Borrower with Bank, for the full amount thereof. Should there be insufficient funds in any such deposit account to pay all such sums when due, for the full amount of such deficiency shall be immediately due and payable by Borrower. III. REPRESENTATIONS AND WARRANTIES:     Borrower makes the following representations and warranties to Bank, which representations and warranties shall survive the execution of this letter and shall continue in full force and effect until the full and final payment, and satisfaction and discharge, of all obligations of Borrower to Bank subject to this letter.     1.  Legal Status.  Borrower is a corporation, duly organized and existing and in good standing under the laws of the State of Delaware, and is qualified or licensed to do business in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could have a material adverse effect on Borrower.     2.  Authorization and Validity.  This letter and each promissory note, contract, instrument and other document deemed necessary by Bank to evidence any extension of credit to Borrower pursuant to the terms and conditions hereof, or now or at any time hereafter required by or delivered to Bank in connection with this letter (collectively, the "Loan Documents") have been duly authorized, and upon their execution and delivery in accordance with the provisions hereof will constitute legal, valid and binding agreements and obligations of Borrower or the party which executes the same, enforceable in accordance with their respective terms.     3.  No Violation.  The execution, delivery and performance by Borrower of each of the Loan Documents do not violate any provision of any law or regulation, or contravene any provision of the Articles of Incorporation or By-Laws of Borrower, or result in a breach of or constitute a default under any contract, obligation, indenture or other instrument to which Borrower is a party or by which Borrower may be bound. 2 --------------------------------------------------------------------------------     4.  Litigation.  There are no pending, or to the best of Borrower's knowledge threatened, actions, claims, investigations, suits or proceedings by or before any governmental authority, arbitrator, court or administrative agency which could have a material adverse effect on the financial condition or operation of Borrower other than those disclosed by Borrower to Bank in writing prior to the date hereof.     5.  Correctness of Financial Statement.  The financial statement of Borrower dated June 30, 2000, a true copy of which has been delivered by Borrower to Bank prior to the date hereof, (a) is complete and correct and presents fairly the financial condition of Borrower, (b) discloses all liabilities of Borrower that are required to be reflected or reserved against under generally accepted accounting principles, whether liquidated or unliquidated, fixed or contingent, and (c) has been prepared in accordance with generally accepted accounting principles consistently applied. Since the date of such financial statement there has been no material adverse change in the condition or operation of Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except in favor of Bank or as otherwise permitted by Bank in writing.     6.  Income Tax Returns.  Borrower has no knowledge of any pending assessments or adjustments of its income tax payable with respect to any year.     7.  No Subordination.  There is no agreement, indenture, contract or instrument to which Borrower is a party or by which Borrower may be bound that requires the subordination in right of payment of any of Borrower's obligations subject to this letter to any other obligation of Borrower.     8.  Permits, Franchises.  Borrower possesses, and will hereafter possess, all permits, consents, approvals, franchises and licenses required and all rights to trademarks, trade names, patents and fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged in compliance with applicable law.     9.  ERISA.  Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended or recodified from time to time ("ERISA"); Borrower has not violated any provision of any defined employee pension benefit plan (as defined in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no Reportable Event, as defined in ERISA, has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under generally accepted accounting principles.     10.  Other Obligations.  Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation.     11.  Environmental Matters.  Except as disclosed by Borrower to Bank in writing prior to the date hereof, Borrower is in compliance in all material respects with all applicable federal or state environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any of Borrower's operations and/or properties, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any of the same may be amended, modified or supplemented from time to time. None of the operations of Borrower is the subject of any federal or state investigation evaluating whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the 3 -------------------------------------------------------------------------------- environment. Borrower has no material contingent liability in connection with any release of any toxic or hazardous waste or substance into the environment. IV. CONDITIONS:     1.  Conditions of Initial Extension of Credit.  The obligation of Bank to extend any credit contemplated by this letter is subject to fulfillment to Bank's satisfaction of all of the following conditions:     (a)  Documentation.  Bank shall have received each of the Loan Documents, duly executed and in form and substance satisfactory to Bank.     (b)  Financial Condition.  There shall have been no material adverse change, as determined by Bank, in the financial condition or business of Borrower, nor any material decline, as determined by Bank, in the market value of any collateral required hereunder or a substantial or material portion of the assets of Borrower.     (c)  Insurance.  Borrower shall have delivered to Bank evidence of insurance coverage on all Borrower's property, in form, substance, amounts, covering risks and issued by companies satisfactory to Bank, and where required by Bank, with loss payable endorsements in favor of Bank.     2.  Conditions of Each Extension of Credit.  The obligation of Bank to make each extension of credit requested by Borrower hereunder shall be subject to the fulfillment to Bank's satisfaction of each of the following conditions:     (a)  Compliance.  The representations and warranties contained herein and in each of the other Loan Documents shall be true on and as of the date of the signing of this letter and on the date of each extension of credit by Bank pursuant hereto, with the same effect as though such representations and warranties had been made on and as of each such date, and on each such date, no default hereunder, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such a default, shall have occurred and be continuing or shall exist.     (b)  Documentation.  Bank shall have received all additional documents which may be required in connection with such extension of credit. V.  COVENANTS:     Borrower covenants that so long Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in writing:     1.  Punctual Payment.  Punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and place and in the manner specified therein.     2.  Accounting Records.  Maintain adequate books and records in accordance with generally accepted accounting principles consistently applied, and permit any representative of Bank, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same and inspect the properties of Borrower. 4 --------------------------------------------------------------------------------     3.  Financial Statements.  Provide to Bank all of the following, in form and detail satisfactory to Bank:     (a) not later than 120 days after and as of the end of each fiscal year, an audited financial statement of Borrower, prepared by a certified public accountant acceptable to Bank, to include a balance, income statement and state of cash flows;     (b) not later than 60 days after and as of the end of each fiscal quarter, a financial statement of Borrower, prepared by Borrower, to include a balance sheet and income statement;     (c) not later than 15 days after and as of the end of each month, a securities portfolio or brokerage statement covering Borrower's cash, cash equivalents and marketable securities; and     (d) from time to time such other information as Bank may reasonably request.     4.  Compliance.  Preserve and maintain all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its business; and comply with the provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower's continued existence and with the requirements of all laws, rules, regulations and orders of a governmental agency applicable to Borrower and/or its business.     5.  Insurance.  Maintain and keep in force insurance of the types and in amounts customarily carried in lines of business similar to that of Borrower, including but not limited to fire, extended coverage, public liability, flood, property damage and workers' compensation, with all such insurance carried with companies and in amounts satisfactory to Bank, and deliver to Bank from time to time at Bank's request schedules setting forth all insurance then in effect.     6.  Facilities.  Keep all properties useful or necessary to Borrower's business in good repair and condition, and from time to time make necessary repairs, renewals and replacements thereto so that such properties shall be fully and efficiently preserved and maintained.     7.  Taxes and Other Liabilities.  Pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both real or personal, including without limitation federal and state income taxes and state and local property taxes and assessments, expect (a) such as Borrower may in good faith contest or as to which a bona fide dispute may arise, and (b) for which borrower has made provision, to Bank's satisfaction, for eventual payment thereof in the event Borrower is obligated to make such payment.     8.  Litigation.  Promptly give notice in writing to Bank of any litigation pending or threatened against Borrower with a claim in excess of $500,000.     9.  Financial Condition.  Maintain Borrower's financial condition as follows using generally accepted accounting principles consistently applied and used consistently with prior practices (except to the extent modified by the definitions herein):     (a) Tangible Net Worth not less than $39,000,000.00 as of December 31, 2000 (the end of Borrower's current fiscal year), with "Tangible Net Worth" defined as the aggregate of total stockholders' equity plus subordinated debt less any intangible assets.     (b) Net income after taxes not less than $1.00 on a quarterly basis, determined as of the end of each fiscal quarter commencing with the fiscal quarter ending December 31, 2000.     10.  Liquidity.  Maintain unencumbered liquid assets (defined as cash, cash equivalents and/or publicly- traded/quoted marketable securities acceptable to Bank) with banks and/or brokers within the 5 -------------------------------------------------------------------------------- U.S. and with have an aggregate fair market value not at any time less than Three Million Five Hundred Thousand Dollars ($3,500,000.00).     11.  Capital Expenditures.  Not make investments in fixed assets in excess of $5,000,000 in the aggregate in the fiscal year ending December 31, 2000 or in excess of $5,000,000 in the aggregate in any fiscal year thereafter.     12.  Lease Expenditures.  Not incur operating lease expense in excess of an aggregate of $3,000,000 in the fiscal year ending December 31, 2000 or in excess of $3,000,000 in the aggregate in any fiscal year thereafter.     13.  Other Indebtedness.  Not create, incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances, whether secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, except (a) the liabilities of Borrower to Bank, (b) any other liabilities of Borrower existing as of, and disclosed to Bank prior to, the date hereof, and (c) purchase money indebtedness incurred in connection with the purchase of equipment hereafter, so long as outstanding purchase money indebtedness incurred in connection with the purchase of equipment, whether before or after the date hereof, at no time exceeds $3,000,000 in the aggregate.     14.  Merger, Consolidation, Transfer of Assets.  Not merge into or consolidate with any other entity; nor make any substantial change in the nature of Borrower's business as conducted as of the date hereof; nor acquire all or substantially all of the assets of any other entity; nor sell, lease, transfer or otherwise dispose of all or a substantial or material portion of Borrower's assets except in the ordinary course of its business.     15.  Guaranties.  Not guarantee or become liable in any way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in the ordinary course of business), accommodation endorser or otherwise for, nor pledge or hypothecate any assets of Borrower as security for, any liabilities or obligations of any other person or entity, except any of the foregoing in favor of Bank.     16.  Loans, Advances, Investments.  Not make any loans or advances to or investments in any person or entity, except any of the foregoing existing as of, and disclosed to Bank prior to, the date hereof.     17.  Pledge of Assets.  Not mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Borrower's assets now owned or hereafter acquired, except any of the foregoing in favor of Bank or which are existing as of, and disclosed to Bank in writing prior to, the date hereof. VI. DEFAULT, REMEDIES:     1.  Default Remedies.  Upon the violation of any term or condition of any of the Loan Documents, or upon the occurrence of any default or defined event of default under any of the Loan Documents: (a) all indebtedness of Borrower under each of the Loan Documents, any term thereof to the contrary notwithstanding, shall at Bank's option and without notice become immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are expressly waived by Borrower; (b) the obligation, if any, of Bank to extend any further credit under any of the Loan Documents shall immediately cease and terminate; and (c) Bank shall have all rights, powers and remedies available under each of the Loan Documents, or accorded by law, including without limitation the right to resort to any or all security for any credit subject hereto and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law. All rights, powers and remedies of 6 -------------------------------------------------------------------------------- Bank may be exercised at any time by Bank and from time to time after the occurrence of any such breach or default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity.     2.  No Waiver.  No delay, failure or discontinuance of Bank in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power, or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing. VII. MISCELLANEOUS:     1.  Notices.  All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this letter must be in writing delivered to each party at its address first set forth above, or to such other address as any party may designate by written notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon receipt.     2.  Costs, Expenses and Attorneys' Fees.  Borrower shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), expended or incurred by Bank in connection with (a) the negotiation and preparation of this letter and the other Loan Documents, Bank's continued administration hereof and thereof, and the preparation of amendments and waivers hereto and thereto, (b) the enforcement of Bank's rights and/or the collection of any amounts which become due to Bank under any of the Loan Documents, and (c) the prosecution or defense of any action in any way related to any of the Loan Documents, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity.     3.  Successors, Assignment.  This letter shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interest hereunder without Bank's prior written consent. Bank reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Bank's rights and benefits under each of the Loan Documents. In connection therewith Bank may disclose all documents and information which Bank now has or hereafter may acquire relating to any credit subject hereto, Borrower or its business, or any collateral required hereunder.     4.  Entire Agreement; Amendment.  This letter and the other Loan Documents constitute the entire agreement between Borrower and Bank with respect to each credit subject hereto and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof. This letter may be amended or modified only in writing signed by each party hereto.     5.  No Third Party Beneficiaries.  This letter is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person 7 -------------------------------------------------------------------------------- or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this letter or any other of the Loan Documents to which it is not a party.     6.  Severability of Provisions.  If any provision of this letter shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition of invalidity without invalidating the remainder of such provision or any remaining provisions of this letter.     7.  Governing Law.  This letter shall be governed by and construed in accordance with the laws of the State of California.     8.  Arbitration.       (a)  Arbitration.  Upon the demand of any party, any Dispute shall be resolved by binding arbitration in accordance with the terms of this letter. A "Dispute" shall mean any action, dispute, claim or controversy of any kind, whether in contract or tort, statutory or common law, legal or equitable, now existing or hereafter arising under or in connection with, or in any way pertaining to, any of the Loan Documents, or any past, present or future extensions of credit and other activities, transactions or obligations of any kind related directly or indirectly to any of the Loan Documents, including without limitation, any of the foregoing arising in connection with the exercise of any self-help, ancillary or other remedies pursuant to any of the Loan Documents. Any party may by summary proceedings bring an action in court to compel arbitration of a Dispute. Any party who fails or refuses to submit to arbitration following a lawful demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any Dispute.     (b)  Governing Rules.  Arbitration proceedings shall be administered by the American Arbitration Association ("AAA") or such other administrator as the parties shall mutually agree upon in accordance with the AAA Commercial Arbitration Rules. All Disputes submitted to arbitration shall be resolved in accordance with the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the Loan Documents. The arbitration shall be conducted at a location in California selected by the AAA or other administrator. If there is any inconsistency between the terms hereof and any such rules, the terms and procedures set forth herein shall control. All statutes of limitation applicable to any Dispute shall apply to any arbitration proceeding. All discovery activities shall be expressly limited to matters directly relevant to the Dispute being arbitrated. Judgment upon any award rendered in an arbitration may be entered in any court having jurisdiction; provided however, that nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. Section 91 or any similar applicable state law.     (c)  No Waiver; Provisional Remedies, Self-Help and Foreclosure.  No provision hereof shall limit the right of any party to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or to obtain provisional or ancillary remedies, including without limitation injunctive relief, sequestration, attachment, garnishment or the appointment of a receiver, from a court of competent jurisdiction before, after or during the pendency of any arbitration or other proceeding. The exercise of any such remedy shall not waive the right of any party to compel arbitration or reference hereunder.     (d)  Arbitrator Qualifications and Powers; Awards.  Arbitrators must be active members of the California State Bar or retired judges of the state or federal judiciary of California, with expertise in the substantive law applicable to the subject matter of the Dispute. Arbitrators are empowered to resolve Disputes by summary rulings in response to motions filed prior to the final arbitration hearing. Arbitrators (i) shall resolve all Disputes in accordance with the substantive law of the 8 -------------------------------------------------------------------------------- State of California, (ii) may grant any remedy or relief that a court of the State of California could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award, and (iii) shall have the power to award recovery of all costs and fees, to impose sanctions and to take such other actions as they deem necessary to the same extent a judge could pursuant to the Federal rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Any Dispute in which the amount in controversy is $5,000,000 or less shall be decided by a single arbitrator who shall not render an award of greater than $5,000,000 (including damages, costs, fees and expenses). By submission to a single arbitrator, each party expressly waives any right or claim to recover more than $5,000,000. Any Dispute in which the amount in controversy exceeds $5,000,000 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations.     (e)  Real Property Collateral; Judicial Reference.  Notwithstanding anything herein to the contrary, no Dispute shall be submitted to arbitration if the Dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such Dispute is not submitted to arbitration, the Dispute shall be referred to a referee in accordance with California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA's selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.     (f)  Miscellaneous.  To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the Dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business, by applicable law or regulation, or to the extent necessary to exercise any judicial review rights set forth herein. If more than one agreement for arbitration by or between the parties potentially applies to a Dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the Dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties.     Your acknowledgement of this letter shall constitute acceptance of the foregoing terms and conditions. Bank's commitment to extend any credit to Borrower pursuant to the terms of this letter 9 -------------------------------------------------------------------------------- shall terminate on November __, 2000, unless this letter is acknowledged by Borrower and returned to bank on or before that date.         Sincerely,         WELLS FARGO BANK, NATIONAL ASSOCIATION         By:   /s/ NANCY MARTORANO    -------------------------------------------------------------------------------- Nancy Martorano Vice President Acknowledged and accepted as of 11/8/00:         STAAR SURGICAL COMPANY         By:   /s/ JOHN SANTOS    -------------------------------------------------------------------------------- John Santos Chief Financial Officer         10 -------------------------------------------------------------------------------- QuickLinks Exhibit 10.72 EXHIBIT "A"

Exhibit 10.24 SURETY Rider No. 1 To be attached to and form a part of: Type of Bond: Bond of Employer Carrying His Own Risk Bond No.:   08167822 executed by:   Labor Ready Central, Inc., as Principal and by:   Fidelity and Deposit Company of Maryland, as Surety, in favor of:   State of Missouri, as Obligee, and effective: September 7, 2000 In consideration of the premium charged for the attached bond, it is hereby agreed to change: The Effective Date of the Bond From: September 7, 2000 To: January 1, 2001 The attached bond shall be subject to all its agreements, limitations and conditions except as herein expressly modified. This rider is effective: September 7, 2000 Signed and Sealed: December 12, 2000 Principal: Labor Ready Central, Inc. By: /s/ Ronald L. Junck, President Surety: Fidelity and Deposit Company of Maryland By: /s/ Patrick D. Dineen, Attorney-in-Fact  

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.18 AGREEMENT     This Agreement, effective as of December 31, 2000, is by and among FEI Company, an Oregon corporation ("FEI"), Philips Business Electronics International BV, a Netherlands corporation formerly known as Philips Industrial Electronics International BV, ("PBE") and Koninklijke Philips Electronics NV, a Netherlands corporation ("Philips").     A.  On November 15, 1996, the parties hereto entered into a Combination Agreement (the "Combination Agreement") under which PBE acquired shares of common stock of FEI, constituting approximately 55% of FEI's outstanding common stock, in exchange for, among other things, 100% of the issued and outstanding capital stock of certain Philips electron optics affiliates.     B.  The percentage ownership interest of PBE has been reduced since the date PBE acquired shares of FEI, such that PBE's interest is now approaching 50%. It is in the mutual best interests of the parties to clarify certain aspects of the agreements and relationships between them to facilitate an orderly transition in the event PBE's ownership interest of FEI is further reduced. The parties desire to memorialize their understandings in this Agreement. As used in this Agreement, "Triggering Date" means the earlier of (i) the date that PBE's ownership interest in FEI falls below 45% of the issued and outstanding shares of FEI or (ii) the date that FEI ceases to be a consolidated company within the Philips group of companies. In regard to a potential determination by Philips to effect a deconsolidation of FEI, Philips agrees to maintain open communication with FEI on an ongoing basis about this matter. Mr. Noud van den Heuvel (or his nominee) of Philips Corporate Control and Mr. John Hodgson of FEI will serve as the principal contact persons for this purpose.     In consideration of the above and the mutual covenants and undertakings contained herein, and subject to and on the terms and conditions herein set forth, the parties agree as follows: 1.  Intellectual Property.     (a) Use of Philips Trademark. Notwithstanding the provisions of Section 5.16(b) of the Combination Agreement, Philips agrees that FEI shall be entitled to apply the "Philips" wordmark and emblem on its products and in any advertising of such products, in combination with the FEI trademark under customary Philips policies, for a one year period commencing on the Triggering Date. The parties will enter into a further trademark license agreement reflecting this understanding.     (b) Patent Transfers.      (i) Patents Transferred Pursuant to the Combination Agreement. Philips agrees and confirms that it will transfer to FEI all of the patents, patent applications, counterpart patents and related documentation as set forth on Exhibit A, at FEI's expense, effective as soon as practicable after the Triggering Date. Philips acknowledges that FEI is entitled to ownership of the patents, patent applications and related documents listed in Exhibit  A, and Philips will cooperate with FEI in securing their transfer and will execute any required documentation therefor, including patent assignments. All such transfers will be made pursuant to Section 5.16(a)(ii) of the Combination Agreement, including provisions stating that the transfers are subject to Philips' prior commitments and license-back to Philips.     (ii) Other Patent Transfers. Philips further agrees that it will transfer the patents, patent applications, counterpart patents and related documentation as set forth on Exhibit B, at FEI's expense, effective as soon as practicable after the Triggering Date. Philips acknowledges that FEI is entitled to ownership of the patents, patent applications and related documents listed in Exhibit B, and Philips will cooperate with FEI in securing their transfer and will execute any required documentation therefor, including patent assignments. FEI agrees to pay NLG 47,925 to Philips 1 -------------------------------------------------------------------------------- International BV upon transfer of the patents listed on Exhibit B. All such transfers will be made pursuant to Section 5.16(a)(ii) of the Combination Agreement, including provisions stating that the transfers are subject to Philips' prior commitments and license-back to Philips.    (iii) License to Philips' Patents Developed Outside the Electron Optics Business. In accordance with Section 5.16(a)(ii) of the Combination Agreement, Philips agrees to grant to FEI, effective as of the Triggering Date, a non-exclusive, non-transferable license, without right to sublicense, to those patents set forth on Exhibit C hereto and such other patents, if any, filed prior to the Triggering Date as FEI may reasonably request in the future. For licenses of patents filed prior to the Triggering Date, the terms of the license will include a license rate of 1% of net realized sales per patent used in the product, not to exceed 5% of net realized sales per product, and other commercially reasonable terms. After the Triggering Date, FEI may request Philips to extend said license against the same terms and conditions with one or more additional patents, which patents, if consented to by Philips on a case by case basis, will be added to such license.     (iv) Jointly Owned Patents. Philips and FEI agree that the patents set forth on Exhibit D are jointly owned by Philips and FEI with each party having an undivided interest and a right to use and grant non-exclusive licenses thereunder without accounting or reporting to the other.     (v) Patent Applications. Until PBE's ownership interest in FEI falls below 25% of the outstanding common stock of FEI, Philips will continue to provide FEI with the opportunity for confidential review of patent applications in areas related to FEI's business.     (vi) Inventions Disclosures. The parties acknowledge that Exhibits A through D to this Agreement may contain invention disclosures for which patent applications have not been filed yet. When and if patent applications based on these invention disclosures are filed, such patent applications and any patents and patent applications based thereon will be treated in accordance with the relevant section of this Agreement and the Exhibit in which they are listed.    (vii) Patent Service Agreement. Philips is willing to continue the patent service agreement (the "PSA") currently in effect between Philips and FEI after the Triggering Date, subject to the termination provisions according to Article 13 of the PSA. For this purpose the parties agree that Article 13 shall read as follows:     "This Agreement shall run as from the Effective Date. However, either FEI and Philips may terminate this Agreement at the end of any year, by giving the other party to this Agreement at least a three months written prior notice. This Agreement terminates automatically from the date that Philips' ownership interest in FEI falls below 30%, after which a maximum period of three months is available for transferring all documents and information to FEI, or to a third party to be designated by FEI."     Philips and FEI agree to negotiate an amendment to the PSA to provide for continuation of services by Philips (subject to Article 13 of the PSA, amended as indicated above) with a gradual increase in rates commencing January 1, 2001 to reach market rates of service by January 1, 2004.   (viii) MSM Patents. As shown in Exhibit B, ownership of patents, patent applications, invention disclosures and technology relating to the MSM product will be transferred to FEI on the Triggering Date. In compensation for the development efforts and expenditure of Philips in developing this technology, FEI will make the following payments to Philips at the times indicated:     December 31, 2001   Euro 150,000         December 31, 2002   Euro 225,000         December 31, 2003   Euro 325,000.     2 --------------------------------------------------------------------------------     In addition, FEI agrees to pay Philips a royalty of 1% of the revenue received by FEI (after deduction of selling commissions, if any) from sales of the MSM product to third party customers during each of the years 2001 through 2010. The royalty will be payable on or before March 31 of each year, commencing March 31, 2002, based on sales revenue received by FEI during the prior calendar year, up to a maximum cumulative royalty payment of Euro1.3 million. If the MSM product is sold by FEI as part of a system, the revenue attributable to the MSM product for this purpose will be equal to the amount of revenue that FEI would have received if the product had been sold on a stand alone basis, but not less than the average per item revenue received for MSM products sold by FEI as stand alone products in the previous six (6) month period.     (c) Contract Research Rate. Research projects now in process between FEI and Philips will be continued as mutually agreed between the parties. The parties agree to negotiate an agreement governing those research projects which will continue or commence after the Triggering Date. This agreement will be similar to currently existing contracts of Philips Research with companies not majority-owned by Philips.     2.  Insurance. In connection with the global insurance coverage currently provided to FEI as a result of Philips' majority ownership thereof, the parties agree that FEI may not participate in the Philips global insurance policies after the Triggering Date; provided however, that if the Triggering Date will occur because of a deconsolidation of FEI from the Philips group that does not result solely from Philips' ownership interest in FEI falling below 45%, Philips (1) will provide 30 calendar days notice to FEI in advance of the deconsolidation and (2) agrees to use its best efforts to arrange with its insurance carriers for the carriers to provide interim policies in the name of FEI at FEI's expense, which interim policies will provide substantially similar coverage for FEI for a period of six months following the Triggering Date. FEI will reimburse Philips' reasonable costs, including internal costs at a rate of NLG 250 per hour, for assistance in arranging the interim policies.     3.  Continuation of Credit Line. The parties acknowledge their general agreement that FEI will promptly seek an alternative commercial credit facility to replace the revolving credit facility currently in effect between Philips and FEI. In that regard, the current Philips' credit facility shall not continue beyond 120 days after the Triggering Date.     4.  PBE Ownership of common stock of FEI. In full settlement of the divergent views of the parties regarding Philips' right pursuant to the Combination Agreement to receive additional shares of common stock of FEI in connection with the exercise of stock options outstanding on February 21, 1997, the parties confirm that Philips will receive shares of common stock of FEI for no additional consideration at the following times and in the following amounts:      (i) Prior to or within ten business days after the execution of this Agreement by all parties: 102,335 shares; and     (ii) No later than 30 calendar days following the close of each fiscal quarter of FEI ending on or after the effective date of this Agreement: a number of shares of common stock of FEI equal to 122.22% of the number of shares issued during that quarter on exercise of (a) FEI stock options outstanding on February 21, 1997, and exercised subsequent to September 30, 2000 and (b) FEI stock options granted on September 18, 1998 in replacement of stock options outstanding on February 21, 1997, and exercised subsequent to September 30, 2000. Exhibit E lists (1) all FEI stock options outstanding on February 21, 1997 and still outstanding on September 30, 2000 and (2) all FEI stock options granted on September 18, 1998 in replacement of stock options outstanding on February 21, 1997 and still outstanding on September 30, 2000.     As soon as practicable following execution of this Agreement, the stock option grant and exercise records of FEI will be reviewed and verified by a representative of Philips Internal Audit. If, after such audit, FEI and Philips do not agree on the number of shares to be issued and issuable to Philips under 3 -------------------------------------------------------------------------------- this Section 4, the records will be submitted to independent auditors for resolution, which resolution will be binding on the parties. 5.Additional Funding to FEI. As further consideration for the agreements and conditions specified in this Agreement, Philips will make cash payments to FEI by wire transfer as follows:     For the year 2001, an amount of USD 3 million in 12 equal installments of USD 250,000;     For the year 2002, an amount of USD 2 million in 12 equal installments of USD 166,667;     For the year 2003, an amount of USD 1 million in 12 equal installments of USD 83,333.     Each of the above-mentioned installments shall be payable at the end of the calendar month to which they relate, in arrears.     The above payments will cease as of the date a change of control occurs with respect to FEI. For purposes of this Agreement, a change of control means (1) the acquisition, directly or indirectly, by a third party of beneficial ownership of more than 50% of the outstanding shares of capital stock of FEI or (2) the transfer of all or substantially all of the assets of FEI through sale or license of the assets to a third party. [SIGNATURE PAGE FOLLOWS] 4 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have executed or caused this Agreement to be executed effective as of the date first written above.     PHILIPS BUSINESS ELECTRONICS INTERNATIONAL BV     By:   /s/ A. VAN DER POEL    --------------------------------------------------------------------------------     Title:   Director     Date:   January 25, 2001     FEI COMPANY     By:   /s/ VAHÉ SARKISSIAN    --------------------------------------------------------------------------------     Title:   President and Chief Executive Officer     Date:   January 25, 2001     KONINKLIJKE PHILIPS ELECTRONICS NV     By:   /s/ A. VAN DER POEL    --------------------------------------------------------------------------------     Title:   Director     Date:   January 25, 2001     By:   /s/ A. WESTERLAKEN    --------------------------------------------------------------------------------     Title:   General Secretary     Date:   February 1, 2001 5 -------------------------------------------------------------------------------- QuickLinks AGREEMENT

-------------------------------------------------------------------------------- Exhibit 10.10 AMENDED AND RESTATED OFFICE SHARING AGREEMENT DATE: August 20, 2001         PARTIES: Spell Capital Partners, LLC ("Spell Capital") 222 South Ninth Street, Suite 2880 Minneapolis, MN 55402         PW Eagle, Inc. ("PWEI") 222 South Ninth Street, Suite 2880 Minneapolis, MN 55402 RECITALS:       A. Spell Capital is a party to a lease dated June 28, 2000 (the "Lease") with 222 SOUTH NINTH STREET LIMITED PARTNERSHIP, a Minnesota limited partnership ("Landlord"), pursuant to which Landlord leased to Spell Capital Suite 2880 (the "Premises") in the building known as The Piper Jaffray Tower in Minneapolis, Minnesota.       B. Spell Capital and PWEI are currently parties to an office sharing agreement (the "Office Sharing Agreement"). PWEI desires to continue using a portion of the Premises, and Spell Capital desires to continue sharing a portion of the Premises with PWEI.       C. The parties desire to amend and restate the terms of the Office Sharing Agreement as set forth herein.         AGREEMENT:     In consideration of the mutual covenants contained herein and other good and valuable consideration, the parties agree as follows:     1. Term. The term of this Agreement shall continue through December 31, 2004 (the "Term").     2. Monthly Fee. PWEI shall pay Spell Capital a fee of $16,750 per month (the "Monthly Fee") for PWEI’s use of the Premises, secretarial and office support and other incidental services provided by Spell Capital at the Premises. PWEI shall reimburse Spell Capital for any out of pocket expenses incurred by Spell Capital for long distance telephone calls, postage, copying and similar items incurred on behalf of PWEI by Spell Capital.     3. Annual Increases in Monthly Fee. On January 1 each year, the Monthly Fee shall be increased by $500.     4. Cost of Leasehold Improvements. PWEI will pay for fifty percent (50%) of the cost of all leasehold improvements to the Premises during the Term.     5. Damages. If PWEI terminates this Agreement during the Term for any reason, it shall pay Spell Capital the sum of $16,750 per month, or the Monthly Fee then in effect, for twelve months following such termination.     6. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Minnesota.     7. Amendment. This Agreement may be amended only upon mutual written agreement of the parties. 1      -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this document as of the date and year first above written. SPELL CAPITAL PARTNERS, LLC       By:   /s/ William Spell                               William Spell, President       PW EAGLE, INC.     By:   /s/ Larry Fleming                               Larry Fleming, President 2      --------------------------------------------------------------------------------

Exhibit 10(i) [TRW LOGO] 2001-2003 STRATEGIC INCENTIVE PROGRAM GRANT Terms and Conditions -------------------------------------------------------------------------------- 1. The Grant This Grant sets forth the terms and conditions under which you will receive performance units in the event that certain financial goals are achieved with respect to the calendar years 2001 through 2003 (the “Performance Period”). 2. Performance Criteria The definition of the goals, for purposes of this Grant, is set forth in Exhibit A. The criteria for including items in or excluding items from the calculations set forth in Exhibit A shall be at the complete discretion of the Compensation Committee of the TRW Directors (the “Committee”). A goal scoring sheet for the three years in the Performance Period and weighted award levels related to each of the financial goals is attached as Exhibit B. 3. Payment Promptly following the availability of financial information at the end of the Performance Period, the number of performance units to be paid out will be determined by multiplying the Grant by the payout percent generated by the goal scoring sheet. Each performance unit will be converted into cash using the average of the high and the low sale price averages of a share of TRW Common Stock (“TRW Common”) on the New York Stock Exchange Composite Transactions Listing, as reported by the New York Stock Exchange (the “Average TRW High and Low”) for each day on which such shares are traded on the New York Stock Exchange during the months of December 2003 and January 2004. This amount will be paid to you in the currency in which you receive your compensation. 4. Taxes Upon any payment pursuant to this Grant, TRW will deduct any withholding or other taxes due. 5. Transferability This Grant is not transferable other than by will or the laws of descent and distribution. 6. Death If your termination of employment occurs as a result of your death during the second or third year of the Performance Period, your estate or those so designated by will or the laws of descent and distribution will be entitled to receive a prorated payment reflecting the number of full months of service that you were employed during the Performance Period. The value of such payment will be based on target performance and each unit will be converted to cash using the Average TRW High and Low for each day on which such shares are traded on the New York Stock Exchange during the two full calendar months preceding the date of your death. 7. Disability If your termination of employment occurs in the second or third year of the Performance Period due to disability for a period of more than twelve months (as determined in accordance with the TRW U.S. Long-Term Disability Plan), you will be entitled to receive a prorated payment reflecting the number of full months of service during the Performance Period before the commencement of your disability. The value of such payment will be based on target performance and each unit will be converted to cash using the Average TRW High and Low for each day on which such shares are traded on the New York Stock Exchange during the two full calendar months preceding the date of the commencement of your disability. 8. Termination of Employment This Grant shall terminate on the date of your termination of employment and you shall not be entitled to any additional payments hereunder. However, if your employment is terminated as a result of retirement during the second or third year of the Performance Period, you may be eligible to receive a prorated payment reflecting the number of full months of service during the Performance Period before your retirement, at the sole discretion of the Committee. Such payment, if approved, will be made in February 2004. -------------------------------------------------------------------------------- 9. Adjustments The Committee shall make such adjustments in the number and kind of performance units, including the right to receive any payouts, as it may determine are equitably required to prevent dilution or enlargement of your rights that would otherwise result from any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of TRW, merger, consolidation, reorganization, partial or complete liquidation or other corporate transaction or event having an effect similar to any of the foregoing. 10. Change in Control The Performance Period as referred to in this Grant will end immediately upon a change in control of TRW Inc. For purposes of this Grant, a change in control is defined in resolutions adopted by the Compensation Committee of the Directors of TRW on July 26, 1989, which, in summary, provide that a change in control is a change occurring (a) by virtue of TRW’s merger, consolidation or reorganization into or with, or transfer of assets to, another corporation or (b) by virtue of a change in the majority of the Directors of TRW during any two-year period unless the election of each new Director was approved by a two-thirds vote of the Directors in office at the beginning of such period or (c) through the acquisition of shares representing 20% or more of the voting power of TRW or (d) through any other change in control reported in any filing with the Securities and Exchange Commission; provided, however, that no change in control is deemed to have occurred by the acquisition of shares, or any report of such acquisition, by TRW, a subsidiary of TRW or a TRW-sponsored employee benefit plan. The language of the resolutions controls over this summary language. If a Change in Control occurs prior to the end of the Performance Period, you will be entitled to receive a payment for the full Performance Period, assuming maximum performance on all goals. The number of units payable, determined in accordance with the preceding sentence, will be issued to you promptly following the Change in Control and will be valued using the Average TRW High and Low for each day on which such shares are traded on the New York Stock Exchange during the 30 calendar days preceding the date the Change in Control occurs. 11. Amendments In addition to the authority to make adjustments as provided in Section 9, the Committee shall have the authority, until such time as a Change in Control as defined in Section 10 occurs, to amend this Grant. Notwithstanding the foregoing, if you transfer positions or change responsibilities within TRW and are no longer eligible to participate in this Program, your Grant will automatically terminate and, if such transfer or change in responsibilities occurs during the second or third year of the Performance Period, you may be entitled to receive a prorated payout, at the sole discretion of the Committee, based on the number of full months that your Grant was in effect. The CEO or the Committee, as the case may be, also reserves the right to withhold payment under this Grant due to individual performance. 12. Miscellaneous This Grant shall not be construed as giving you any right to continue in the employ of TRW. Subject to the requirements and limitations in Sections 10 and 11 above, the Committee has authority to interpret and construe any provision of this Grant and any such interpretation and construction shall be binding and conclusive. Except as provided in Sections 6, 7 and 10 above, no rights hereunder shall accrue to you with respect to the Performance Period until such period is completed and the goals performance for such period has been approved as provided in Section 3 above. This Grant is an extraordinary item of compensation outside the scope of your employment contract, if any. As such, this Grant is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-term service awards, social insurance contributions (except where local law specifically provides otherwise), pension or retirement benefits, or similar payments. 13. Entire Agreement This Grant sets forth the entire understanding between you and TRW with respect to the subject matter hereof and supersedes all prior agreements and understandings, whether oral or written, relating hereto.  

Exhibit 10.3 March 1, 2001   Personal and Confidential Board of Directors First National Bank of Joliet 78 North Chicago Street Joliet, Illinois 60431 Gentlemen:              As you know, Bank of Montreal (“BMO”), Bankmont Financial Corp. (“Bankmont”) and First National Bancorp, Inc. (“FNB”) intend to enter into an Agreement and Plan of Merger (the “Agreement”) whereby FNB will merge with and into Bankmont (the “Merger”).  We are writing this letter because each of you is currently a director of First National Bank of Joliet (“FNBJ”) and, in view of your standing in the community, your expertise, and your knowledge concerning FNBJ and its business it is important to us that we have the benefit of your counsel going forward and, therefore, we would like to retain each of you as a director of FNBJ, subject to the terms and conditions set forth herein, in the event the Merger is consummated.              1.  Bankmont agrees to pay each of you, in addition to any compensation that you are entitled to receive annually or per meeting as a director under any compensation policy or agreement currently in effect, a one time bonus in the amount of $120,000 (the “Bonus”) in lieu of any “change of control” payment that you are otherwise entitled to receive pursuant to the terms of any policy or agreement currently in effect with FNB and/or FNBJ.  The Bonus will be payable in two (2) equal installments of $60,000.  The first installment payment will be payable on the six (6) month anniversary of the effective date of the Merger and the second installment payment will be payable on the one (1) year anniversary of the effective date of the Merger provided that you have not resigned as a director of FNBJ prior to the time any such payment is due you.  Notwithstanding the foregoing, if at any time prior to the one (1) year anniversary of the effective date of the Merger you (i) resign pursuant to the mandatory retirement policy or agreement currently in effect, (ii) die, or (iii) become disabled such that you are unable to fulfill your duties as a director, Bankmont will remain obligated to pay the Bonus to you, or your estate or guardian, as the case may be, pursuant to the aforementioned terms.  If you accept the terms of this letter, any such “change of control” provision in any policy or agreement will become null and void upon the execution of this letter.              2.  Except as otherwise provided herein, Bankmont agrees that it will not reduce the amount of compensation that each of you is entitled to receive as a director of FNBJ under any policy or agreement currently in effect for at least three (3) years from the effective date of the Merger.              3.  Bankmont agrees that it will adopt or retain any policy or agreement currently in effect regarding mandatory retirement age for directors of FNBJ’s board of directors.              4.  Bankmont agrees to retain each of you as a director of FNBJ for as long as you care to serve (subject to FNBJ’s current retirement policy); provided that you have properly performed your duties as a director and Bankmont is not precluded from retaining you as a director pursuant to any law, rule or regulation, or requested to remove you by any regulatory agency.              If you are in agreement with the terms set forth herein, please sign this letter below and return it to us at your earliest convenience.              Please note, this letter may be executed in two or more counterparts, each of which shall be deemed to constitute one original, but all of which together shall constitute one and the same instrument.         Sincerely,               /s/   Paul V. Reagan               Bankmont Financial Corp.                   /s/   George H. Buck --------------------------------------------------------------------------------   /s/   Michael C. Reardon --------------------------------------------------------------------------------   George H. Buck   Michael C. Reardon           /s/   Walter F. Nolan --------------------------------------------------------------------------------   /s/   Charles R. Peyla --------------------------------------------------------------------------------   Walter F. Nolan   Charles R. Peyla           /s/   Albert G. D’Ottavio --------------------------------------------------------------------------------   /s/   Sheldon C. Bell --------------------------------------------------------------------------------   Albert G. D’Ottavio   Sheldon C. Bell           /s/   Louis R. Peyla --------------------------------------------------------------------------------   /s/   Howard E. Reeves --------------------------------------------------------------------------------   Louis R. Peyla   Howard E. Reeves           /s/   Kevin T. Reardon --------------------------------------------------------------------------------       Kevin T. Reardon              

EXHIBIT 10.5                       Employment Agreements have been executed by the Company and the indicated employees, each substantially identical in all material respects to the following form of employment agreement except as noted below. Each Employment Agreement was executed by Mr. Saueracker for the Company, except the agreement with Mr. Saueracker, which was executed by Mr. John Curcio for the Company.   EMPLOYEE AND POSITION -------------------------------------------------------------------------------- BASE SALARY -------------------------------------------------------------------------------- DATE OF AGREEMENT -------------------------------------------------------------------------------- TERMINATION DATE OF AGREEMENT [IF NOT EXTENDED PURSUANT TO SECTION 1(a)] --------------------------------------------------------------------------------    Allen Cheng       Vice President $ 210,000 March 1, 2001 July 31, 2002    Michael A. Cipolla       Controller and Chief            Accounting Officer $ 160,000 March 1, 2001   February 28, 2002    Howard R. Crabtree       Vice President, Organization        and Human Resources $ 250,000 March 1, 2001 July 31, 2002    Anton Dulski       Chief Operating Officer $ 385,000 March 1, 2001   February 28, 2003    S. Garrett Gray       Vice President, General       Counsel and Secretary $ 250,000 March 1, 2001 July 31, 2002    William Kromberg        Vice President - Taxes $   200,000 March 1, 2001 February 28, 2002    Kenneth Massimine       Vice President $ 200,000 March 1, 2001 July 31, 2002    Paul R. Saueracker      President and      Chief Executive Officer $ 500,000 March 1, 2001   February 28, 2003    John A. Sorel       Vice President $ 235,000 March 1, 2001 July 31, 2002   EMPLOYMENT AGREEMENT         This Employment Agreement ("Agreement"), made as of the ____ day of __________, 200___, by and between Minerals Technologies Inc., 405 Lexington Avenue, New York, New York 10174-1901, a Delaware Corporation (hereinafter referred to as "Employer"), and ________________ (hereinafter referred to as "Executive").       WHEREAS, in furtherance of Employer's commitment to the continued success of its businesses, and in recognition of the valuable contributions to be made by Executive, Employer has agreed to employ Executive for a period commencing on the _____ day of _________ 2001, ("Commencement Date") and terminating on the expiration of the "Term" as hereinafter defined, subject to certain terms and conditions as hereinafter set forth, and Executive has indicated his willingness to accept such employment;       NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, the parties agree as follows:       1.       (a) The employment of Executive by Employer will commence on the Commencement Date and, unless terminated on an earlier date in the manner hereinafter provided, shall terminate on the expiration of the Term. For purposes of this Agreement, "Term" shall mean a period beginning on the Commencement Date and ending on the ______ day of_________________, subject to any extensions thereof as provided herein. On the first day of each month occurring after the Commencement Date, the Term shall automatically be extended for an additional month, unless, prior to any such first day of a month, the Employer or Executive shall have given written notice to the other party not to extend the Term or Executive shall have reached his sixty-fifth birthday. Nothing in this Section shall limit the right of the Employer or Executive to terminate Executive's employment hereunder pursuant to the terms and conditions set forth in Section 7. The Employer and Executive agree that neither such notice not to extend the Term by the Employer nor failure of this Agreement to be extended because Executive has reached his sixty-fifth birthday shall be considered as a termination of Executive other than for Cause (as defined below) pursuant to Section 7(a) and shall not constitute Good Reason for Executive to terminate his employment hereunder pursuant to Section 7(c)(ii).             (b) During the Term, Executive will be employed by Employer as _____________ of Employer at an annual salary of not less than $_____________ ("Base Salary") and will participate in all benefit plans and other fringe benefits available to similarly situated executives in accordance with their respective terms. By December 31_______, and thereafter, Employer will review Executive's salary on an annual basis in accordance with Employer's policies, to determine appropriate increases, if any. In addition to salary, Executive will receive bonus payments as determined from time to time by Employer's Board of Directors or the Compensation and Nominating Committee thereof. Any such payment with respect to a calendar year will be made in the first quarter of the following year but shall be deemed earned and due and owing if Executive is employed on December 31st of the applicable calendar year, regardless of his status as of the payment date.       2.       It is contemplated that, in connection with his employment hereunder, Executive may be required to incur reasonable and necessary travel, business entertainment and other business expenses. Employer agrees to reimburse Executive for all reasonable and necessary travel, business entertainment, and other business expenses incurred or expended by him incident to the performance of his duties hereunder, upon submission by Executive to Employer of vouchers or expense statements satisfactorily evidencing such expenses.       3.       During the Term, Employer will provide retirement, employee benefits (pre- and post-retirement) and fringe benefit plans to Executive no less favorable than those made available to Employer's executive employees generally, to the extent that Executive qualifies under the eligibility provisions of such plans. Executive shall be entitled to a period of paid vacation each year as provided in Employer's established vacation policy, but in no event shall such period be shorter than that agreed to between Employer and Executive under any prior agreement.       4.       Executive agrees that he shall use his best efforts to promote and protect the interest of Employer, its subsidiaries and related corporations, and to devote his full working time, attention and energy to performing the duties of his position.       5.       In the event of the "Permanent Disability" (as defined below) of Executive during the Term, Employer shall have the right, upon written notice to Executive, to terminate his employment hereunder, effective upon the giving of such notice. Upon such termination, Employer and Executive shall be discharged and released from any further obligations under this Agreement, except that the obligations provided for in Section 9 hereof shall survive any such termination. Disability benefits, if any, due under applicable plans and programs of the Employer shall be determined under the provisions of such plans and programs. For purposes of this Section 5, "Permanent Disability" means any physical or mental disability or incapacity which permanently renders Executive incapable of performing the services required of him by Employer.       6.       In the event of the death of Executive during the Term, the salary to which Executive is entitled hereunder shall continue to be paid through the end of the month in which death occurs, to the last beneficiary designated by Executive by written notice to Employer, or, failing such designation, to his estate. Executive's designated beneficiary or personal representative, as the case may be, shall accept the payments provided for in this Section 6 in full discharge and release of Employer of and from any further obligations under this Agreement. Any other benefits due under applicable plans and programs of Employer shall be determined under the provisions of such plans and programs.       7.       (a) Employer or Executive may terminate Executive's employment with Employer under this Agreement at any time by providing the other party with ninety (90) days advance written notice, in which case Executive's employment shall terminate at the end of said ninety-day period. In the event during the Term Employer terminates the employment of Executive for reasons other than for Cause or the Permanent Disability or death of Executive or Executive resigns for Good Reason (as defined below), Employer will pay Executive his Base Salary through the end of the Term (but in no event shall Executive be paid his Base Salary for more than fifteen (15) months following his date of termination) plus any "Termination Bonuses", as defined herein, less any severance payments paid Executive pursuant to Employer policies. For purposes of this Agreement, "Termination Bonuses" shall mean amounts which would otherwise be payable to Executive during the Term pursuant to Section 1(b) were Executive an employee of Employer, provided that in no event will any such bonus be greater in amount than the average amount of any such bonuses received by Executive in the two years immediately preceding the termination of his employment with Employer, or the amount of such bonus received by Executive in the prior year if Executive has received only one such bonus payment. In addition to the foregoing payments, Executive shall be entitled to coverage under Employer's Group Benefit Plan for medical and dental expense coverage and prescription drugs until the end of the Term.             (b) Executive shall be required to mitigate the amount of any payment provided for pursuant to Section 7(a) by seeking other comparable employment within a reasonable commuting distance of his home, taking into account the provisions of Section 9 of this Agreement. Anything in this Agreement to the contrary notwithstanding, in the event that Executive provides services for pay to anyone other than Employer or any of its affiliates or subsidiaries from the date Executive's employment hereunder is terminated and during such period as Executive is receiving salary continuation payments pursuant to Section 7(a), the amounts to be paid to Executive during such period pursuant to this Agreement shall be reduced by the amounts of salary, bonus or other cash compensation earned by Executive during such period as a result of Executive's performing such services.             (c) For purposes of this Agreement:             (i) "Cause" shall be limited to the following: >       (A) Executive shall have failed to perform any of his material > obligations as set forth herein, provided that Employer has advised Executive > of such failure and given Executive a reasonable period of time to cure such > failure and Executive has failed to do so; or > >       (B) Executive shall commit acts constituting (i) a felony involving > moral turpitude materially adversely reflecting on the Employer or (ii) fraud > or theft against Employer.             (ii) "Good Reason" shall mean termination at the election of Executive based on any of the following: >       (A) The assignment to Executive of any duties substantially inconsistent > with his status as _____________ of Employer or a substantial adverse > alteration in the nature or status of his responsibilities pursuant to this > Agreement, except in connection with the termination of his employment for > Cause, or normal retirement, death, or by Executive other than for Good > Reason; > >       (B) A reduction of Executive's fringe or retirement benefits that is not > applied by Employer to executives generally or a reduction by Employer in > Executive's Base Salary; > >       (C) The merger or consolidation of Employer into or with any other > entity, or the sale of all or substantially all of the assets of Employer to > an unaffiliated entity unless the entity which survives such merger or to whom > such assets are transferred shall assume and agree to perform the obligations > of Employer hereunder pursuant to an instrument reasonably acceptable to > Executive; or > >       (D) Separation of Executive's office location from the principal > corporate office of Employer or relocation outside the contiguous United > States.       8.       Employer shall have the right to terminate this Agreement immediately with no further liability under its terms if Executive terminates his employment without Good Reason, or if Executive is discharged by Employer for Cause. In such event, Executive shall be entitled only to receive his earned Base Salary through the date of termination and to receive any bonus payment to which he may be entitled pursuant to Section 1(a). It is agreed that the provisions of Section 9 shall survive any such termination of this Agreement.       9.       (a) Executive agrees that during the term of his employment hereunder and, subject to the last sentence of this Section 9(a), during the further period of two (2) years after the termination of such employment for whatever reason, Executive shall not, without the prior written approval of Employer, directly or indirectly through any other person, firm or corporation, (i) engage or participate in or become employed by or render advisory or other services to or for any person, firm or corporation, or in connection with any business enterprise, which is, directly or indirectly, in competition with any of the business operations or activities of Employer, or (ii) solicit, raid, entice or induce any such person who on the date of termination of employment of Executive is, or within the last six (6) months of Executive's employment by Employer was, an employee of Employer, to become employed by any person, firm or corporation which is, directly or indirectly, in competition with any of the business operations or activities of Employer, and Executive shall not approach any such employee or former employee for such purpose or authorize or knowingly approve the taking of such actions by any other person; provided, however, that Executive shall not be bound by the restrictions contained in clause (i) of this Section 9(a) if Employer terminates his employment during Term other than for "Cause" (as defined in Section 7(c) hereof). The foregoing restrictions shall apply to the geographical areas where Employer does business and/or did business during the term of Executive's employment and all places where, at the date of termination of employment of Executive, Employer had plans or reasonable expectations to do business; provided that if any Court construes any portion of this provision or clause of this Agreement, or any portion thereof, to be illegal, void or unenforceable because of the duration of such provision or the area or matter covered thereby, such Court shall reduce the duration, area, or matter of such provision and, in its reduced form, such provision shall then be enforceable and shall be enforced. Notwithstanding the provisions of this Section 9, Employer shall be entitled to enforce the provisions of Section 9(a)(i) following the end of Executive's term of employment hereunder only during such time as the Employer continues to pay Executive an amount equal to the Base Salary that Executive was receiving at the time of such termination, unless Executive was terminated for Cause.             (b) Recognizing that the knowledge, information and relationship with customers, suppliers, and agents, and the knowledge of Employer's and its subsidiary companies' business methods, systems, plans and policies which Executive shall hereafter establish, receive or obtain as an employee of Employer or its subsidiary companies, are valuable and unique assets of the respective businesses of Employer and its subsidiary companies, Executive agrees that, during and after the term of his employment hereunder, he shall not (otherwise than pursuant to his duties hereunder) disclose, without the prior written approval of Employer, any such knowledge or information pertaining to Employer or any of its subsidiary companies, their business, personnel or policies, to any person, firm, corporation or other entity, for any reason or purpose whatsoever. The provisions of this Section 9(b) shall not apply to information which is or shall become generally known to the public or the trade (other than by reason of Executive's breach of his obligations hereunder), information which is or shall become available in trade or other publications, and information which Executive is required to disclose by law or an order of a court of competent jurisdiction. If Executive is required by law or a court order to disclose such information, he shall notify Employer of such requirement and provide Employer an opportunity (if Employer so elects) to contest such law or court order.       10.       Executive agrees that Employer shall withhold from any and all payments required to be made to Executive pursuant to this Agreement, all federal, state, local and/or other taxes which Employer determines are required to be withheld in accordance with applicable statutes and/or regulations from time to time in effect.       11.       This Agreement shall be construed under the laws of the State of New York.       12.       This Agreement supersedes all prior negotiations and understandings of any kind with respect to the subject matter hereof and contains all of the terms and provision of agreement between the parties hereto with respect to the subject matter hereof. Any representation, promise or condition, whether written or oral, not specifically incorporated herein, shall be of no binding effect upon the parties.       13.       (a) If any portion of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, that portion only shall be deemed deleted as though it had never been included herein but the remainder of this Agreement shall remain in full force and effect.             (b) Executive acknowledges and agrees that Employer's remedies at law for a breach or threatened breach of any of the provisions of Section 9 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, Employer, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.             (c) This Agreement shall not be assignable by Executive. 14.       No modification, termination or waiver of any provision of this Agreement shall be valid unless it is in writing and signed by both parties hereto. 15.       Employer represents that it has all requisite power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement, and that this Agreement is enforceable against it in accordance with its terms.       MINERALS TECHNOLOGIES INC.   By: ________________________ Name: Paul R. Saueracker Title: President and Chief Executive Officer     Agreed to by:   ________________________ Executive

EXHIBIT 10.30 SUPPLEMENTAL AGREEMENT TO THE BOTTLER'S AGREEMENT This Supplemental Agreement (the "Supplemental Agreement") is entered into with effect from October 6, 2000, by and among The Coca-Cola Company and The Coca-Cola Export Corporation (hereinafter collectively or severally referred to as the "Company") and Bottling Holdings (Netherlands) B.V., Coca-Cola Enterprises Belgium, Coca-Cola Entreprise, Coca-Cola Enterprises Nederland B.V., Coca-Cola Enterprises Limited and La Societe de Boissons Gazeuses de la Cote d'Azur, S.A. (hereinafter collectively or severally referred to as the "Bottler(s)"), WHEREAS, each Bottler has entered into a Bottler's Agreement with the Company effective July 26, 1996 except that the Bottler's Agreement between, Coca-Cola Enterprises Limited and the Company is effective February 10, 1997, the Bottler's Agreement between Bottling Holdings (Netherlands) B.V. and the Company is effective October 6, 2000 and the Bottler's Agreement between La Societe de Boissons Gazeuses de la Cote d'Azur, S.A. and the Company is effective May 1, 1992 (hereinafter collectively or severally referred to as the "Bottler's Agreement(s)") concerning the preparation, packaging, distribution and sale of certain non-alcoholic beverages under trademarks owned by The Coca-Cola Company (hereinafter referred to as the "Beverages") packaged in containers authorized in the Bottler's Agreements by The Coca-Cola Company (hereinafter referred to as "Authorized Containers") and covering a territory particularly described in each Bottler's Agreement (hereinafter collectively or severally referred to as the "Territory(ies)"); WHEREAS, in an effort to maximize the beverage production and distribution efficiencies of their respective industrial and commercial facilities, the Bottlers desire to have the flexibility to: (1) exercise the production and/or distribution rights under their Bottler's Agreement in the Territory(ies) covered by any one or more of the other Bottler's Agreement(s); (2) exercise, in their respective Territory, the production and/or distribution rights under any one or more of the other Bottler's Agreement(s); and (3) allow each Bottler to have any other Bottler manufacture, for the requesting Bottler, Beverages in Authorized Containers listed in its respective Bottler's Agreement; WHEREAS, subject to the terms of this Supplemental Agreement, the Company is desirous to authorize each Bottler to prepare and package and/or distribute and sell the Beverages in the Territory(ies); NOW, THEREFORE: 1. In addition to the rights granted to each Bottler under Clause I of each Bottler's Agreement to prepare, package, distribute and sell the Beverages in Authorized Containers in and throughout a specific Territory, each Bottler is hereby authorized to: a) prepare and package and/or sell or distribute the Authorized Containers throughout any one or more of the Territory(ies); b) prepare and package and/or sell or distribute, in its respective Territory, the Authorized Containers listed under any one or more of the other Bottler's Agreement(s); and c) have any other Bottler manufacture for the requesting Bottler Beverages authorized under the requesting Bottler's Bottler's Agreement.   2. Notwithstanding the provisions under 1) above, each Bottler shall, throughout the duration of this Supplemental Agreement, be primarily responsible to the Company for fulfilling all of its obligations under the Bottlers Agreement it has entered into with the Company, including but not limited to its obligation to prepare and present to the Company once in each calendar year, a program (the "Annual Program") which shall include but shall not be limited to the marketing, management, financial, promotional and advertising plans of the Bottler showing in detail the activities contemplated for the ensuing twelve-month period or such other period as the Company may prescribe, and which shall be acceptable to the Company as to form and substance. The Bottler shall continue to prosecute diligently such Annual Program and shall report quarterly or at such other intervals as the Company may request in connection with the implementation of the Annual Program. The Bottler shall also report on a monthly basis, or at such other intervals as the Company may request, to the Company, sales of each of the Beverages in each of the Territories and in such detail and containing such information as may be requested by the Company.   3. In addition, notwithstanding the provision under 1) above, no Bottler shall be engaged in production, packaging, sale or distribution activities in any of the other Bottlers' Territories (i) at the expense of neglecting the development of the Company's Beverages in the Territory defined in the Bottlers Agreement it has entered into with the Company, and (ii) unless its obligations under the Bottler's Agreement it has entered into with the Company are fulfilled to the satisfaction of the Company.     4. Notwithstanding the foregoing, no Bottler shall initiate the production, packaging, sale or distribution of any Beverage or any Authorized Container in any Territory, which at such time is not produced, packaged, sold or distributed within that Territory, without the-prior express agreement on a customer and consumer program acceptable to the Company or its designated entity, for the Beverage or Authorized Container in question.   5. Each Bottler shall comply with all applicable laws and regulations in effect in any Territory where it produces, packages, sells or distributes the Beverages.   6. It is the desire of the parties that this Supplemental Agreement remain in force for the duration of the Bottlers Agreement(s). However, the system of operation authorized under this Supplemental Agreement is a new concept which has not been implemented by the Company with independent entities before. It is therefore possible that unforeseen difficulties may arise in its application. The Company therefore retains the rights to (i) withdraw selectively the authorization of any of the Bottlers to operate in the Territories of the others; or (ii) terminate this Supplemental Agreement at any time during its validity by giving the Bottlers ninety (90) days' prior written notice of its intention to terminate.   7. This Supplemental Agreement shall be interpreted, construed and governed by and in accordance with the laws of Belgium. Any dispute arising hereunder shall be referred to the courts of Brussels.   8. This Supplemental Agreement supersedes any previous agreements entered into among the Company and the Bottlers in connection with the subject matter herein. Except as herein modified, the Bottler's Agreements and all of their stipulations, covenants, agreements, terms, conditions and provisions shall remain in full force and effect. IN WITNESS WHEREOF, The Coca-Cola Company, The Coca-Cola Export Corporation, Bottling Holdings (Netherlands) B.V., Coca-Cola Enterprises Belgium, Coca-Cola Entreprise, Coca-Cola Enterprises Nederland B.V., Coca-Cola Enterprises Limited and La Societe de Boissons Gazeuses de la cote d'Azur, S.A. have caused this Supplemental Agreement to be signed and acknowledged by their duly qualified representative. THE COCA-COLA COMPANY THE COCA-COLA EXPORT CORPORATION By: S/ DAVID M. TAGGART By: S/ WILLIAM J. DAVIS Authorized Representative Authorized Representative Date: OCT 06 2000 Date: OCT 06 2000   BOTTLING HOLDINGS COCA-COLA ENTERPRISES BELGIUM (NETHERLANDS), B.V. By: S/ FRANK GOVAERTS By: S/ GRAY MCCALLEY Authorized Representative Authorized Representative Date: OCT 06 2000 Date: OCT 06 2000   COCA-COLA ENTREPRISE COCA-COLA ENTERPRISES NEDERLAND B.V.   By: S/ D. REINICHE By: S/ FRANK GOVAERTS Authorized Representative Authorized Representative Date: OCT 06 2000 Date: OCT 06 2000   COCA-COLA ENTERPRISES LIMITED LA SOCIETE DE BOISSONS GAZEUSES DE LA COTE D'AZUR, S.A. By: S/ GRAY MCCALLEY Authorized Representative By: S/ DANIEL JAN Date: OCT 06 2000 Authorized Representative Date: OCT 06 2000

QuickLinks -- Click here to rapidly navigate through this document SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT     THIS SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (the "Amendment"), dated as of April 13, 2001, is made and entered into among INTERDENT, INC. ("the Company"), the Requisite Holders and Union Bank of California, N.A., The Chase Manhattan Bank, Bank of America, N.A., Citizens Bank of Massachusetts, First National Bank, Fleet Capital Corporation, Sovereign Bank and U.S. Bank National Association (collectively, the "Additional Holders").     WHEREAS, the Company has entered into a Registration Rights Agreement dated as of March 11, 1999 (the "Registration Rights Agreement"), pursuant to which the Holders received registration rights with respect to certain securities of the Company owned by the Holders; and     WHEREAS, the Additional Holders desire to become parties to the Registration Rights Agreement, as amended hereby.     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:     1.  Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Registration Rights Agreement.     2.  Pursuant to Section 19 thereof, the Registration Rights Agreement is hereby amended as follows:     (a) For all purposes of the Registration Rights Agreement, each Additional Holder shall be considered a Holder and entitled to all rights and subject to all obligations under the Registration Rights Agreement, as amended pursuant to this Amendment.     (b) Schedule I to the Registration Rights Agreement is hereby amended to add at the end thereof, the following text: Union Bank of California, N.A. 400 California St., 8th Floor San Francisco, CA 94104 Attention: Nancy Perkins, Vice President Telephone: (415) 765-2264 Telecopier: (415) 765-2170 The Chase Manhattan Bank 1166 Sixth Avenue, 16th Floor New York, NY 10036 Attention: Eric Groberg, Vice President Telephone: (212) 899-1297 Telecopier: (212) 899-2926 Bank of America, N.A. South Coast Financial Center 675 Anton Blvd., 2nd Floor Costa Mesa, CA 92626-7013 Attention: Ronald Parisi, Senior Vice President Telephone: (714) 850-6590 Telecopier: (714) 850-6566 Citizens Financial Group, Inc. 53 State Street, 8th Floor Boston, MA 02109 1 -------------------------------------------------------------------------------- Attention: Larry Jacobs, Vice President Telephone: (617) 994-7144 Telecopier: (617) 742-9471 First National Bank 401 West "A" Street San Diego, CA 92101 Attention: Daniel T. Grenci, Senior Vice President Telephone: (619) 233-5588 ext. 1603 Telecopier: (619) 235-1266 Fleet Capital Corporation 15260 Ventura Blvd., Suite 400 Sherman Oaks, CA 91403-7899 Attention: Leslie Reuter, Senior Vice President Telephone: (818) 382-4403 Telecopier: (818) 382-4291 Sovereign Bank 100 Pearl Street, 5th Floor Hartford, CT 06103 Attention: Roland Lamothe Telephone: (860) 757-3415 Telecopier: (860) 757-3450 U.S. Bank National Association 601 Second Avenue South MPFP2516 Minneapolis, MN 55402-4302 Attention: Daniel Falstad, VP Telephone: (612) 923-2176 Telecopier: (612) 923-2148     3.  All other provisions of the Registration Rights Agreement shall remain in full force and effect. 2 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have executed and delivered this Second Amendment to Registration Rights Agreement as of the day and year first above written.     INTERDENT INC.             By: /s/ MICHAEL T. FIORE -------------------------------------------------------------------------------- Michael T. Fiore Co-Chairman of the Board and Chief Executive Officer ADDITIONAL HOLDERS:           UNION BANK OF CALIFORNIA, N.A.             By: /s/ THOMAS FRATAR --------------------------------------------------------------------------------     Name: Thomas Fratar --------------------------------------------------------------------------------     Title: Vice President --------------------------------------------------------------------------------     THE CHASE MANHATTAN BANK             By: /s/ ERIC GROBERG --------------------------------------------------------------------------------     Name: Eric Groberg --------------------------------------------------------------------------------     Title: Vice President --------------------------------------------------------------------------------     BANK OF AMERICA, N.A.             By: /s/ RONALD J. PARISI --------------------------------------------------------------------------------     Name: Ronald J. Parisi --------------------------------------------------------------------------------     Title: Sr. Vice President --------------------------------------------------------------------------------     CITIZENS FINANCIAL GROUP, INC.             By: /s/ LAWRENCE E. JACOBS --------------------------------------------------------------------------------     Name: Lawrence E. Jacobs --------------------------------------------------------------------------------     Title: Vice President --------------------------------------------------------------------------------     FIRST NATIONAL BANK             By: /s/ DANIEL T. GRENCY --------------------------------------------------------------------------------     Name: Daniel T. Grency --------------------------------------------------------------------------------     Title: CEO --------------------------------------------------------------------------------     FLEET CAPITAL CORPORATION             By: /s/ LESLIE REUTER --------------------------------------------------------------------------------     Name: Leslie Reuter --------------------------------------------------------------------------------     Title: Sr. Vice President --------------------------------------------------------------------------------     SOVEREIGN BANK             By: /s/ ROLAND D. LAMOTHE --------------------------------------------------------------------------------     Name: Roland D. Lamothe --------------------------------------------------------------------------------     Title: Vice President -------------------------------------------------------------------------------- 3 --------------------------------------------------------------------------------     U.S. BANK NATIONAL ASSOCIATION             By: /s/ DANIEL J. FALSTAD --------------------------------------------------------------------------------     Name: Daniel J. Falstad --------------------------------------------------------------------------------     Title: Vice President -------------------------------------------------------------------------------- REQUISITE HOLDERS:           J.P MORGAN PARTNERS (23A SBIC), LLC     By: J.P. Morgan Partners (23A SBIC), Inc. its Managing Member             By: /s/ J.P. MORGAN PARTNERS --------------------------------------------------------------------------------     Name:    --------------------------------------------------------------------------------     Title:    --------------------------------------------------------------------------------     SPROUT CAPITAL VII, L.P.     By: DLJ Capital Corp., its Managing General Partner             By: /s/ ROBERT FINZI -------------------------------------------------------------------------------- Robert Finzi Attorney in Fact SPROUT GROWTH II, L.P.           By: DLJ Capital Corp., its Managing Genberal Partner             By: /s/ ROBERT FINZI -------------------------------------------------------------------------------- Robert Finzi Attorney in Fact     THE SPROUT CEO FUND, L.P.     By: DLJ Capital Corp., its General Partner             By: /s/ ROBERT FINZI -------------------------------------------------------------------------------- Robert Finzi Attorney in Fact     DLJ CAPITAL CORP.             By: /s/ ROBERT FINZI -------------------------------------------------------------------------------- Robert Finzi Attorney in Fact     DLJ FIRST ESC L.L.C.             By: /s/ ROBERT FINZI -------------------------------------------------------------------------------- Robert Finzi Attorney in Fact 4 --------------------------------------------------------------------------------     LEVINE LEICHTMAN CAPITAL PARTNERS II, L.P.     By: Levine Leichtman Capital Partners, Inc.             By: /s/ LEVINE LEICHTMAN CAPITAL PARTNERS, INC. --------------------------------------------------------------------------------     Name:    --------------------------------------------------------------------------------     Title:    --------------------------------------------------------------------------------     SRM '93 Children's Trust             By: /s/ MICHAEL T. FIORE --------------------------------------------------------------------------------     Name:    --------------------------------------------------------------------------------     Title:    --------------------------------------------------------------------------------             /s/ MICHAEL T. FIORE -------------------------------------------------------------------------------- Michael T. Fiore             /s/ DR. STEVEN R. MATZKIN -------------------------------------------------------------------------------- Dr. Steven R. Matzkin             /s/ L. THEODORE VAN EERDEN -------------------------------------------------------------------------------- L. Theodore Van Eerden             /s/ NORMAN R. HUFFAKER -------------------------------------------------------------------------------- Norman R. Huffaker             /s/ RANDY HENRY -------------------------------------------------------------------------------- Randy Henry             /s/ GRANT M. SADLER -------------------------------------------------------------------------------- Grant M. Sadler             /s/ DAVID P. NICHOLS -------------------------------------------------------------------------------- David P. Nichols             /s/ MITCHELL B. OLAN -------------------------------------------------------------------------------- Mitchell B. Olan             /s/ ROBERT FINZI -------------------------------------------------------------------------------- Robert Finzi             /s/ ERIC GREEN -------------------------------------------------------------------------------- Eric Green             /s/ PAUL H. KECKLEY -------------------------------------------------------------------------------- Paul H. Keckley             /s/ H. WAYNE POSEY -------------------------------------------------------------------------------- H. Wayne Posey             /s/ ROBERT F. RAUCCI -------------------------------------------------------------------------------- Robert F. Raucci             /s/ CURTIS LEE SMITH, JR. -------------------------------------------------------------------------------- Curtis Lee Smith, Jr. 5 -------------------------------------------------------------------------------- QuickLinks SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT

EXHIBIT 10.3     META GROUP, INC. INCENTIVE STOCK OPTION AGREEMENT     META Group, Inc., a Delaware Corporation (the “Company”), hereby grants as of September 11, 2001 to you (the “Employee”), an option to purchase shares (the “Option Shares”) of its Common Stock, $.01 par value (“Common Stock”), at the price of $2.00 per share.  The quantity of Option Shares granted and vesting schedule is defined on the cover page, hereof.  The Option Shares are granted on the following terms and conditions:                   1.             Grant Under Second Amended and Restated 1995 Stock Plan.  This option is granted pursuant to and is governed by the Company’s Second Amended and Restated 1995 Stock Plan (the “Plan”) and, unless the context otherwise requires, terms used herein shall have the same meaning as in the Plan.  Determinations made in connection with this option pursuant to the Plan shall be governed by the Plan as it exists on this date.                   2.             Grant as Incentive Stock Option; Other Options.  This option is intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).  This option is in addition to any other options heretofore or hereafter granted to the Employee by the Company or any Related Corporation (as defined in the Plan), but a duplicate original of this instrument shall not effect the grant of another option.                   3.             Vesting of Option if Employment Continues; Acceleration on Change of Control.                   (a)           Subject to Section 3(b), if the Employee has continued to be employed by the Company or any Related Corporation through the dates listed under the column entitled “Full Vest” on the cover page hereof, the Employee may exercise this option for the number of shares of Common Stock set opposite the applicable date.                   (b)           In addition to the foregoing but subject to Section 4, if the Employee’s employment with the Company or any Related Corporation is terminated without Cause by the Company or any Related Corporation (including for such purpose any successor to the Company resulting from a Change of Control (as defined below)) during the one year period following the consummation of a Change of Control, then this option shall become exercisable for an additional number of Option Shares equal to the lesser of (i) 87,500 and (ii) the total number of Option Shares with respect to which this option is not yet exercisable at the time of any such termination.  For the purposes of this Section 3(b), “Change of Control” shall mean: (x) the sale of the Company by merger in which the shareholders of the Company in their capacity as such no longer own a majority of the outstanding equity securities of the Company (or its successor); or (y) any sale of all or substantially all of the assets or capital stock of the Company (other than in a spin-off or similar transaction) or (z) any other acquisition of the business of the Company, as determined by the Board.                   (c)           Notwithstanding the foregoing, in accordance with and subject to the provisions of the Plan, the Committee may, in its discretion, further accelerate the date that any installment of this Option becomes exercisable.  The foregoing rights are cumulative and (subject to Sections 4 or 5 hereof if the Employee ceases to be employed by the Company and all Related Corporations) may be exercised on or before the date which is ten years from the date this option is granted. (Five years if Employee holds more than 10% of voting power.)                   4.             Termination of Employment.                                   (a)           Termination Other Than for Cause:  If the Employee ceases to be employed by the Company and all Related Corporations, other than by reason of death or disability as defined in Section 5 or termination for Cause as defined in Section 4(c), no further installments of this option shall become exercisable, and this option shall terminate (and may no longer be exercised) after the passage of 90 days from the Employee’s last day of employment, but in no event later than the scheduled expiration date.  In such a case, the Employee’s only rights hereunder shall be those which are properly exercised before the termination of this option.                                 (b)           Termination for Cause:  If the employment of the Employee is terminated for Cause (as defined in Section 4(c)), this option shall terminate upon the Employee’s receipt of written notice of such termination and shall thereafter not be exercisable to any extent whatsoever.                                   (c)           Definition of Cause:  “Cause” means conduct involving one or more of the following: (i) the substantial and continuing failure of the Employee, after notice thereof, to render services to the Company or Related Corporation in accordance with the terms or requirements of his or her employment; (ii) disloyalty, gross negligence, willful misconduct, dishonesty or breach of fiduciary duty to the Company or Related Corporation; (iii) the commission of an act of embezzlement or fraud; (iv) deliberate disregard of the rules or policies of the Company or Related Corporation which results in direct or indirect loss, damage or injury to the Company or Related Corporation; (v) the unauthorized disclosure of any trade secret or confidential information of the Company or Related Corporation; or (vi) the commission of an act which constitutes unfair competition with the Company or Related Corporation or which induces any customer or supplier to breach a contract with the Company or Related Corporation.                   5.             Death; Disability.                                   (a)  Death:  If the Employee dies while in the employ of the Company or any Related Corporation, the Employee’s estate, personal representative or beneficiary to whom this option has been assigned pursuant to Section 9 hereof may exercise this option, to the extent this option is otherwise exercisable on the date of the Employee’s death, at any time within one year after the date of death, but not later than the scheduled expiration date.                                   (b)  Disability:  If the Employee ceases to be employed by the Company and all Related Corporations by reason of his or her disability (as defined in the Plan), this option may be exercised, to the extent otherwise exercisable on the date of the termination of his or her employment, at any time within 180 days after such termination, but not later than the scheduled expiration date.                                   (c)  Effect of Termination:  At the expiration of the 180-day period provided in paragraph (a) or (b) of this Section 5 or the scheduled expiration date, whichever is the earlier, this option shall terminate (and shall no longer be exercisable) and the only rights hereunder shall be those as to which the option was properly exercised before such termination.                   6.             Partial Exercise.  This option may be exercised in part at any time and from time to time within the above limits, except that this option may not be exercised for a fraction of a share unless such exercise is with respect to the final installment of stock subject to this option and cash in lieu of a fractional share must be paid, in accordance with Paragraph 13(G) of the Plan, to permit the Employee to exercise completely such final installment.  Any fractional share with respect to which an installment of this option cannot be exercised because of the limitation contained in the preceding sentence shall remain subject to this option and shall be available for later purchase by the Employee in accordance with the terms hereof.                   7.             Payment of Price.  (a) The option price shall be paid in the following manner:                                              (i)   in cash or by check;                                              (ii)   subject to paragraph 7(b) below, by delivery of shares of the Company’s Common Stock having a fair market value (as determined by the Committee) equal as of the date of exercise to the option price;                                            (iii)  by delivery of an assignment satisfactory in form and substance to the Company of a sufficient amount of the proceeds from the sale of the Option Shares and an instruction to the broker or selling agent to pay that amount to the Company; or                                              (iv)   by any combination of the foregoing.                                   (b)           Limitations on Payment by Delivery of Common Stock:  If the Employee delivers Common Stock held by the Employee (“Old Stock”) to the Company in full or partial payment of the option price, and the Old Stock so delivered is subject to restrictions or limitations imposed by agreement between the Employee and the Company, an equivalent number of Option Shares shall be subject to all restrictions and limitations applicable to the Old Stock to the extent that the Employee paid for the Option Shares by delivery of Old Stock, in addition to any restrictions or limitations imposed by this Agreement.  Notwithstanding the foregoing, the Employee may not pay any part of the exercise price hereof by transferring Common Stock to the Company unless such Common Stock has been owned by the Employee free of any substantial risk of forfeiture for at least six months.                                   (c)           Permitted Payment by Recourse Note:  In addition, if this paragraph is initialed below by the person signing this Agreement on behalf of the Company, the option price may be paid by delivery of the Employee’s three-year personal recourse promissory note bearing interest payable not less than annually at the applicable Federal rate, as defined in Section 1274(d) of the Code.                                                                   __________                                                                 (initials)                   8.             Method of Exercising Option.  Subject to the terms and conditions of this Agreement, this option may be exercised by written notice to the Company at its principal executive office, or to such transfer agent as the Company shall designate.  Such notice shall state the election to exercise this option and the number of Option Shares for which it is being exercised and shall be signed by the person or persons so exercising this option.  Such notice shall be accompanied by payment of the full purchase price of such shares, and the Company shall deliver a certificate or certificates representing such shares as soon as practicable after the notice is received.  Such certificate or certificates shall be registered in the name of the person or persons so exercising this option (or, if this option shall be exercised by the Employee and if the Employee shall so request in the notice exercising this option, shall be registered in the name of the Employee and another person jointly, with right of survivorship).  In the event this option is exercised, pursuant to Section 5 hereof, by any person or persons other than the Employee, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise this option.                   9.             Option Not Transferable.  This option is not transferable or assignable except by will or by the laws of descent and distribution.  During the Employee’s lifetime, only the Employee may exercise this option.                   10.          No Obligation to Exercise Option.  The grant and acceptance of this option imposes no obligation on the Employee to exercise it.                   11.          No Obligation to Continue Employment.  Neither the Plan, this Agreement, nor the grant of this option imposes any obligation on the Company or any Related Corporation to continue the Employee in employment.                   12.          No Rights as Stockholder until Exercise.  The Employee shall have no rights as a stockholder with respect to the Option Shares until such time as the Employee has exercised this option by delivering a notice of exercise and has paid in full the purchase price for the shares so exercised in accordance with Section 8.  Except as is expressly provided in the Plan with respect to certain changes in the capitalization of the Company, no adjustment shall be made for dividends or similar rights for which the record date is prior to such date of exercise.                 13.          Capital Changes and Business Successions.  The Plan contains provisions covering the treatment of options in a number of contingencies such as stock splits and mergers.  Provisions in the Plan for adjustment with respect to stock subject to options and the related provisions with respect to successors to the business of the Company are hereby made applicable hereunder and are incorporated herein by reference.                   14.          Early Disposition.  The Employee agrees to notify the Company in writing immediately after the Employee transfers any Option Shares, if such transfer occurs on or before the later of (a) the date two years after the date of this Agreement or (b) the date one year after the date the Employee acquired such Option Shares.  The Employee also agrees to provide the Company with any information concerning any such transfer required by the Company for tax purposes.   15.          Withholding Taxes.  If the Company or any Related Corporation in its discretion determines that it is obligated to withhold any tax in connection with the exercise of this option, or in connection with the transfer of, or the lapse of restrictions on, any Common Stock or other property acquired pursuant to this option, the Employee hereby agrees that the Company or any Related Corporation may withhold from the Employee’s wages or other remuneration the appropriate amount of tax.  At the discretion of the Company or Related Corporation, the amount required to be withheld may be withheld in cash from such wages or other remuneration or in kind from the Common Stock or other property otherwise deliverable to the Employee on exercise of this option.  The Employee further agrees that, if the Company or any Related Corporation does not withhold an amount from the Employee’s wages or other remuneration sufficient to satisfy the withholding obligation of the Company or Related Corporation, the Employee shall make reimbursement on demand, in cash, for the amount underwithheld.                   16.          Lock-up Agreement.  The Employee agrees that in connection with an underwritten public offering of Common Stock, upon the request of the Company or the principal underwriter managing such public offering, this Option and the Option Shares may not be sold, offered for sale or otherwise disposed of without the prior written consent of the Company or such underwriter, as the case may be, for at least 270 days after the effectiveness of the Registration Statement filed in connection with such offering, or such longer period of time as the Board of Directors may determine if all of the Company’s directors and officers agree to be similarly bound.  The lock-up agreement established pursuant to this paragraph 16 shall have perpetual duration.                   17.          Arbitration.  Any dispute, controversy, or claim arising out of, in connection with, or relating to the performance of this Agreement or its termination shall be settled by arbitration in the State of Connecticut, pursuant to the rules then pertaining of the American Arbitration Association.  Any award shall be final, binding and conclusive upon the parties and a judgment rendered thereon may be entered in any court having jurisdiction thereof.                   18.          Provision of Documentation to Employee.  By signing this Agreement the Employee acknowledges receipt of a copy of this Agreement and a copy of the Plan.                   19.          Miscellaneous.                                   (a)  Notices:  All notices hereunder shall be in writing and shall be deemed given when sent by certified or registered mail, postage prepaid, return receipt requested, to the address set forth below.  The addresses for such notices may be changed from time to time by written notice given in the manner provided for herein.                                   (b)  Entire Agreement; Modification:  This Agreement constitutes the entire agreement between the parties relative to the subject matter hereof, and supersedes all proposals, written or oral, and all other communications between the parties relating to the subject matter of this Agreement.  This Agreement may be modified, amended or rescinded only by a written agreement executed by both parties.                                   (c)  Severability:  The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way affect the validity, legality or enforceability of any other provision.                                 (d)  Successors and Assigns: This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, subject to the limitations set forth in Section 9 hereof.                                   (e)  Governing Law:  This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware, without giving effect to the principles of the conflicts of laws thereof.         Notice of Grant of Stock Options and Option Agreement   META Group, Inc. ID:  06-0971675 208 Harbor Drive Stamford, CT 06912               Effective September 11, 2001, you have been granted a(n) Incentive Stock Option to buy One Hundred Seventy Five Thousand (175,000) shares of META Group, Inc. (the Company) stock at $2.00 per share.   The total option price of the shares granted is $350,000.00.   Shares in each period will become exercisable on the date shown, subject to acceleration under certain circumstances in accordance with Section 3.   Shares   Vest Type   Full Vest   Expiration   43,750   On Vest Date   September 11, 2002   September 11, 2011   43,750   On Vest Date   September 11, 2003   September 11, 2011   43,750   On Vest Date   September 11, 2004   September 11, 2011   43,750   On Vest Date   September 11, 2005   September 11, 2011           By your signature and the Company’s signature below, you and the Company agree that these options are granted under and governed by the terms and conditions of the Company’s Stock Option Plan as amended and the Option Agreement, all of which are attached and made a part of this document.              /s/ Dale Kutnick      September 11, 2001 META Group, Inc.   Date                      /s/ Michael Levine      September 11, 2001 Name:  Michael Levine   Date          

  Exhibit 10.61 SEVERANCE COMPENSATION AGREEMENT Dated as of July 11, 2001 Between DATUM INC., a Delaware corporation, (the “Company”) And Ilan Havered (the “Executive”)      The Company’s Board of Directors (the “Board”) has determined that it is appropriate to reinforce and encourage the continued attention and dedication of members of the Company’s management, including the Executive, to their assigned duties without distraction in potentially disturbing circumstances arising from the possibility of a change in control of the Company.      This Agreement sets forth the severance compensation which the Company agrees it will pay to the Executive if the Executive’s employment with the Company terminates under one of the circumstances described herein following a “Change in Control” of the Company (as defined in Section 2).      1. Term. The term (“Term”) of this Agreement shall commence on the date hereof and, subject to earlier termination pursuant to Section 3(b), 3(c) or 3(d) hereof, shall end three (3) years following the date on which notice of non-renewal or termination of this Agreement is given by either the Company or Executive to the other. Thus, this Agreement shall be renewable automatically on a daily basis so that the outstanding Term is always three (3) years following any effective notice of non-renewal or of termination given by the Company or Executive.      2. Change in Control. No compensation shall be payable under this Agreement unless and until (a) there has been a Change in Control of the Company while the Executive is still an employee of the Company and (b) the Executive’s employment by the Company terminates in the circumstances specified in Section 3(a). For purposes of this Agreement, a “Change in Control” of the Company shall be deemed to have occurred if (i) there shall be consummated (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company’s Common Stock would be converted into cash, securities or other property, other than a consolidation or merger of the Company in which the holders of the Company’s Common Stock immediately prior to the consolidation or merger have substantially the same proportionate ownership of at least 65% of common stock of the surviving corporation immediately after the consolidation or merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company other than to a corporation in which the holders of the Company’s Common Stock immediately prior to such transaction have substantially the same proportionate ownership of at least 65% of the common stock of such corporation, or (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of more than 35% of the Company’s outstanding shares of Common Stock, or (iv) during any period of two consecutive years during the term of this Agreement, individuals who at the beginning of the two (2) year period constituted the entire Board do not for any reason 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 five-eighths of the directors then still in office who were directors at the beginning of the period.      3. Termination Following Change in Control.           (a) Termination. If a Change in Control of the Company shall have occurred while the Executive is still an employee of the Company, the Executive shall be entitled to the compensation provided in Section 4 upon the subsequent termination of the Executive’s employment with the Company within twenty-four (24) months of such Change in Control, whether requested by the Executive or by the Company, unless such termination is as a result of (i) the Executive’s death; (ii) the Executive’s Disability (as defined in Section (3)(b) below); (iii) the Executive’s Retirement (as defined in Section 3(c) below); (iv) the Executive’s termination by the Company for Cause (as defined in Section 3(d) below); or (v) the Executive’s decision to terminate employment other than for Good Reason (as defined in Section 3(e) below).           (b) Death or Disability. If, as a result of the Executive’s incapacity due to physical or mental illness, the Executive is absent from his duties with the Company on a full-time basis for six (6) months, the Company may elect to terminate the Executive for “Disability” by written notice to Executive and without liability to Executive pursuant to this Agreement; provided, however, that any such termination shall be effective only at the end of thirty (30) days following the delivery of such notice and only if Executive fails to return to the full-time performance of duties by the end of such 30-day notice period. In addition, this Agreement shall terminate immediately in the event of the death of the Executive occurring at any time during the Term hereof, and in such event the Company shall have no liability by reason of such termination.           (c) Retirement. The Executive shall be deemed terminated automatically, without liability to Executive pursuant to this Agreement, upon Retirement (as hereinafter defined) of Executive without liability to the Company pursuant to this Agreement. “Retirement” as used in this Agreement shall be deemed to occur upon the Executive’s having reached such age as shall have been fixed in any arrangement mutually established by the Company and the Executive.           (d) Cause. The Company may terminate the Executive, without liability to the Executive pursuant to this Agreement, if the Executive’s employment with the Company is terminated for Cause. For purposes solely of determining whether the Company may terminate the Executive pursuant to this Section 3(d) without liability to the Executive, the Executive shall be deemed to have been terminated for “Cause” only if Executive had engaged in fraud, misappropriation or embezzlement, or any conviction or admission of a felony or other offense involving dishonest or moral turpitude. Notwithstanding the foregoing, the Executive shall not be deemed, for purposes of this Agreement, to have been terminated for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than five-eighths of the entire membership of the Company’s Board at a meeting of the Board called and held for that purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct set forth in the second sentence of this Section 3(d) and specifying the particulars thereof in detail.   --------------------------------------------------------------------------------             (e) Good Reason. The Executive may terminate the Executive’s employment for Good Reason at any time after a Change in Control during the Term. For purposes of this Agreement, “Good Reason” shall mean any of the following:                (i) The Company has materially changed the Executive’s position, duties, responsibilities, status, or offices as in effect immediately prior to a Change in Control of the Company, or has removed the Executive from or failed to reelect the Executive to any of such positions;                (ii) A reduction by the Company in the Executive’s base salary as in effect on the date hereof or as the same may be increased from time to time during the Term;                (iii) Any failure by the Company to continue in effect any benefit plan or arrangement (including, without limitation, the Company’s life insurance, accident, disability and health insurance plans, 401(k) and bonus plans, stock options, and all other similar plans which are from time to time made generally available to senior executives/officers of the Company) and in which the Executive is participating at the time of a Change in Control of the Company, unless there are substituted therefore plans or arrangements providing the Executive with essentially equivalent and no less favorable benefits (hereinafter referred to as “Benefit Plans”), or the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any such Benefit Plan or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of a Change in Control of the Company;                (iv) Any failure by the Company to continue in effect any incentive plan or arrangement (including, without limitation, the Company’s plans enumerated in subparagraph (iii) above and similar incentive compensation benefits) in which the Executive is participating at the time of a Change in Control of the Company, unless there are substituted therefore plans or arrangements providing the Executive with essentially equivalent and no less favorable benefits (hereinafter referred to as “Incentive Plans”), or the taking of any action by the Company which would adversely affect the Executive’s participation in any such Incentive Plan or reduce the Executive’s potential benefits under any such Incentive Plan, expressed as a percentage of his base salary, by more than ten (10) percentage points in any fiscal year as compared to the immediately preceding fiscal year;                (v) Any failure by the Company to continue in effect any plan or arrangement to receive securities of the Company (including, without limitation, the Company’s stock option and purchase plans and any other plan or arrangement to receive and exercise stock options, stock appreciation rights, restricted stock or grants thereof) in which the Executive is participating at the time of a Change in Control of the Company, unless there are substituted therefor plans or arrangements providing the Executive with essentially equivalent and no less favorable (hereinafter referred to as “Securities Plans”), or the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any such Securities Plan;                (vi) A relocation of the Company’s principal executive offices to a location outside of Orange County, California, or the Executive’s relocation to any place other than the location at which the Executive performed the Executive’s duties prior to a Change in Control of the Company, except for required travel by the Executive on the Company’s business to an extent   --------------------------------------------------------------------------------   substantially consistent with the Executive’s business travel obligations during the twelve (12) months immediately preceding a Change of Control of the Company;                (vii) Any failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled at the time of a Change of Control of the Company;                (viii) Any material breach by the Company of any provision of this Agreement;                (ix) Any failure by the Company to obtain the assumption of this Agreement by any successor or assignee of the Company; or                (x) Any purported termination of the Executive’s employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3(f), and for purposes of this Agreement, no such purported termination shall be effective.           (f) Notice of Termination. Any termination of the Executive by the Company for Disability pursuant to Section 3(b) or for Cause pursuant to Section 3(d) shall be communicated by a Notice of Termination. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate those specific termination provisions in this Agreement relied upon and which set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provisions so indicated. For purposes of this Agreement, no such purported termination by the Company shall be effective without such Notice of Termination.           (g) Date of Termination. “Date of Termination” shall mean (i) if the Executive is terminated by the Company for Disability, thirty (30) days after Notice of Termination is given to the Executive (provided that the Executive shall not have returned to the performance of the Executive’s duties on a full-time basis during such 30-day period) or (ii) if the Executive is terminated by the Company for any other reason, the date on which a Notice of Termination is given; provided that if within thirty (30) days after any Notice of Termination is given to the Executive by the Company the Executive notifies the Company that a dispute exists concerning the termination, the Date of Termination shall be the date the dispute is finally determined, whether by mutual agreement by the parties or upon final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected).      4. Severance Compensation upon Termination of Employment. Subject to Section 4(e) below, if, within twenty-four (24) months following a Change in Control, the Company shall terminate the Executive’s employment other than pursuant to Section 3(b), 3(c) or 3(d), or if the Executive terminates his employment for Good Reason pursuant to Section 3(e), then:   --------------------------------------------------------------------------------             (a) Severance Payment. The Company shall pay to the Executive as severance pay a lump sum, in cash, in full on the fifth day following the Date of Termination an amount equal to (i) the Executive’s highest annual base salary in effect during the 12-month period immediately preceding the Date of Termination, and (ii) a lump sum payment of the Executive’s incentive compensation bonus that would otherwise be payable to Executive under the Company’s Bonus Plan then in effect for the year in which the Date of Termination occurred assuming one hundred percent (100%) satisfaction of all performance goals established under such Bonus Plan for the Executive, multiplied by 2.0. The foregoing payment shall be in addition to any payments or other compensation that would otherwise be payable to executives under any other then existing Severance Plan of the Company. All payments hereunder shall be made net of withholdings required by applicable federal, state or local laws.           (b) Stock Options. All stock options not currently exercisable held by the Executive will accelerate and become exercisable as of the Date of Termination.           (c) Restricted Stock. All restrictions on any restricted stock, including without limitation any vesting requirements on any unvested stock, held by the Executive as of the Date of Termination shall be removed.           (d) Continuation of Benefits. The Company shall continue for a period of one (1) year from the Date of Termination to provide the following benefits to the Executive on the same terms as provided to the Executive on the Date of Termination:                (i) Participation in the Company’s medical, dental and vision plans;                (ii) Long-term disability insurance; and                (iii) Life Insurance. Notwithstanding the foregoing, any benefits payable under this subsection 4(d) shall terminate at such time as the Executive becomes eligible for similar benefits from any subsequent employer; provided, however that at the end of the period of coverage hereinabove provided for, the Executive shall have the option to have assigned to the Executive at no cost and with no apportionment of prepaid premiums, any assignable insurance owned by the Company and relating specifically to the Executive.           (e) Limitation. To the extent that any or all of the payments and benefits provided for in this Agreement constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code (the “Code”) and, but for this Section 4(e), would be subject to the excise tax imposed by Section 4999 of the Code, then the aggregate amount of such payments and benefits shall be reduced such that the present value thereof (as determined under the Code and applicable regulations) is equal to 2.99 times the Executive’s “base amount” (as defined in the Code). The determination of any reduction or increase of any payment or benefits under this Section 4 pursuant to the foregoing provision shall be made by a nationally recognized public accounting firm chosen by the Company in good faith, and such determination shall be conclusive and binding on the Company and the Executive.   --------------------------------------------------------------------------------        5. No Obligation to Mitigate Damages: No Effect on Other Contractual Rights.           (a) No Obligation to Mitigate. The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor, except as set forth in Section 4(d), shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by the Executive as the result of employment by another employer after the Date of Termination, or otherwise.           (b) No Effect on Other Contractual Rights. The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive’s existing rights, or rights which would accrue solely as a result of the passage of time, under any Benefit Plan, Incentive Plan or Securities Plan, employment agreement or other contract, plan or arrangement.      6. Successors and Assigns.           (a) The Company. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor or assignee to its business and/or assets as aforesaid which assumes the obligations of the Company under this Agreement or which otherwise becomes bound by all of the terms and provisions of this Agreement by operation of law. If at any time during the term of this Agreement the Executive is employed by any corporation a majority of the voting securities of which is then owned by the Company, such indirect employment of the Executive by the Company shall not excuse the Company from performing its obligations under this Agreement as if the Executive were directly employed by the Company, and the Company agrees that it shall pay or shall cause such employer to pay any amounts owed to the Executive pursuant to Section 4 hereof, notwithstanding any such indirect employment relationship.           (b) The Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts are still payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or other designee or, if there be no such designee, to the Executive’s estate.      7. Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered, one business day after being sent for overnight delivery by a nationally recognized overnight courier or three business days after being mailed by United States registered mail, return-receipt requested, postage-prepaid, addressed as follows:           If to the Company:           Vice President and Chief Financial Officer Datum Inc. 9975 Toledo Way Irvine, California 92618   --------------------------------------------------------------------------------             If to the Executive:                __________________________                __________________________ or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.      8. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of California.      9. Validity. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.      10. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.      11. Arbitration, Legal Fees and Expenses. In the event of any controversy, claim or dispute between the parties hereto arising out of or relating to this Agreement, the matter shall be determined by arbitration, which shall take place in Orange County, California, under the rules of the American Arbitration Association; and a judgment upon such award may be entered in any court having jurisdiction thereof. Any decision or award of such arbitrator shall be final and binding upon the parties and shall not be appealable. The parties hereby consent to the jurisdiction of such arbitrator and of any court having jurisdiction to enter judgment upon and enforce any action taken by such arbitrator. The Company shall pay all legal fees and expenses that the Executive may incur as a result of the Company’s contesting the validity, enforceability or the executive’s interpretation of, or determinations under, this Agreement.      12. Confidentiality. The Executive shall retain in confidence any and all confidential information known to the Executive concerning the Company and its business so long as such information is not otherwise publicly disclosed.      13. Entire Agreement. This Agreement contains all of the terms agreed upon between the Executive and the Company with respect to the subject matter hereof and replaces and supersedes all prior severance agreements between the Executive and the Company. The Executive and the Company agree that no term, provision or condition of this Agreement shall be held to be altered, amended, changed or waived in any respect except as evidenced by written agreement of the Executive and the Company.   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.       “COMPANY”   “EXECUTIVE”       DATUM, INC           By: /s/ Erik H. van der Kaay   By: /s/ Ilan Havered Name: Erik H. van der Kaay   Name: Ilan Havered Title: President and Chief Executive Officer   Title: Vice President, International Sales and Marketing  

FIRST AMENDMENT TO THE COUNTRYWIDE CREDIT INDUSTRIES, INC.ANNUAL INCENTIVE PLAN       WHEREAS, Countrywide Credit Industries, Inc. (the "Company") desires to amend its Annual Incentive Plan (the "Plan") to increase the maximum award payable to a participant for any plan year;       NOW, THEREFORE, the Plan is amended to read as follows effective July 12, 2001: 1. Section 4.3, Maximum Awards, is hereby amended in its entirety to read as follows: "The maximum Award payable to a Participant for any Plan Year is four million dollars ($4,000,000)."         IN WITNESS WHEREOF, the Company has caused this First Amendment to be executed by its duly authorized officer as of this twelfth day of July, 2001.                                                                                                             Countrywide Credit Industries, Inc.                                                                                                                  By:                                                                                                                                Anne McCallion                                                                       Managing Director,                                                                       Chief Administrative Officer         Attest:                                                              Susan E. Bow Executive Vice President and Deputy General Counsel

ALPHARMA INC. EXECUTIVE BONUS PLAN (EFFECTIVE JANUARY 1, 2001) Purpose. The purpose of this Executive Bonus Plan is to foster continuing long-term growth in earnings of Alpharma Inc. by rewarding key executives for outstanding performance in the accomplishment of assigned goals through annual awards of cash bonuses.   Definitions. Base Salary: The Participant's annual base salary rate of earnings in effect as of December 31, of any Incentive Year. Board of Directors: The Board of Directors of the Company. Bonus Award: An amount awarded to a Participant pursuant to Section 4. CEO: The Chief Executive Officer of the Company. CFO: The Chief Financial Officer of the Company. Change of Control: The occurrence of any of the following events: a. (i) The acquisition 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, the Company or its subsidiaries, or any employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of voting securities of the Company) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of shares of Common Stock sufficient to elect a majority of directors; (ii) persons who, as of the date of this Indenture, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such person were a member of the Incumbent Board; (iii) approval by the stockholders of the Company or a reorganization, merger or consolidation , in each case, with respect to which persons who where the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, beneficially own shares sufficient to elect a majority of directors in the election of directors of the reorganized, merged or consolidated company; or (iv) a liquidation or dissolution of the Company (other than pursuant to the United States Bankruptcy Code) or the conveyance, transfer or leasing of all or substantially all of the assets of the Company to any person; provided, however, that for the purposes of clauses (i) - (iv) above, the terms "person", "entity" and "group" shall not include (x) A.L. Industrier AS ("Industrier"), (y) the stockholders of Industrier in the case of a distribution of shares of capital stock of the Company beneficially owned by Industrier to the shareholders of Industrier, unless a Change in Control of Industrier has occurred or occurs concurrently with such a distribution, or in series of related transactions of which such distribution is part, (determined without regard to this clause (y) of this proviso) or (z) E.W. Sissener, his spouse, any heir or descendant of Mr. Sissener or the spouse of any such heir or descendant or the estate of Mr. Sissener (each, an "EWS Party"), or any trust or other similar arrangement for the benefit of any EWS Party or any corporation or other person or entity controlled by one or more EWS Party or any group of which any EWS Party is a member. For purposes of the preceding sentence, a "liquidation" or "dissolution" shall not be deemed to include any transfer of Company property soley to any persons identified in clauses (x), (y) and (z) of the proviso of such sentence. b. Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. Committee : The Executive Compensation Committee of the Company. Compensation Committee: The Compensation Committee of the Board of Directors. Company : Alpharma Inc., a Delaware corporation. Company Bonus Pool: An amount earned in any Incentive Year as determined pursuant to Section 4, from which Bonus Awards may be paid. Company Executive: A Participant who is not an officer or employee of an SBU. Company Maximum Bonus Pool: The amount of the Bonus Pool which would be earned assuming the Company Net Income Goal for the applicable Incentive Year was exceeded by more than 20%. Company Threshold Bonus Pool: The amount of the Bonus Pool which would be earned assuming the Company Net Income Goal for the applicable Incentive Year was less than the Company Net Income Goal but at least 90% thereof. Company Net Income Goal: The net income shall be the target level of consolidated net income of the Company (as determined by the Company's audited financial statements for the relevant Incentive Year) as established prior to the beginning of the Incentive Year by the CEO (which may be adjusted for that Incentive Year, in the discretion of the CEO, if necessary for equitable purposes) which if achieved would result in the awarding of a Bonus Pool under Section 4. Company Target Bonus Pool: A Company Bonus Pool equal to the sum of the Target Bonuses for all Eligible Employees which would be funded if the Company Net Income Goal for the applicable Incentive Year is achieved at the 100% level established by the CEO. Eligible Employee: For each Incentive Year, a person who (a) is regularly employed by the Company or an SBU on a full-time basis, or who, under conditions approved by the Committee, is regularly employed by the Company or an SBU on a part-time basis and (b) has been employed by the Company or an SBU for the entire Incentive Year and in an Eligible Participant Level at the end of such Incentive Year or, if not an active employee at the end of the Incentive Year, his or her employment was terminated during the Incentive year (i) on account of death, Retirement or disability or (ii) after a Change in Control transaction and (c) has been assigned Individual Goals to be accomplished during the Incentive Year and (d) has not engaged in any conduct that the Committee determines to be against the best interests of the Company. Eligible Participant Levels: For each Incentive Year, all Vice Presidents of the Company, the President of each SBU, all Vice Presidents of each SBU and such other employees designated by the Committee. Incentive Year: A fiscal year of the Company in which the Plan is in effect. Individual Goals: Performance Goals assigned to a Participant by his or her relevant SBU President (or, in the case of a Company Executive or an SBU President, the CEO) and approved by the CEO. Maximum Bonus: An amount equal to 150% of an Eligible Employee's Target Bonus. Participant: Each Eligible Employee for an Incentive Year. Plan: The Executive Bonus Plan as set forth herein, as from time to time amended. Retirement: The termination of a Participant's employment with the Company, at an age and meeting all other terms and conditions of "retirement", as that term is used by the Participant's local employing unit. SBU: Each individually managed business unit of the Company as designated from time to time by the CEO. SBU Goals: The target operating income for an SBU (as determined utilizing the normal course accounting practices and procedures of the Company) as established by the CEO prior to the beginning of the relevant Incentive Year (as may be adjusted during that Incentive Year, in the discretion of the CEO if necessary for equitable purposes) or such other or additional goals as determined by the CEO prior to the beginning of the relevant Incentive Year. SBU Maximum Bonus Component: The amount of the SBU Bonus Component which would be earned assuming the SBU Goals for the Incentive Year were exceeded by more than 20%. SBU Threshold Bonus Component: The amount of the SBU Bonus Component which would be earned assuming the SBU Goals for the Incentive Year were less than the SBU Goals but at least 90% thereof. SBU Target Bonus Component: A SBU Bonus Component (computed individually for each SBU) equal to the sum of the Target Bonuses for all Eligible Employees of the relevant SBU which would be funded if the Company's Net Income Goal and SBU Goals for the applicable Incentive Year are achieved at the 100% level established by the CEO. Target Bonus: The targeted amount of Bonus Award established for each Eligible Employee, expressed as a percentage of the Eligible Employee's Base Salary corresponding to the Eligible Employee's position at the end of the applicable Incentive Year, assuming the Company Net Income Goals, Individual Goals and, if relevant, the SBU Goals for such Incentive Year are achieved at the 100% level established by the CEO.   Establishment of Goals, Bonus Pool Range and Participant Bonus Award Formulae: Prior to March 31st of each Incentive Year, the CEO (with the concurrence of the Compensation Committee as to (a), (b) and (c) below) shall establish in writing and deliver to the Committee: The Company Net Income Goal for such Incentive Year at Threshold, Target and Maximum levels, and by means of one or more formulae the corresponding amount of the Company Bonus Pool which may be earned at each level of achievement. The SBU Goals for each SBU (considered individually) for such Incentive Year at Threshold, Target and Maximum levels, and by means of one or more formulae the corresponding amount of the SBU Bonus Component which may be earned at each level of achievement of such SBU Goals. The Target Bonus percentage for each Eligible Participant Level (or group of Eligible Participant Levels). By means of one or more formulae, the relative percentage of each Participant's Target Bonus which will be based upon achievement of Company Net Income Goal, SBU Goals (which shall not be applicable to Company Executives) and Individual Goals and the percentage by which a Participant's Target Bonus will be adjusted, upward or downward based upon actual performance being less or more than the Company Net Income Goal and the SBU Goals. Determination of Bonus Pool and Awards: As soon as practicable after the end of each Incentive Year: The CFO shall determine whether the Company Net Income Goal and each of the SBU Goals for the Incentive Year were achieved and, if so, at what level of achievement under the formulae established for such Incentive Year pursuant to Section 3 hereof. If the Company Net Income Goal for an Incentive Year has been achieved at the Threshold level or better, then a Company Bonus Pool shall be earned for that Incentive Year, the CFO shall determine the amount thereof and Eligible Employees shall be entitled to receive Bonus Awards if the further requirements of this Section 4 are met. If the Threshold Company Net Income Goal was not achieved, then no Bonus Awards shall be payable to any Participant for such Incentive Year. If (i) a Company Bonus Component has been funded pursuant to subsection (b) above then (ii) if the SBU Goals for an Incentive Year have been achieved at the Threshold level or better, then an SBU Bonus Pool (with each SBU being considered individually) shall be earned for that Incentive Year, the CFO shall determine the amount thereof and Eligible Employees of that SBU shall be entitled to receive Bonus Awards. If the Threshold SBU Goals were not achieved then, Bonus Awards shall still be payable to any Eligible Employee of said SBU provided that the Company and individual Goals provide for such award. The computation required by this subsection (c) shall not apply to Company Executives. The relevant SBU Presidents (or the CEO as to Company Executives and SBU Presidents ) shall determine whether (or the extent to which) each Participant has met his or her Individual Goals. Utilizing the Target Bonus Percentage and the formulae established pursuant to subsections 3 (a), (b) and (d) above and the determinations required by the previous subsections of this Section 4, the CFO shall determine the Bonus Award due to each Participant; provided that no Bonus Award may exceed the Maximum Bonus Award. Except as set forth in Section 10 below, in no event shall the aggregate Bonus Awards computed for payment pursuant to this Section 4 exceed the Company Bonus Pool nor shall the aggregate Bonus Awards payable to Eligible Employees' of an SBU exceed that SBU's Bonus Pool. In the event the computations required by this Section 4 would cause the requirements of the previous sentence to be violated, the amount of each relevant Participant's Bonus Award shall be reduced pro rata in an amount that will allow the aggregate of all Bonus Awards to comply with the provisions of the previous sentence. 5. Vesting and Payment of Awards; Deferral Election. Bonus Awards shall be immediately and fully vested upon the CFO's authorization of the Company Bonus Pool for the applicable Incentive Year. In general, Bonus Awards shall be paid to Participants within a reasonable time after the CFO's authorization of such awards. (a) The Committee in its sole and exclusive discretion may allow Participants at certain Grade Levels and/or located in certain countries the opportunity to defer payment of all or a portion of any Bonus Award earned for any Incentive Year pursuant to the terms of the Company's Deferred Compensation Plan, as in effect from time to time. (b) All payments made under this Plan shall be subject to any required withholdings. (c) Bonus Awards shall be payable soley from the general assets of the Company and its subsidiaries. No Participant shall have any right to, or interest in, any specific assets of the Company or any subsidiary in respect of Bonus Awards. The foregoing shall not preclude the Company from establishing one or more funds from which payments under the Plan shall be made including, but not limited to, circumstances under which payments are to be made following a Change of Control.       6. Amendment and Termination. The Board of Directors of the Company, in absolute discretion of the body so acting and without notice, may at any time amend or terminate the Plan, provided that no such amendment or termination shall adversely affect the rights of any Participant under any Bonus Award previously granted. Further, once an Incentive Year has commenced, neither the Board of Directors nor Company shall have the discretion not to make Bonus Awards if Bonus Awards are earned pursuant to the terms hereof for that Incentive Year.   7. No Assignment. Bonus Awards authorized under this Plan shall be paid only to Participants (or, in the event of a Participant's death, to the person or persons identified pursuant to Section 8 hereof). No Bonus Award, nor any part thereof, and no right or claim to any of the moneys payable pursuant to the provisions of this Plan shall be anticipated, assigned, or otherwise encumbered, nor be subject to attachment, garnishment, execution or levy of any kind, prior to the actual assignment or other encumbrance or attachment, garnishment, execution or levy and shall be of no force or effect, except as other provided by law. Notwithstanding the above, if a Participant is adjudged incompetent, the Committee may direct that any amounts payable be paid to the Participant's guardian or legal representative.   Employment and Plan Rights. The Plan shall not be deemed to give any Eligible Employee or Participant the right to be retained in the employ of the Company or any Subsidiary, nor shall the Plan interfere with the right of the Company or any Subsidiary to discharge any employee at any time, nor shall the Plan be deemed to give any employee any right to any Bonus Award until such award is authorized in accordance with Section 4 and, in the event of a Participant's death, payment shall be made to his or her estate or as otherwise authorized by a Court of competent jurisdiction.   Administration and Authority. The Plan shall be administered by the Committee except with respect to the power reserved herein to the CEO and CFO. The CEO and CFO may delegate any or all their responsibilities hereunder to the Committee. All decisions, determinations and interpretations of the Committee, the CEO or the CFO with respect to the exercise of their respective responsibilities, shall be binding on all parties concerned.   10. Bonus Awards in the event of Change of Control. Notwithstanding any other provision of this Plan to the contrary, in the event of a Change of Control, a Bonus Award for the Incentive Year in which the Change of Control occurs shall be paid to each employee in an Eligible Participant Level at the time of the Change of Control, whether or not the employee remains employed by the Company or a Subsidiary at the end of the Incentive Year (other than any such employees whose termination of employment is by the Company for cause). The amount of Bonus Award payable to each such employee shall be no less than the product of (a) the highest bonus percentage, measured as a percentage of Base Salary, awarded to the employee for any of the three full Incentive Years preceding the Incentive Year in which the Change of Control occurs, and (b) the employee's Target Bonus for the Incentive Year in which the Change of Control occurs. Bonus Awards payable under this Section 11 shall be in addition to any Bonus Award otherwise payable under this Plan for the Incentive Year during which a Change in Control has occurred.   11. Partial Year Employees. If any employee of the Company or an SBU meets all of the conditions set forth within the definition of "Eligible Employee" (i) as of the last day of an Incentive Year except the requirement that he or she have been employed by the Company or an SBU for the entire Incentive Year or (ii) his or her employment was terminated during the Incentive Year by death, disability, Retirement or after a Change in Control subject to the adoption of other rules or procedures deemed equitable in the circumstances by the Committee, such employee shall be eligible of a Bonus Award computed as if he or she had been an Eligible Employee for the entire Incentive Year but then reduced pro rata for the portion of the Incentive Year during which he or she was not an employee of the Company or an SBU. The Company Target Bonus Pool, and the relevant SBU Target Bonus Pool, shall be increased by an amount equal to the sum of any Bonus Awards payable under this Section 11.   12. Effect of Local Laws To the extent that any applicable statute, law or regulation ("Local Law") contains provisions requiring treatment more favorable to a Participant than is provided for in this Plan, the provisions of such Local Law shall prevail over the provisions of this Plan with respect to any Participant whose primary place of employment is within the jurisdiction of such Local Law. 13. Applicability of Plan Document. The Plan shall be applicable for Incentive Years beginning on and after January 1, 2001.

EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, made as of the 13th day of September, 2001, between GREEN MOUNTAIN COFFEE, INC., a Delaware corporation ("Employer") and ROBERT D. BRITT, an individual residing at 3 Adams Court, South Burlington, VT 05403, ("Executive"), is hereby amended and restated as follows: W I T N E S S E T H: WHEREAS, Employer and Executive entered into an Employment Agreement made as of the 26th day of March, 1993; and WHEREAS, Employer wishes to realign its management structure; and WHEREAS, Employer wishes to provide for the employment of Executive as Employer's Chief Financial Officer, Vice President, Secretary and Treasurer through the later of September 30, 2001 or any date thereafter deemed effective by Employer ("Effective Date"); and WHEREAS, the Chairman of the Board of Employer has requested that the Executive complete his term as a member of the Board of Directors of Employer through to, at a minimum, the 2002 Annual Meeting of Stockholders tentatively scheduled for April 2002; and WHEREAS, Employer wishes to provide for the employment of Executive as Employer's Vice President of Finance and Treasurer on the conditions set forth as of the Effective Date; and WHEREAS, Executive wishes to serve in such capacities on the terms and conditions herein set forth. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto agree as follows: Employment, Powers, Duties and Acceptance. 1. Employer hereby agrees to continue the employment of Executive as Employer's Chief Financial Officer, Vice President, Treasurer and Secretary until the Effective Date and agrees to employ Executive as of the Effective Date for the term hereof (as set forth in Section 2 hereof), to render services to Employer as Employer's Vice President of Finance and Treasurer reporting directly to the Chief Financial Officer. Executive presents and warrants to Employer that he has full power and authority to enter into this Agreement and is not under any obligation of a contractual or other nature to any person, firm, or corporation which is inconsistent or in conflict with this Agreement, or which would prevent, limit or impair in any way the performance by Executive of his obligations hereunder. 2. Executive's duties as Chief Financial Officer, Vice President, Treasurer and Secretary shall be substantially similar to those currently performed by Employee. As Vice President of Finance and Treasurer of Employer, Executive shall be responsible for investor relations, risk management and the treasury functions of Employer's business and will render such other services for Employer, exclusive of traditional "Controller" financial reporting and standard transactional accounting roles, consistent with Executive's status and experience, as may be mutually determined from time to time between Executive and the Chief Executive Officer or the Board of Directors of Employer. 3. Executive shall be a full-time employee of Employer and shall devote all of his working time, best efforts and full skill and attention to Employer's business. During the term hereof, Executive (i) shall not be engaged in any other business activity which, in the reasonable judgment of the Board of Directors of Employer, conflicts with the duties of Executive hereunder or has a material adverse effect on Employer or its goodwill, whether or not such activity is pursued for gain, profit or other pecuniary advantage and (ii) agrees to serve, without additional compensation, as an officer and/or director of Employer or any parent, subsidiary or affiliate of Employer. 4. Executive's principal place of employment shall during the term hereof be within the area of Waterbury, Vermont and environs, subject to reasonable travel requirements on behalf of Employer. 5. During the first 12-month period of his employment hereunder, Executive shall be entitled to five weeks of vacation with pay. Thereafter, Executive shall be entitled to increases in vacation with pay in accordance with Employer's standard policy with regard to vacation increases in effect for all employees of Employer. 6. During the term of his employment hereunder, at a minimum Executive shall be entitled to the full use and benefit of Employer funded equipment and other resources now used by Executive. 7. Executive shall be entitled to a bonus for the fiscal year 2001 ending September 29, 2001, commensurate with the bonus program (including "discretionary" bonuses) used to pay other Senior Leadership Team Members of Employer. Term The term of Executive's employment under this Agreement will commence as of the day hereof and shall continue until terminated by either party at any time after January 31, 2002 for any reason or for no reason, it being expressly understood and agreed that Executive's employment hereunder is an "at will" arrangement after January 31, 2002. In the event Executive's employment hereunder is terminated, at the request of Employer, Executive agrees to resign as an officer and/or director of Employer and/or its affiliates. Compensation On condition that Executive shall perform each and every term and condition of this Agreement on his part to be kept or performed, Employer agrees to pay or cause to be paid to Executive, and Executive agrees to accept, the following compensation: a. A salary at the rate of $153,303 per year ("Base Compensation"), payable in installments in accordance with Employer's standard payroll practices; b. Such bonuses, if any, commensurate with the Executive's seniority and stature in the organization as may be determined by the Board of Directors of Employer based upon performance criteria to be mutually agreed upon by Executive and Employer; c. In the event at any time on or after June 1, 2001, Executive's employment is hereunder terminated by Employer other than (A) for cause or (B) as a result of the voluntary resignation of Executive, Employer shall pay to Executive or Executive's legal representatives or designated beneficiaries, in the event of Executive's death, an amount equal to 100% of his then Base Compensation (the "Severance Payment"), such amount to be paid in 12 equal monthly installments commencing the first full calendar month following such termination; provided, however, that in the event that the consummation of a Sale of Employer occurs within one year after such termination, Employer shall pay to Executive an aggregate amount equal to 200% of his Base Compensation at the time of such termination less any portion of the Severance Payment theretofore paid to Executive, such amount to be paid in 24 equal monthly installments commencing on the last day of the first full calendar month following the consummation of such Sale of Employer. Any bonus earned by Executive and unpaid at the time of termination shall be paid within 30 days of termination; d. (i) Subject to paragraph (d)(ii) below, in the event of the consummation of a Sale of Employer during the term of Executive's employment hereunder, Employer shall pay to Executive or Executive's legal representatives or designated beneficiaries, in the event of Executive's death or disability (as hereinafter defined), as additional compensation, an amount equal to 200% of his then Base Compensation (the "Sale of Employer Payment") payable in 24 equal monthly installments, commencing on the last day of the first full month after the consummation of such Sale of Employer. Within seven business days after the date of the consummation of such Sale of Employer, the Sale of Employer Payment will be placed in escrow by Employer with an independent escrow agent selected by Employer and thereafter disbursed to Executive monthly in accordance with the terms of this paragraph (d)(i). (ii) Notwithstanding anything to the contrary contained in this Agreement, in the event the purchaser (or surviving corporation) in a Sale of Employer offers to continue Executive's employment and Executive accepts such employment, Executive shall not be entitled to receive the Sale of Employer Payment except to the extent hereinafter provided in this paragraph (d)(ii): (A) In the event Executive's employment continues for two years or more following consummation of a Sale of Employer, Executive shall not be entitled to receive any portion of the Sale of Employer Payment; and A. In the event Executive's employment is terminated at any time prior to the expiration of two years, other than for cause or due to Executive's voluntary resignation, after consummation of a Sale of Employer, Executive shall be entitled to receive the Sale of Employer Payment less the full amount of any and all compensation paid to Executive following such Sale of Employer, such amount to be paid in 24 equal monthly installments commencing on the last day of the first full month after the consummation of such Sale of Employer. (iii) For all purposes of this Agreement, a "Sale of Employer" shall mean (A) the sale of all or substantially all of Employer's stock or assets to any party that does not on the date of this Agreement own at least 50% of the outstanding common stock of Employer, (B) a merger or consolidation of Employer with or into such third party, in either case if the stockholders of Employer receive consideration consisting substantially of cash, promissory notes or securities of a class traded in the public securities markets and having a readily ascertainable value or (C) any transaction or series of related transactions as a result of which Robert P. Stiller or his affiliate ceases to hold at least forty-five percent (45%) of Employer's issued and outstanding common stock. a. In the event that Executive's employment is terminated under circumstances referred to in section 3.1(c) or 3.1(d) hereof, Employer agrees that, from and after the date of termination of Executive's employment until the earlier of (A) 12 months from the date of such termination; (B) 24 months from the date of such termination (in the event such termination occurs as a result of a Sale of Employer); or (C) at such time (the "Alternate Coverage Date") as Executive is eligible to obtain any alternative medical insurance coverage by a subsequent employer or the Executive otherwise obtains alternative medical coverage (whether or not the same as that provided by the Employer to and whether or not Executive is required to pay all or any portion of the premium therefore), Employer shall continue to cover Executive under its health, hospitalization or other medical plan to the same extent and in the same manner, and subject to the same requirements as to contributions by Executive, as applicable generally to similarly situated participant in such plans or pay Executive's coverage under the Consolidated Omnibus Budget Reconciliation Act ("COBRA"). The foregoing coverage shall not relieve Employer of any other or further obligation to provide coverage under COBRA. In addition, Executive will receive the Employer's normal short-term and long-term disability coverage as provided to executives of the Employer. If such disability coverage does not extent extend to the Executive through the Employer's current group insurance policy, Employer will provide comparable individual disability coverage during the Severance Payment or Sale of Employer Payment periods. b. In the event that Executive's employment is terminated under circumstances referred to in Section 3.1(c) or 3.1(d) hereof, Employer agrees to provide the following to Executive commencing the effective date of termination: (i) career counseling and executive outplacement services for one year, reasonably satisfactory to Executive; (ii) positive letters of recommendations to prospective employers of Executive; and (iii) such other normal termination benefits provided to departing executives of the Employer. 2. As used in this Agreement, the term "for cause" shall mean and include any of the following events: a. fraud, misappropriation or embezzlement by Executive involving Employer or any subsidiary or affiliate thereof; b. the conviction in any jurisdiction of Executive for any crime involving moral turpitude or which constitutes a felony; c. Executive's demonstrated voluntary unwillingness to perform his duties as described in section 1.2, including Executive's failure or refusal to carry out or perform such actions or duties as he is specifically directed, within reason, to carry out or perform by the Chief Executive Officer or the Board of Directors of Employer, provided that Executive shall not be required to perform any illegal or unethical act; d. the willful engaging by Executive in conduct which has or could reasonably be expected to have a material adverse effect on Employer or any of its subsidiaries or affiliates; or e. the material breach by Executive of any representations, warranties, agreements or covenants made by Executive in this Agreement or any other agreement between Employer and Executive. 2. Subject to Executive's meeting the eligibility requirements of each plan, Executive shall participate in and be covered by each profit sharing, bonus, pension, life insurance, accident insurance, health insurance, hospitalization, and any other employee benefit plan of Employer available generally to executives of Employer, on the same basis as shall be available to other executives without restriction or limitation by reason of this Agreement. 3. Nothing herein contained shall prevent Employer from at any time increasing compensation herein provided to be paid to Executive, either permanently or for a limited period, or from paying bonuses and other additional compensation to Executive, whether or not based upon the earnings of the business of Employer, in the event that Employer in its sole discretion, shall deem it advisable so to do in order to recognize and compensate fairly Executive for the value of his services. Reimbursement for Expenses Employer shall reimburse Executive for all reasonable expenses paid or incurred by him on behalf of Employer in the course of his employment, but payment shall be made only against a signed, itemized list of such expenditures, utilizing procedures and general forms for that purpose established by Employer. 5. Death or Disability 5.1 If Executive shall die during the term hereof, this Agreement shall immediately terminate, except that Executive's legal representatives or designated beneficiaries shall be entitled to receive the same compensation provided hereunder to the last day of the month in which his death occurs in addition to all other compensation and benefits due Executive's legal representatives or designated beneficiaries under this Agreement. 5.2 In the event of the Disability of Executive, as herein defined, Executive shall be entitled to continue to receive payment of his compensation in accordance with the terms of Sections 3.1 (a) and (b) hereof during the continuance of his Disability for a period of three (3) months from the date of such determination of Disability. If Executive's Disability continues for a period in excess of three (3) months from the date of such determination, Employer may at any time thereafter terminate Executive's employment hereunder by written notice to Executive. If Executive's employment is so terminated, Executive will receive the Employer's normal short-term and long-term disability benefits as provided to executives of the Employer. If for some reason or any reason the Employer's group disability insurance policies do not extend to the Executive, Employer with will continue such benefit under an individual policy or by other means. Employer shall have the right, exercisable in its reasonable judgment, to make a determination of the Disability of Executive. The date of commencement of Executive's Disability shall be the date set forth in the notice given by Employer to Executive of a determination of Disability. The term "Disability" shall mean physical or mental illness or injury which prevents Executive from performing his customary duties for Employer and which shall not be affected by a return to work by Executive for less than one (1) calendar month. 6. Effects of Termination Termination of this Agreement shall entitle Employer immediately to relieve Executive of all duties and offices, and shall be effective upon written notice thereof to Executive. In the event of termination of Executive's employment under this Agreement for cause, Executive shall be entitled to no further compensation hereunder except compensation pursuant to Sections 3.1(a) or (b) which may have accrued prior to such termination. 7. Confidentiality Agreement, Covenant Not to Compete or Hire Certain Employees 1. In view of the fact that Executive will be brought into close contact with many confidential affairs of Employer and its affiliates not readily available to the public, Executive agrees during the term of his employment under this Agreement and thereafter: a. to keep secret and retain in the strictest confidence all information about business and financial matters (such as costs, profits and plans for future development, methods of operation and marketing concepts) of Employer and its affiliates; their employment policies and plans; and any other proprietary information relating to Employer and its affiliates, their operations, business and financial affairs (collectively, but excluding information known to Executive prior to his employment with Employer, the "confidential information") and, for such time as Employer or any of its affiliates is operating, not to disclose the confidential information to anyone not then an officer, director or authorized employee of Employer or any of its affiliates, either during or after the termination of his employment with Employer, except in the course of performing his duties hereunder or with Employer's express written consent or except to the extent that such confidential information can be shown to have been in the public domain through no fault of Executive; and b. to deliver to Employer within ten days after termination of his services to Employer or at any time Employer may so request, all memoranda, notes, records, reports and other documents relating to Employer's or any of its affiliates' business, financial affairs or operations and all property associated herewith, which he may then possess or have under his control. 2. In consideration of the compensation payable to Executive hereunder, including without limitation, the Base Compensation, the Severance Payment, if applicable, and the Sale of Employer Payment, if applicable, Executive agrees that during the "Non-Compete Period" (as hereinafter defined), without Employer's written consent (which may be withheld for any reason or for no reason in Employer's sole discretion), Executive shall not do anything adverse to the interests of Employer, and shall not, directly or indirectly himself or by or through a family member or otherwise, alone or as a member of a partnership or joint venture, or as a principal, officer, director, consultant, employee or stockholder of any other entity, compete with Employer or be engaged in or connected with any other business competitive with that of Employer or any affiliate thereof, provided, however, that Executive may own as a passive investment not more than one percent (1%) of the securities of any publicly held corporation that may engage in a business competitive with that of Employer or any affiliate thereof. For purposes of this Section 7.2, the "Non-Compete Period" means (i) such time as Executive is employed by Employer hereunder and (ii) if Executive's employment is terminated by Employer (A) for cause or (B) by reason of Executive's voluntary resignation, the twelve (12) month period following such termination, provided that in the case of clause 3.1 (d)(ii)(B) Employer shall continue to pay Executive his then Base Compensation during such 12-month period. If Executive's employment is terminated for any reason other than (A) for cause or (B) by reason of Executive's voluntary resignation, the Non-Compete Period shall end on the date Employer ceases to pay Executive's Base Compensation. 3. Executive shall not at any time during the one year period ("the Restricted Period") following the termination of his employment with Employer for any reason whatsoever (i) employ any individual who was employed by Employer or any affiliate thereof at any time during the Restricted Period or (ii) in any material aspect cause, influence, or participate in the employment of any such individual by anyone else in any business that is competitive with any of the businesses engaged in by Employer or any affiliate thereof. 4. Executive shall not at any time during the Restricted Period directly or indirectly (i) persuade or attempt to persuade any material customer or supplier of Employer or any affiliate thereof to cease doing business with Employer or any affiliate thereof or to reduce the amount of business it does with Employer or any affiliate thereof or (ii) solicit for himself or any person the coffee and coffee related sales of any individual or business which was a material customer or supplier of Employer or any affiliate thereof at any time during the one-year period immediately preceding such termination. 5. It is agreed that Executive's services are unique and that any breach or threatened breach by Executive of any of the foregoing provisions of this Section 7 cannot be remedied solely by damages. In the event of a breach or a threatened breach by Executive of any of the provisions of this Section 7, Employer shall be entitled to injunctive relief restraining Executive and any business, firm, partnership, individual, corporation or entity participating in such breach or attempted breach. Nothing herein, however, shall be construed as prohibiting Employer from pursuing any other remedies available by law or in equity, for such breach or threatened breach including the recovery of damages and the immediate termination of Executive. Relationship of Parties Nothing herein contained shall be deemed to constitute a partnership between or a joint venture by the parties, nor shall anything herein contained be deemed to constitute either Executive or Employer the agent of the other except as is provided herein. Neither Executive nor Employer shall be or become liable or bound by any representation, act or omission whatsoever of the other made contrary to the provisions of this Agreement. Assignment In the event of the consummation of a Sale of Employer during the term of this Agreement, the entity resulting from the merger or consolidation or the entity to which the assets or stock of employer shall be sold or transferred shall be obligated to affirm all of the terms and conditions of this Agreement, and, upon such affirmance, this Agreement shall be fully binding upon such entity and Executive in accordance with its terms. Neither this Agreement nor any rights to any payments hereunder shall be assignable by Executive, but in the event of Executive's death, it shall be binding upon and inure to the benefit of his heirs and distributees and his executors, administrators and personal representatives. Notices. All notices and communications hereunder shall be in writing and be given by registered or certified mail, postage and registration or certification fees prepaid, and shall be deemed given when so mailed as follows: If to Employer: Green Mountain Coffee, Inc. 33 Coffee Lane Waterbury, VT 05676 If to Executive: 3 Adams Court South Burlington, VT 05403 The foregoing addresses may be changed by notice given in the manner set forth in Section 10. Miscellaneous. 1. This Agreement contains the entire understanding of the parties hereto with respect to the employment of Executive by Employer during the term hereof, and the provisions hereof may not be altered, amended, waived, terminated, or discharged in any way whatsoever except by subsequent written agreement executed by the party charged therewith. This Agreement supercedes all prior employment agreements, letters, understandings and arrangements between Executive and Employer pertaining to the terms of the employment of Executive by Employer, including without limitation, the employment agreement which was executed by Employer and Executive on March 26, 1993. A waiver by either of the parties of any of the terms or conditions of this Agreement, or of any breach hereof, shall not be deemed a waiver of such terms and conditions for the future or of any other term or condition hereof, or of any subsequent breach hereof. 2. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without limiting the generality of the foregoing sentence (i) if any of the covenants contained in Section 7 hereof are hereafter construed to be invalid or unenforceable in any jurisdiction, the same shall not affect the remainder of the covenant or covenants or the enforceability in any other jurisdiction, which shall be given full effect, without regard to the invalid portions or the unenforceability in such other jurisdictions and (ii) if any of the covenants contained in Section 7 hereof are held to be unenforceable because of the scope or duration thereof, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision, and, in its reduced form, said provision shall be enforceable; provided, however, that such court's determination shall not affect the enforceability of Section 7 hereof in any other jurisdiction. 3. 4. Employer shall have the right to deduct and withhold from Executive's compensation the amounts required to be deducted and withheld by Employer pursuant to any present or future law. In the event that Employer makes any payments or incurs any charges for Executive's account or Executive incurs any person charges with Employer, Employer shall have the right and Executive hereby authorizes Employer to recoup such payments or charges by deducting and withholding the aggregate amount thereof from any compensation otherwise payable to Executive hereunder. 5. This Agreement shall be construed and interpreted under the laws of the State of Vermont applicable to contracts to be performed entirely therein. 6. The captions in this Agreement are not part of the provisions hereof, are merely for the purpose of references and shall have no force or effect for any purpose whatsoever, including the construction of the provisions of this Agreement. IN WITNESS WHEREOF, the parties hereby have executed this Agreement as of the date first above written. GREEN MOUNTAIN COFFEE, INC. By:_/s/Robert. P Stiller _______ Robert P. Stiller, President and Chief Executive Officer   /s/ Robert D. Britt Robert D. Britt

Exhibit 10.2 FOURTH AMENDMENT TO DISTRIBUTION/SUPPLY AGREEMENT This FOURTH AMENDMENT is effective the 1st day of January, 2001 to the Distribution/Supply Agreement dated September 4, 1997 (the “Distribution Agreement”) by and between Endocardial Solutions, Inc. (“ESI”) and Medtronic, Inc. (“Medtronic”). Section 1.1 (Specific Definitions), “Medtronic Territories” shall be amended to read as follows: “Medtronic Territories” means only those countries included within Medtronic’s currently designated “Europe,” sales region as more fully described in Schedule 1.2. Schedule 1.2 is amended to delete the term “Japan” and “Canada.” The caption of Article 2 is amended to delete the words “and Japan.” Articles 3 (ESI Sales and Distribution) shall be amended to read as follows: ESI retains all rights to the Systems not expressly granted to Medtronic.  ESI shall establish a direct sales force for Systems in North America and Japan through a combination of ESI employees and/or independent third-party sales representatives.  ESI shall use its commercially reasonable best efforts to ensure that any such independent third-party sales representatives of Systems in North America and Japan are not Medtronic Competitors. Section 4.1(a) shall be amended to read as follows: 4.1        Right of First Offer Outside Medtronic Territories. (a) In the event that ESI proposed to enter into any distribution, sales representative or similar license agreement with any third party regarding the sales, distribution or licensing of the Systems in the Field of Use outside the Medtronic Territories, North America or Japan (such regions to be described as (i) Asia Pacific (excluding Japan), (ii) Australia/New Zealand, (iii) Central/South America and (iv) the Middle East and Africa, ESI agrees it shall offer Medtronic a first right to become ESI’s exclusive distributor of the ESI System is each of such regions. Except to the extent provided above, the remaining terms and conditions of the Distribution Agreement, as amended, shall remain in full force and effect. MEDTRONIC, INC. ENDOCARDIAL SOLUTIONS, INC.         /s/ Warren Watson -------------------------------------------------------------------------------- /s/ James W. Bullock -------------------------------------------------------------------------------- Warren Watson Vice President EP Systems, CRM Title: President/CEO     Dated: 2 March 01 Date: 4/25/01  

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.13 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT BY AND AMONG MEDICALOGIC, INC., as Buyer and BRYAN D. HIXSON, and HAROLD HARTSELL, as Sellers, and ANYWHEREMD.COM, INC. dated as of April 17, 2000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE OF CONTENTS             Page -------------------------------------------------------------------------------- 1.   Definitions   1 2.   Purchase and Sale of Company Shares         2.1   Basic Transaction   5     2.2   Purchase Price   5     2.3   Contingent Purchase Price   5     2.4   Notice of Performance; Adjustments to Number of Shares   7     2.5   The Closing   10     2.6   Deliveries at the Closing   10 3.   Representations and Warranties of Sellers and Buyer         3.1   Representations and Warranties of the Sellers   10     3.2   Representations and Warranties of the Buyer   11 4.   Representations and Warranties of the Company         4.1   Organization and Qualification   12     4.2   Subsidiaries   13     4.3   Capitalization   13     4.4   Authority   14     4.5   No Conflict   14     4.6   Consents   14     4.7   Company Financial Statements   15     4.8   No Undisclosed Liabilities   15     4.9   No Changes   15     4.10   Taxes   16     4.11   Restrictions on Business Activities   18     4.12   Title to Properties; Absence of Liens and Encumbrances   19     4.13   Governmental Authorization   19     4.14   Intellectual Property   20     4.15   Product Warranties; Defects; Liabilities   25     4.16   Agreements, Contracts and Commitments   25     4.17   Interested Party Transactions   27     4.18   Compliance with Laws   27     4.19   Litigation   28     4.20   Insurance   28     4.21   Minute Books   28     4.22   Environmental Matters   28     4.23   Brokers' and Finders' Fees   29     4.24   Employee Matters and Benefit Plans   29     4.25   Bank Accounts   34     4.26   Indemnification Obligations   34     4.27   Representations Complete   34 5.   Pre-Closing Covenants         5.1   General   34     5.2   Notices and Consents   34     5.3   Operation of Business   35     5.4   Access   35     5.5   Notice of Developments   35     5.6   Exclusivity   35     5.7   Balance Sheet   35     5.8   Hixson Agreement-Technology Sale Agreement; Royalty Agreements   35 i -------------------------------------------------------------------------------- 6.   Post-Closing Covenants         6.1   General   36     6.2   Litigation Support   36     6.3   Access to Records and Files   36     6.4   Sellers' Health and Welfare Benefits   36     6.5   Company Operating Budget and Salaries   37     6.6   Hixson Healthcare, Inc. — Auto-DOC; Royalty Agreements   37     6.7   Non-Compete   37 7.   Conditions to Obligation to Close         7.1   Conditions to Obligation of the Buyer   38     7.2   Conditions to Obligation of the Sellers   39 8.   Remedies for Breaches of This Agreement         8.1   Survival of Representations and Warranties   40     8.2   Indemnification Provisions for Benefit of the Buyer   40     8.3   Indemnification Provisions for Benefit of the Sellers   41     8.4   Matters Involving Third Parties   41     8.5   Determination of Adverse Consequences   42     8.6   Exclusive Remedy   42 9.   Cooperation on Tax Matters         9.1   Pre-Closing Returns   42     9.2   Post-Closing Returns   42     9.3   Government Certificates   43     9.4   Section 6043 Reports   43 10.   Termination         10.1   Termination of Agreement   43     10.2   Effect of Termination   43 11.   Miscellaneous         11.1   Press Releases and Public Announcements   44     11.2   No Third Party Beneficiaries   44     11.3   Entire Agreement   44     11.4   Succession and Assignment   44     11.5   Counterparts   44     11.6   Headings   44     11.7   Notices   44     11.8   Governing Law   45     11.9   Dispute Resolution   45     11.10   Amendments and Waivers   46     11.11   Severability   46     11.12   Expenses   46     11.13   Construction   47     11.14   Incorporation of Exhibits and Schedules   47 ii -------------------------------------------------------------------------------- LIST OF SCHEDULES AND EXHIBITS Exhibits --------------------------------------------------------------------------------     Exhibit A   Hixson Asset Purchase Agreement Exhibit B-1   Form of Opinion of Sellers' Counsel Exhibit B-2   Form of Opinion of Buyers' Counsel Exhibit C   Employment Agreement Exhibit D   Escrow Agreement Schedules --------------------------------------------------------------------------------     Schedule 3.1(b)   Non-Contravention Schedule 3.1(d)   Company Shares Schedule 4.1   Organization and Qualification Schedule 4.5   No Conflict Schedule 4.6   Consents Schedule 4.7   Company Financial Statements Schedule 4.8   No Undisclosed Liabilities Schedule 4.9   No Changes Schedule 4.9(i)   No Changes; Agreements Schedule 4.10   Tax Returns and Audits Schedule 4.12(a)   Title to Properties; Absence of Liens and Encumbrances; Real Property Schedule 4.12(c)   Title to Properties; Asset Condition Schedule 4.12(b)   Title to Properties; Absence of Liens and Encumbrances; Leased Property Schedule 4.13   Governmental Authorizations Schedule 4.14   Intellectual Property Schedule 4.14(b)   Registered Intellectual Property Rights Schedule 4.14(c)   Registered Intellectual Property Rights; Action Schedule 4.14(d)   Valid Company Intellectual Property Schedule 4.14(e)   Company Intellectual Property; Liens Schedule 4.14(f)   Company Intellectual Property; Transferable Schedule 4.14(h)   Company Intellectual Property; Third Party Schedule 4.14(j)   Company Intellectual Property; Improvements Schedule 4.14(l)   Company Intellectual Property; Breach of Contract Schedule 4.14(m)   Company Intellectual Property; Obligation or Duty to Warrant Schedule 4.14(s)   Company Intellectual Property; Conduct of the Business Schedule 4.14(t)   Company Intellectual Property; Royalties Schedule 4.15   Product Warranties; Defects; Liabilities Schedule 4.16(a)   Agreements, Contracts and Commitments; Collective Bargaining Schedule 4.16(b)   Agreements, Contracts and Commitments; Breach Schedule 4.24(b)   Company Employee Plan and Employee Agreements Schedule 4.24(d)   Employee Plan Compliance Schedule 4.24(g)   No Post-Employment Obligations Schedule 4.24(i)(i)   Effect of Transaction; Current or Future Payment Schedule 4.24(i)(ii)   Parachute Payment Schedule 4.24(j)   Employment Matters Schedule 4.24(k)   Labor Schedule 4.25   Bank Accounts iii -------------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT     This Stock Purchase Agreement is entered into as of April 17, 2000, by and among MedicaLogic, Inc., an Oregon corporation (the "Buyer"), AnywhereMD.com, Inc., a California corporation (the "Company"), and Bryan Hixson and Harold Hartsell (each a "Seller," and collectively the "Sellers"). The Buyer, the Sellers and the Company are referred to collectively in this Agreement as the "Parties".     The Sellers own all of the outstanding capital stock of the Company. This Agreement contemplates a transaction in which the Buyer will purchase from the Sellers, and the Sellers will sell to the Buyer, all of the outstanding capital stock of the Company for the consideration described herein.     NOW, THEREFORE, in consideration of the premises and the mutual promises made in this Agreement, and in consideration of the representations, warranties and covenants contained in this Agreement, the Parties hereto agree as follows: 1. Definitions.     "Accredited Investor" has the meaning set forth in Regulation D promulgated under the Securities Act.     "Adverse Consequences" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses.     "Applicable Rate" means the prime rate of interest publicly announced from time to time by U.S. Bank National Association in Portland, Oregon.     "Attorney Records" means with respect to any Seller or the Company, all of the books, files, documents, and records of attorneys or accountants relating to their respective representations in connection with the negotiation, execution and delivery of this Agreement and the transactions contemplated by this Agreement.     "Buyer" has the meaning set forth in the preface above.     "Closing" has the meaning set forth in Section 2.5 below.     "Closing Date" has the meaning set forth in Section 2.5 below.     "Code" means the Internal Revenue Code of 1986, as amended.     "Company" has the meaning set forth in the preface above.     "Company Authorizations" has the meaning set forth in Section 4.13 below.     "Company Common Stock" has the meaning set forth in Section 4.3(a) below.     "Company Financials" has the meaning set forth in Section 4.7 below.     "Company Intellectual Property" has the meaning set forth in Section 4.14(a)(iii) below.     "Company Registered Intellectual Property Rights" has the meaning set forth in Section 4.14(b) below.     "Company Share(s)" means any share of the capital stock of the Company.     "Confidential Information" means any information concerning the businesses and affairs of the Company that is not already generally available to the public.     "Conflict" has the meaning set forth in Section 4.5 below. 1 --------------------------------------------------------------------------------     "Contingent Purchase Price" has the meaning set forth in Section 2.3 below.     "Contract" has the meaning set forth in Section 4.16 below.     "Copyrights" has the meaning set forth in Section 4.14(a)(ii) below.     "Current Company Balance Sheet" has the meaning set forth in Section 4.7 below.     "Disclosure Schedule" means any one of the Disclosure Schedules referred to in Sections 3.1, 3.2 and 4 below.     "Employment Agreement" means the Employment Agreement with each of the Sellers in the form attached as Exhibit C.     "Environmental Claim" has the meaning set forth in Section 4.22 below.     "Environmental, Health and Safety Laws" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, the Clean Air Act, the Clean Water Act and the Occupational Safety and Health Act of 1970, each as amended, together with all equivalent or comparable state laws concerning pollution or protection of the environment, or employee health and safety.     "Environmental Laws" has the meaning set forth in Section 4.22 below.     "Escrow Agent" means West Coast Trust Co., Inc., dba West Coast Trust in its capacity as an escrow agent under the Escrow Agreement.     "Escrow Agreement" means the escrow agreement with respect to the Holdback, by and among the Buyer, the Sellers and the Escrow Agent, a copy of which is attached hereto as Exhibit D.     "Funded Debt" means as applied to the Company on a consolidated basis, without duplication, (i) indebtedness for borrowed money, and (ii) obligations evidenced by notes, bonds, debentures or similar instruments.     "Governmental Entity" has the meaning set forth in Section 4.6 below.     "Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.     "Hazardous Materials" has the meaning set forth in Section 4.22 below.     "Hixson" means Hixson HealthCare Corporation, a California corporation.     "Hixson Acquisition" has the meaning set forth in Section 5.8.     "Hixson Agreement" has the meaning set forth in Section 5.8.     "Holdback" has the meaning set forth in Section 2.2(c).     "Indemnified Party" has the meaning set forth in Section 8.4(a) below.     "Indemnifying Party" has the meaning set forth in Section 8.4(a) below.     "Intellectual Property Rights" has the meaning set forth in Section 4.14(a)(ii) below.     "Liens" has the meaning set forth in Section 4.10(b)(vii) below.     "Maskworks" has the meaning set forth in Section 4.14(a)(ii) below.     "Material Adverse Change" has the meaning set forth in Section 4 below.     "Material Adverse Effect" has the meaning set forth in Section 4 below. 2 --------------------------------------------------------------------------------     "Ordinary Course of Business" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).     "Party" has the meaning set forth in the preface above.     "Patents" has the meaning set forth in Section 4.14(a)(ii) below.     "Performance Contingencies" has the meaning set forth in Section 2.3 below.     "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, limited liability company, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof).     "Pro Rata Basis" means an allocation among the Sellers in proportion to their respective holdings of the Company Shares as set forth on Section 3.1(d) of the Disclosure Schedules.     "Prohibited Transaction" has the meaning set forth in ERISA Section 406 and Code Section 4975.     "PTO" has the meaning set forth in Section 4.14(b) below.     "Purchase Price" has the meaning set forth in Section 2.2(a) below.     "Registered Intellectual Property Rights" has the meaning set forth in Section 4.14(a)(iv) below.     "Reportable Event" has the meaning set forth in ERISA Section 4043.     "Returns" has the meaning set forth in Section 4.10(b)(i) below.     "Securities Act" means the Securities Act of 1933, as amended.     "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended.     "Seller(s)" has the meaning set forth in the preface above.     "Small Business Status" has the meaning set forth in Section 4.14(c) below.     "Subsidiary" means any corporation with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors.     "Taxes" has the meaning set forth in Section 4.10(a) below.     "Technology" has the meaning set forth in Section 4.14(a)(i) below.     "Technology Sale Agreement" shall mean that certain Technology Sale Agreement by and among Harold Hartsell and the Company relating to, among other things, Mr. Hartsell's sale of certain source code to Company.     "Third Party Claim" has the meaning set forth in Section 8.4(a) below.     "Trademarks" has the meaning set forth in Section 4.14(a)(ii) below. 2. Purchase and Sale of Company Shares.     2.1 Basic Transaction. Upon and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Sellers, and the Sellers agree to sell to the Buyer, all of their Company Shares for the consideration specified below in this Section 2.     2.2 Purchase Price.     (a) The purchase price for the Company Shares (the "Purchase Price") shall be $7,000,000 in cash, less the Holdback, the treatment of which shall be governed by Section 2.2(c) below. Sellers shall also be eligible to receive the Contingent Purchase Price described in Section 2.3. 3 --------------------------------------------------------------------------------     (b) At the Closing, the Buyer shall pay the Purchase Price to the Sellers on a Pro Rata Basis by wire transfer of immediately available funds, (A) less the amount of Funded Debt as determined by the Current Company Balance Sheet (the Buyer shall pay in full each creditor of Funded Debt, subject to Section 5.7 of this Agreement), and (B) less the Holdback.     (c) The Buyer shall withhold from the Purchase Price the amount of $700,000 (the "Holdback"), and deposit such funds into the account contemplated by the Escrow Agreement on or before the Closing Date. The escrowed funds shall be available to Buyer for indemnification claims under Section 8 in accordance with the terms of the Escrow Agreement.     2.3 Contingent Purchase Price. After the Closing Date, the Sellers shall be eligible to receive up to 600,000 shares (which may be subject to adjustment as provided in Section 2.4(d) below) of registered Buyer common stock (the "Contingent Purchase Price") to be earned, if at all, based on the achievement of the following operational and performance targets (collectively, the "Performance Contingencies"):     (a) 125,000 shares if the Sellers (with reasonable assistance from Buyer) successfully complete production of the prescription writing, drug information, clinical content and real-time advertising components of its Palm® OS devices application within 60 days of receiving a specifications document from Buyer. The specifications document will be sufficiently detailed to enable the Sellers to develop the features and functionality described in this section and will be supplied to the Sellers within ten (10) business days of the Closing Date. It is anticipated that the specifications document will be created with the input of the Sellers, through e-mail correspondence and face-to-face meetings.     (b) 100,000 shares if the Sellers (with reasonable assistance from Buyer) successfully complete production of the super bill, lab results and referrals management components of its Palm® OS devices application within 90 days of receiving a specifications document from the Buyer. The specifications document will be sufficiently detailed to enable the Sellers to develop the features and functionality described in this section and will be supplied to the Sellers within a reasonable period of time after the completion of the functionality described in (a) above. It is anticipated that the specifications document will be created with the input of the Sellers, through e-mail correspondence and face-to-face meetings.     (c) 75,000 shares if the Sellers (with reasonable assistance from Buyer) successfully complete production of the EMR-lite component of its Palm® OS devices application within 90 days of receiving a specifications document from the Buyer. The specifications document will be sufficiently detailed to enable the Sellers to develop the features and functionality described in this section and will be supplied to the Seller within a reasonable period of time after the completion of the functionality described in (b) above. It is anticipated that the specifications document will be created with the input of the Sellers, through e-mail correspondence and face-to-face meetings.     (d) 150,000 shares if the Sellers and Buyer are successful in deploying 20,000 hand-held units (Palm® OS or Windows® CE-based) to physicians or nurse practitioners for purposes of utilizing parts or all of the functionality outlined in Section 2.3(a), (b) or (c) above.     (e) 50,000 shares at the end of each of the first three years of their employment term under the Employment Agreements (each, an "Anniversary Date") (for a total of 150,000 shares in the aggregate) if both Sellers (or, to the limited extent set forth in the Employment Agreements, at least one Seller) has remained continuously employed by the Company, Buyer or Buyer's affiliates, for such year (each, an "Employment Year").     (f)  The time requirements set forth in (a), (b) and (c) above shall apply only to the time it takes the Sellers to develop the application functionality described and not any additional time required for other activities undertaken by anyone not under the control and direction of the 4 -------------------------------------------------------------------------------- Sellers which inhibits or delays development, including without limitation, testing, marketing and implementation planning prior to commercial launch, nor shall the time requirement apply to any delay that may result from the inability to integrate any functionality with the back-end/database due to the unavailability or incompleteness of such back-end/database. The functionality requirements set forth in (a), (b) and (c) above shall also be subject to reasonable technical limitations of the Palm® OS operating system and related devices. If the time commitments described above are not met due to the technical limitations of the Palm® OS operating system and related devices, the Buyer will redefine the functionality thereof so that the application will fit within such technical specifications, and the Buyer shall extend the time period for the achievement of such goal for 30 days or other reasonable extension of such time period. The Performance Contingencies set forth in (a), (b) and (c) above shall be limited to developing the hand-held client applications and interfaces only, and the Buyer shall assume responsibility for back-end/database development. So long as Buyer provides the Sellers with reasonable prior notice, Buyer reserves the right to require completion of the Performance Contingency set forth in (c) prior to completion of the Performance Contingency set forth in (b). Any such change shall not reduce the time periods allowed to the Sellers for fulfillment of such Performance Contingencies. The Parties acknowledge that the deliverables outlined in (a), (b) and (c) above are subject to change based on changing market and/or technological conditions. If such conditions change in a way that materially affects the Sellers, in Buyer's sole discretion, the Parties agree to make reasonable best efforts to redefine these deliverables accordingly for purposes of restructuring such earn-outs; provided, however, that no such restructuring of the earn-outs shall have any impact on any Contingent Purchase Price earned as a result of any Performance Contingency which (except for the commercial launch of the units) has already been fully or substantially fulfilled. Buyer shall retain final approval regarding hiring additional technical resources to achieve these targets, but agrees to the following additional technical resources: (i) 2.0 FTE (Palm® OS); and (ii) potentially 1.0 FTE (Windows® CE). The Parties also acknowledge that nothing herein shall prevent the Buyer from making changes in the corporate structure of the Company or by assigning, subject to the limits set forth in the Employment Agreements, the Sellers to work for the Buyer or Buyer's affiliates; provided that no such change shall prevent the Sellers from having an opportunity to fulfill the terms of the earn-outs and that the parties will use reasonable best efforts to restructure the earn-outs to account for such change.     (g) Notwithstanding the time requirements set forth in (a), (b) or (c) above, such earn-outs are contingent on commercial launch of hand-held units utilizing part or all of the functionality outlined therein and shall not be paid until commercial launch has occurred. The Sellers agree to use reasonable efforts to assist in the provision of technical support, and completion of the commercial launch, of each application.     (h) Except to the limited extent set forth in the Employment Agreements for that portion of the Contingent Purchase Price earned pursuant to section (e) above, the Contingent Purchase Price shall be paid to the Sellers on a Pro-Rata Basis.     (i)  A Seller shall be entitled to his portion of a Contingent Purchase Price payment only if it is earned while he is still employed by the Buyer under his Employment Agreement or after the expiration of the Term (as defined in the Employment Agreement), unless his termination of employment is by the Buyer without cause or by reason of his death or Disability (as defined in the Employment Agreement). 2.4 Notice of Performance; Adjustments to Number of Shares.     (a) When Sellers believe that one or more of the Performance Contingencies have been achieved, they will transmit a written Request for Performance Contingency Determination to Buyer. If the Buyer determines, in its reasonable judgment, that any of the Performance 5 -------------------------------------------------------------------------------- Contingencies (other than the commercial launch of the application) have been fulfilled in a timely manner, then within 15 days from the receipt of the Request for Performance Contingency Determination, Buyer will provide the Sellers with a written confirmation relating to the fulfillment of such Performance Contingency.     (b) Subject to the limitations in Section 2.4(c) below, Buyer will cause certificates representing the Contingent Purchase Price shares to be issued within 30 days following the Anniversary Date for any Contingent Purchase Price earned during the immediately preceding Employment Year.     (c) Not more than 200,000 shares shall be paid as the Contingent Purchase Price in any one year Employment Year, provided, however, that shares earned in excess of 200,000 in any year shall be issued in the following Employment Year. Notwithstanding the foregoing, if the Buyer terminates the Sellers during the term of the Employment Agreements without cause, then all earned shares shall be issued within 30 days of such termination, and any shares payable through the fourth anniversary date shall be issued within 60 days following the occurrence of the last event necessary for the fulfillment of each Performance Contingency.     (d) The number and type of securities issued in payment of the Contingent Purchase Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:     (i)  Adjustment for Stock Splits and Combinations. If the Buyer, at any time or from time to time after the date hereof, effects a subdivision of the outstanding common stock of the Buyer (the "Buyer's Common Stock"), the number of shares issued in payment of the Contingent Purchase Price in effect immediately before that subdivision shall be proportionately increased, and conversely, if the Buyer, at any time or from time to time after the date hereof, combines the outstanding shares of the Buyer's Common Stock into a smaller number of shares, the number of shares issued in payment of the Contingent Purchase Price then in effect immediately before the combination shall be proportionately decreased.     (ii) Adjustment for Certain Dividends and Distributions. If the Buyer at any time or from time to time after the date hereof makes, or fixes a record date for the determination of holders of the Buyer's Common Stock entitled to receive, without payment therefor, a dividend or other distribution payable in additional shares of the Buyer's Common Stock, then and in each such event the number of shares issued in payment of the Contingent Purchase Price then in effect shall be increased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying such the number of shares issued in payment of the Contingent Purchase Price then in effect by a fraction (i) the numerator of which shall be the total number of shares of the Buyer's Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of the Buyer's Common Stock issuable in payment of such dividend or distribution and (ii) the denominator of which is the total number of shares of the Buyer's Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date.     (iii) Adjustments for Other Dividends and Distributions. In the event the Buyer, at any time or from time to time after the date hereof, makes, or fixes a record date for the determination of holders of the Buyer's Common Stock entitled to receive, without payment therefor, a dividend or other distribution payable in securities of the Buyer other than shares of the Buyer's Common Stock, then and in each such event provision shall be made so that the Sellers shall receive, in addition to the number of shares of the Buyer's Common Stock issued in payment of the Contingent Purchase Price, the amount of securities of the Buyer that they would have received had the number of shares of the Buyer's Common Stock issued in payment of the Contingent Purchase Price been issued in full on the date of such event and 6 -------------------------------------------------------------------------------- had the Sellers thereafter, during the period from the date of such event to and including the exercise date, retained such securities, receivable by them as aforesaid during such period.     (iv) Adjustment for Reclassification, Exchange and Substitution. In the event that at any time or from time to time after the date hereof, the Buyer's Common Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in this Section 2.4(d)), then and in any such event the Sellers shall have the right to receive upon the payment of the Contingent Purchase Price the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change, by a holder of the number of shares of the Buyer's Common Stock which otherwise would have been issued in payment of the Contingent Purchase Price if due and payable immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein.     (v) Reorganization, Mergers, Consolidations or Sales of Assets. If at any time or from time to time after the date hereof, there is a capital reorganization of the Buyer's Common Stock (other than a recapitalization, subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Section 2.4(d)), then, as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the Sellers shall thereafter be entitled to receive upon the payment of the Contingent Purchase Price the number of shares of stock or other securities or property to which a holder of the number of shares of the Buyer's Common Stock otherwise deliverable upon the payment of the Contingent Purchase Price would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 2.4(d) with respect to the rights of the Sellers after the reorganization, merger, consolidation or sale to the end that the provisions of this Section 2.4(d) (including adjustment of the number of shares issued in payment of the Contingent Purchase Price) shall be applicable after that event and be as nearly equivalent as may be practicable.     2.5 The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Stoel Rives LLP, in Portland, Oregon, commencing at 9:00 a.m. local time on the second business day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated by this Agreement (other than conditions with respect to actions the respective Parties will take at the Closing itself) or such other date as the Buyer and the Sellers may mutually determine (the "Closing Date").     2.6 Deliveries at the Closing. At the Closing, (i) the Sellers will deliver to the Buyer the various certificates, instruments and documents referred to in Section 7.1 below, (ii) the Buyer will deliver to the Sellers the various certificates, instruments and documents referred to in Section 7.2 below, (iii) the Sellers will deliver to the Buyer original stock certificates representing all of their Company Shares, endorsed in blank or accompanied by duly executed assignment documents, in form acceptable to Buyer and its counsel, and (iv) the Buyer will deliver to the Sellers the consideration specified in Section 2.2 above. 3. Representations and Warranties of Sellers and Buyer.     3.1 Representations and Warranties of the Sellers. Each Seller severally represents and warrants to the Buyer that the statements contained in this Section 3.1 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3.1). 7 --------------------------------------------------------------------------------     (a) Authorization of Transaction. Each Seller has full power and authority to execute and deliver this Agreement and to perform his obligations under this Agreement. This Agreement constitutes the valid and legally binding obligation of each Seller, enforceable in accordance with its terms and conditions, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the rights of creditors, and except as enforceability may be limited by rules of law governing specific performance, injunctive relief or other equitable remedies. Neither Seller is required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement.     (b) Noncontravention. Except as set forth on Schedule 3.1(b), neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) result in a violation by any Seller of any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which any Seller is subject or (B) result in a breach or violation by any Seller of, constitute a default by any Seller under, result in the acceleration against any Seller of, create in any party the right against any Seller to accelerate, terminate, modify, or cancel any agreement, contract, lease, license, instrument, or other arrangement to which any Seller is bound or to which any assets of any Seller are subject.     (c) Brokers' Fees. Neither Seller has any liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.     (d) Company Shares. The Sellers, and no other Person, hold of record and own beneficially the number of Company Shares set forth next to their names in Schedule 3.1(d), free and clear of any restrictions on transfer (other than any restrictions under the Securities Act and state securities laws), taxes, Liens, options, warrants, purchase or other rights, contracts, commitments, equities, claims, and demands. Neither Seller is a party to, or aware of, any option, warrant, purchase or other right, or other contract or commitment that could require any Seller to sell, transfer, or otherwise dispose of any capital stock of the Company (other than this Agreement). Neither Seller is a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any capital stock of the Company.     (e) Company Representations. Each of the Sellers confirms the accuracy and completeness of the Company's representations and warranties in Section 4 as if such representations and warranties were set forth in this Section 3.     3.2 Representations and Warranties of the Buyer. The Buyer represents and warrants to the Sellers that the statements contained in this Section 3.2 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3.2).     (a) Organization of the Buyer. The Buyer is a corporation duly organized and validly existing under the laws of the State of Oregon.     (b) Authorization of Transaction. The Buyer has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations under this Agreement. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms and conditions, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the rights of creditors, and except as enforceability may be limited by rules of law governing specific performance, injunctive relief or other equitable remedies. The Buyer is not required to give any notice to, make 8 -------------------------------------------------------------------------------- any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement, except filings under the Hart-Scott-Rodino Act, if applicable.     (c) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) violate in any material way any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject, or any provision of its articles of incorporation or bylaws, each as amended or (B) materially conflict with, result in a material breach of, constitute a material default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which the Buyer is a party or by which it is bound or to which any of its assets is subject.     (d) Brokers' Fees. The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.     (e) Investment. The Buyer is knowledgeable about the industry in which the Company conducts its business, is an Accredited Investor and is not acquiring the Company Shares with a view to, or for sale in connection with, any distribution thereof within the meaning of the Securities Act. 4. Representations and Warranties of the Company.     For purposes of this Agreement, "Material Adverse Effect" or "Material Adverse Change" means any effect, change, event, circumstance or condition which when considered with all other effects, changes, events, circumstances or conditions would reasonably be expected to affect materially and adversely the business, results of operations, financial condition or prospects of a party, in each case including its Subsidiaries together with it taken as a whole. In no event shall any of the following constitute a Material Adverse Effect or a Material Adverse Change: (i) effects, changes, events, circumstances or conditions generally affecting the industry in which the Company operates or arising from changes in general business or economic conditions; (ii) any effects, changes, events, circumstances or conditions resulting from any change in law or generally accepted accounting principles, which affect generally entities such as the Company; and (iii) any effect resulting from compliance by the Company with the terms of this Agreement. For all purposes of Section 4 of this Agreement, a statement about the "Company" refers to the Company and all of its Subsidiaries jointly and refers to the Company and each of its Subsidiaries separately.     The Company hereby represents and warrants to Buyer that the statements contained in this Section 4 are correct and complete as of the date of this Agreement and will be correct and complete on the Closing Date, as though made then and as though the Closing Date was substituted for the date of this Agreement throughout this Section 4:     4.1 Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. The Company is a California corporation. The Company has the corporate power and corporate authority to own, lease and operate its properties and to carry on its business as it is now being conducted, and as proposed to be conducted, and to perform its obligations under any contracts by which it is bound. The Company is duly qualified or licensed to do business in California. The Company has delivered a true and correct copy of its Certificate or Articles of Incorporation and Bylaws, each as amended to date, to Buyer. Such Certificate or Articles of Incorporation and Bylaws are in full force and effect. The Company is not in violation of any of the provisions of its Certificate or Articles of Incorporation or Bylaws. 9 --------------------------------------------------------------------------------     4.2 Subsidiaries. The Company does not have any Subsidiaries or affiliated companies and does not otherwise own, directly or indirectly, any shares of capital stock or any equity, debt or similar interest in or any interest convertible, exchangeable or exercisable for any equity, debt or similar interest in, or control, directly or indirectly, any other corporation, partnership, association, joint venture or other business entity, foreign or domestic. The Company has not agreed nor is the Company obligated to make or be bound by any written, oral or other agreement, contract, sub-contract, lease, binding understanding, instrument, note, option, warranty, purchase order, license, sub-license, insurance policy, benefit plan, commitment or undertaking of any nature, as of the date hereof or as may hereafter be in effect under which it may become obligated to make any future investment in or capital contribution to any other entity.     4.3 Capitalization.     (a) The authorized capital stock of the Company consists of 100,000 shares of authorized Common Stock, no par value, of which 100,000 shares are issued and outstanding ("Company Common Stock"). The Company has not authorized or issued any other class or series of equity securities (other than Company Common Stock). The Company Common Stock is held of record by the persons, with the addresses of record and in the amounts set forth on Schedule 3.1(d). No shares of Company Common Stock held by any shareholder are subject to a repurchase right in favor of the Company. All outstanding shares of Company Common Stock are duly authorized, validly issued, fully paid and non-assessable and not subject to preemptive rights created by statute, the Certificate or Articles of Incorporation or Bylaws of the Company, each as amended to date, or any agreement to which the Company is a party or by which it is bound. All issued and outstanding shares of Company Common Stock have been offered, sold and delivered by the Company in full compliance with applicable federal and state securities laws.     (b) There are no subscriptions, options, warrants, equity securities, partnership interests or similar ownership interests, calls, rights (including preemptive rights), commitments or agreements of any character to which the Company is a party or by which it is bound obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or acquisition of, any shares of capital stock, partnership interests or similar ownership interests of the Company or obligating the Company to grant, extend, accelerate the vesting of or enter into, any such subscription, option, warrant, equity security, call, right, commitment or agreement.     (c) As of the date of this Agreement, except as contemplated by this Agreement, there are no registration rights agreements, no voting trust, proxy or other similar agreement or understanding to which the Company is a party or by which it is bound with respect to any equity security of any class of the Company.     (d) As a result of the transactions contemplated by this Agreement, Buyer will be the record and sole beneficial owner of all Company Shares and rights to acquire or receive Company Shares.     4.4 Authority. The Company has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The Company's Board of Directors has unanimously approved such transaction and this Agreement. This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company, enforceable in accordance with its terms.     4.5 No Conflict. Except as set forth on Schedule 4.5, the execution, delivery and performance of this Agreement (and the other agreements contemplated by this Agreement) by the Company and the Sellers does not, and, as of the Closing Date, the consummation of the transactions contemplated hereby (and by the other agreements contemplated by this Agreement) (a) will not conflict with, contravene, or result in any violation or breach of, or default under (with or without notice or lapse of 10 -------------------------------------------------------------------------------- time, or both), or give rise to a right of termination, refund, modification, cancellation or acceleration of any obligation or loss of any benefit under (any such event, a "Conflict") (i) any provision of the Certificate or Articles of Incorporation or Bylaws of the Company or any of its Subsidiaries, or (ii) except to the extent that such Conflict would not have a Material Adverse Effect, any mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise, license, judgment, order, ruling, decree, statute, law, ordinance, rule or regulation applicable to the Company or its businesses, properties or assets; and (b) do not and will not result in the creation of any Lien against any property, asset or business of the Company.     4.6 Consents. No consent, waiver, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other federal, state, county, local or foreign governmental authority, instrumentality, agency or commission ("Governmental Entity") or any third party, is required by or with respect to the Company in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (a) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities laws, and (b) such other consents, waivers, authorizations, filings, approvals and registrations that are set forth on Schedule 4.6.     4.7 Company Financial Statements. Schedule 4.7 sets forth true and correct copies of the Company's unaudited pro forma balance sheet as of the Closing Date (the "Company Financials"). The Company Financials are complete and correct in all material respects. Subject to usual and customary year-end accounting adjustments, the Company Financials present fairly in all material respects the financial condition and operating results of the Company as of the dates and during the periods indicated therein. The Company's unaudited pro forma balance sheet as of the Closing Date shall be referred to herein as the "Current Company Balance Sheet."     4.8 No Undisclosed Liabilities. Except as set forth in Schedule 4.8 or for those undisclosed liabilities that will not have a Material Adverse Effect, the Company does not have, as of the date hereof, any liability, indebtedness or obligation of any type, whether accrued, absolute, contingent, matured, unmatured, known or unknown or other (whether or not required to be reflected in financial statements in accordance with GAAP), which individually or in the aggregate, (a) has not been reflected in the Current Company Balance Sheet or (b) has not been set forth in a Disclosure Schedule.     4.9 No Changes. Except as set forth in Schedule 4.9, since March 15, 2000 and through the date of this Agreement, there has not been, occurred or arisen any:     (a) transaction by the Company except in the Ordinary Course of Business;     (b) amendments or changes to the Certificate or Articles of Incorporation or Bylaws of the Company;     (c) capital expenditure or capital commitment by the Company of $5,000 in any individual case or $25,000 in the aggregate (other than commitments to pay expenses incurred in connection with this transaction);     (d) destruction of, damage to or loss of any material assets, business or customer of the Company (whether or not covered by insurance);     (e) change in accounting methods, principles or practices (including any change in depreciation or amortization policies or rates) by the Company;     (f)  revaluation by the Company of any of its material assets, including, without limitation, writing down the value of capitalized inventory or writing off notes or accounts receivable; 11 --------------------------------------------------------------------------------     (g) declaration, setting aside or payment of a dividend or other distribution with respect to any Company Shares, or any direct or indirect redemption, purchase or other acquisition by the Company of any Company Shares;     (h) split, combination or reclassification of any Company Shares;     (i)  agreement, contract, covenant, instrument, lease, license or commitment to which the Company is a party or by which it or any of its assets is bound or any termination, extension, amendment or modification of the terms of any agreement, contract, covenant, instrument, lease, license or commitment to which the Company is a party or by which it or any of its assets is bound, except as set forth in Schedule 4.9(i);     (j)  sale, lease, license or other disposition of any of the assets or properties of the Company, or creation of any lien or security interest in such assets or properties except in the Ordinary Course of Business;     (k) loan by the Company to any person or entity, incurring by the Company of any indebtedness, guaranteeing by the Company of any indebtedness, issuance or sale of any debt securities of the Company or guaranteeing of any debt securities of others except for advances to employees for travel and business expenses in the Ordinary Course of Business;     (l)  waiver or release of any right or claim of the Company, including any write-off or other compromise of any amount of any account receivable of the Company;     (m) except as set forth in Schedule 4.14, (i) sale by the Company of any Company Intellectual Property (as defined in Section 4.14 below) or the entering into of any license agreement (other than end-user license agreements entered into by the Company in the Ordinary Course of Business), distribution agreement, reseller agreement, security agreement, assignment or other conveyance or option for the foregoing, with respect to the Company Intellectual Property with any person or entity, (ii) the purchase or other acquisition of any Intellectual Property (as defined in Section 4.14 below) or the entering into of any license agreement, distribution agreement, reseller agreement, security agreement, assignment or other conveyance or option for the foregoing, with respect to the Intellectual Property of any person or entity or (iii) the change in pricing or royalties set or charged by the Company to its customers or licensees or in pricing or royalties set or charged by persons who have licensed Intellectual Property to Company;     (n) issuance or sale by the Company of any Company Shares, or securities exchangeable, convertible or exercisable therefor, or any securities, warrants, options or rights to purchase any of the foregoing or any amendment of any existing equity arrangement; or     (o) agreement by the Company or any officer or employee thereof to do any of the things described in the preceding clauses (a) through (n) (other than negotiations with Buyer and its representatives regarding the transactions contemplated by this Agreement).     4.10 Taxes.     (a) Definition of Taxes. For the purposes of this Agreement, "Tax" or, collectively, "Taxes", means any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts and any obligations under any agreements or arrangements with any other Person with respect to such amounts and including any liability for taxes of a predecessor entity. 12 --------------------------------------------------------------------------------     (b) Tax Returns and Audits. Except as set forth in Schedule 4.10:     (i)  The Company has prepared and filed on a timely basis all required federal, state, local and foreign returns, estimates, information statements and reports ("Returns") relating to any and all Taxes concerning or attributable to the Company or its operations and such Returns are true and correct and have been completed in accordance with applicable law.     (ii) The Company: (A) has paid or accrued all Taxes it is required to pay or accrue and (B) has withheld with respect to its employees all federal and state income taxes, FICA, FUTA and other Taxes required to be withheld.     (iii) The Company has not been delinquent in the payment of any Tax nor is there any Tax deficiency outstanding, proposed or assessed against the Company, nor has the Company executed any waiver of any statute of limitations on or extended the period for the assessment or collection of any Tax.     (iv) No audit or other examination of any Return of the Company is presently in progress, nor is the Company aware of or has the Company been notified of any request for such an audit or other examination.     (v) The Company has no liabilities for unpaid federal, state, local or foreign Taxes that have not been accrued or reserved against in the Company Financials, whether asserted or unasserted, contingent or otherwise, and the Company has not incurred any liability for Taxes since the date of the Current Company Balance Sheet other than in the Ordinary Course of Business.     (vi) The Company has provided to Buyer copies of all federal and state income and all state sales and use Returns for all periods since Company's organization.     (vii) There are (and as of immediately following the Closing there will be) no liens, pledges, charges, claims, restrictions on transfer, mortgages, security interests or other encumbrances of any sort (collectively, "Liens") on the assets of the Company relating to or attributable to Taxes, other than Liens for Taxes not yet due and payable as of such time.     (viii) To the Company's knowledge, there is no basis for the assertion of any claim relating or attributable to Taxes that, if adversely determined, would result in any Lien on the assets of the Company.     (ix) None of the Company's assets are treated as "tax-exempt use property" within the meaning of Section 168(h) of the Code.     (x) There is no contract, agreement, plan or arrangement to which the Company is a party, including but not limited to the provisions of this Agreement, covering any employee or former employee of the Company that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to Section 280G, 404 or 162(m) of the Code.     (xi) The Company has not filed any consent agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by the Company.     (xii) The Company is not a party to a tax sharing or allocation agreement nor does the Company owe any amount under any such agreement. The Company has not been a member of an affiliated group (within the meaning of Section 1504(a) of the Code) filing a consolidated income tax return. 13 --------------------------------------------------------------------------------     (xiii) The Company is not, and has not been at any time, a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code.     (xiv)  No adjustment or deficiency relating to any Return filed or required to be filed by the Company has been proposed formally or informally by any tax authority to the Company or any representative thereof, nor is the Company or any of its representatives, agents, employees, or advisors aware that any such proposal is being considered.     (xv) The Company has not distributed the stock of any corporation in a transaction satisfying the requirements of Section 355 of the Code or any other transaction. No Company Shares have been distributed in a transaction satisfying the requirements of Section 355 of the Code.     4.11 Restrictions on Business Activities. There is no agreement (noncompete or otherwise), judgment, injunction, order or decree to which the Company is a party or otherwise binding upon the Company that has or reasonably would be expected to have the effect of prohibiting or impairing any business practice of the Company, any acquisition of property (tangible or intangible) by the Company or the conduct of business by the Company. Without limiting the foregoing, the Company has not entered into any agreement under which the Company is restricted from selling, licensing or otherwise distributing any of its products or services to any class of customers, in any geographic area, during any period of time or in any segment of the market.     4.12 Title to Properties; Absence of Liens and Encumbrances.     (a) The Company does not own any real property, nor has it ever owned any real property. Schedule 4.12(a) sets forth a list of all real property currently leased by the Company and the name of each lessor. The Company has provided true and complete copies of all real property leases and amendments thereto to Buyer. All such current leases are in full force and effect, are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing default or event of default, or to the Company's knowledge, any event which with notice or lapse of time, or both, would constitute a default. Except where such violation would not have a Material Adverse Effect, neither the operations of the Company on such real property nor such real property, including improvements thereon, violate any applicable building code, zoning requirement, or classification or pollution control ordinance or statute relating to the particular property or such operations, and such compliance is not dependent, in any instance, on so-called non-conforming use exceptions.     (b) The Company has good and marketable title to, or, in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets, real, personal and mixed, used or held for use in its business, free and clear of any Liens, except as reflected in the Company Financials or in Schedule 4.12(b) and except for liens for taxes not yet due and payable and such imperfections of title and encumbrances, if any, which are not material in character, amount or extent, and which do not materially interfere with the present use, of the property subject thereto or affected thereby.     (c) Except as set forth in Schedule 4.12(c), all facilities, machinery, equipment, fixtures, vehicles, and other properties owned, leased or used by the Company are (i) adequate for the conduct of the business of the Company as currently conducted and (ii) in good operating condition, regularly and properly maintained, subject to normal wear and tear and reasonably fit and usable for the purposes for which they are being used, except where a failure to be in such condition would not have a Material Adverse Effect on the Company.     4.13 Governmental Authorization. Schedule 4.13 accurately lists each consent, license, permit, grant or other authorization issued to the Company by a Governmental Entity (a) pursuant to which the Company currently operates or holds any interest in any of its properties or (b) which is required for 14 -------------------------------------------------------------------------------- the operation of its business or the holding of any such interest (collectively called "Company Authorizations"). The Company Authorizations are in full force and effect and constitute all Company Authorizations required to permit the Company to operate or conduct its business or hold any interest in its properties or assets. To the Company's knowledge, the Company is in compliance in all material respects with the terms of the Company Authorizations except where the failure to comply would not have a Material Adverse Effect.     4.14 Intellectual Property.     (a) Definitions. For all purposes of this Agreement, the following terms shall have the following respective meanings:     (i)  "Technology" shall mean any or all of the following: (A) works of authorship including, without limitation, computer programs, source code and executable code, whether embodied in software, firmware or otherwise, documentation, designs, files, net lists, records, data and mask works; (B) inventions (whether or not patentable), improvements and technology; (C) proprietary and confidential information, including technical data and customer and supplier lists, trade secrets and know how; (D) databases, data compilations and collections and technical data; (E) logos, trade names, trade dress, trademarks and service marks; (F) World Wide Web addresses, domain names and sites; (G) tools, methods and processes; and (H) all instances of the foregoing in any form and embodied in any media.     (ii) "Intellectual Property Rights" shall mean any or all of the following and all rights in, arising out of, or associated therewith: (A) all United States and foreign patents and utility models and applications therefor and all reissues, divisions, re-examinations, renewals, extensions, provisionals, continuations and continuations-in-part thereof and equivalent or similar rights anywhere in the world in inventions and discoveries, including, without limitation, invention disclosures ("Patents"); (B) all trade secrets and other rights in know-how and confidential or proprietary information; (C) all copyrights, copyrights registrations and applications therefor and all other rights corresponding thereto throughout the world ("Copyrights"); (D) all mask works, mask work registrations and applications therefor, and any equivalent or similar rights in semiconductor masks, layouts, architectures or topology ("Maskworks"); (E) all industrial designs and any registrations and applications therefor throughout the world; (F) all rights in World Wide Web addresses and domain names and applications and registrations therefor; (G) all trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor and all goodwill associated therewith throughout the world ("Trademarks"); and (H) any similar, corresponding or equivalent rights to any of the foregoing anywhere in the world.     (iii) "Company Intellectual Property" shall mean any Technology and Intellectual Property Rights including the Company Registered Intellectual Property Rights (as defined below) that are owned (in whole or in part) by the Company. For purposes of this Agreement, Company Intellectual Property includes any trademarks owned by Sellers, individually, and, for the avoidance of doubt, includes any and all intellectual property acquired pursuant to the Hixson Acquisition and the Technology Sale Agreement.     (iv) "Registered Intellectual Property Rights" shall mean all United States, international and foreign: (A) Patents, including applications therefor; (B) registered Trademarks, applications to register Trademarks, including intent-to-use applications, or other registrations or applications related to Trademarks; (C) Copyrights registrations and applications to register Copyrights; (D) Mask Work registrations and applications to register Mask Works; and (E) any other Technology that is the subject of an application, certificate, filing, registration or other document issued by, filed with, or recorded by, any state, government or other public or private legal authority at any time. 15 --------------------------------------------------------------------------------     (b) Schedule 4.14(b) lists all Registered Intellectual Property Rights owned by, filed in the name of, or applied for, by the Company (the "Company Registered Intellectual Property Rights") and lists any proceedings or actions before any court, tribunal (including the United States Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the world) related to any of the Company Registered Intellectual Property Rights or Company Intellectual Property.     (c) Each registration of Company Registered Intellectual Property Rights is valid and subsisting, and all necessary registration, maintenance and renewal fees in connection with such Company Registered Intellectual Property Rights have been paid and all necessary documents and certificates in connection with such Company Registered Intellectual Property Rights have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Registered Intellectual Property Rights. Except as set forth on Schedule 4.14(c), there are no actions that must be taken by the Company within one hundred twenty (120) days of the Closing Date, including the payment of any registration, maintenance or renewal fees or the filing of any responses to PTO office actions, documents, applications or certificates for the purposes of obtaining, maintaining, perfecting or preserving or renewing any Registered Intellectual Property Rights. In each case in which the Company have acquired all rights, title and interest in, as opposed to the right to use, any Technology or Intellectual Property Right from any person, the Company or such Subsidiary has obtained a valid and enforceable assignment sufficient to irrevocably transfer all rights in such Technology and the associated Intellectual Property Rights to the Company. Except as set forth on Schedule 4.14(c), the Company has not claimed a particular status, including "Small Business Status," in the application for any Intellectual Property Rights, which claim of status was not at the time made, or which has since become, inaccurate or false or that will no longer be true and accurate as a result of the Closing.     (d) The Company has no knowledge of any facts or circumstances that would render any Company Intellectual Property invalid or unenforceable. Except as set forth on Schedule 4.14(d), without limiting the foregoing, the Company knows of no information, materials, facts or circumstances, including any information or fact that would constitute prior art, that would render any of the Company Registered Intellectual Property Rights invalid or unenforceable, or would adversely effect any pending application for any Company Registered Intellectual Property Right and the Company has not misrepresented, or failed to disclose, and has no knowledge of any misrepresentation or failure to disclose, any fact or circumstances in any application for any Company Registered Intellectual Property Right that would constitute fraud or a misrepresentation with respect to such application or that would otherwise affect the validity or enforceability of any Company Registered Intellectual Property Right.     (e) Each item of Company Intellectual Property is free and clear of any Liens except for non-exclusive licenses granted to end-user customers in the Ordinary Course of Business. The Company is the exclusive owner of all Company Intellectual Property subject only to non-exclusive licenses granted to distributors, resellers and end-users. Without limiting the foregoing, to the knowledge of the Company: (i) the Company is the exclusive owner of all Trademarks used in connection with the operation or conduct of the business of the Company, including the sale, licensing, distribution or provision of any products or services by the Company; and (ii) except as set forth on Schedule 4.14(e), the Company owns exclusively, and has good title to, all Copyrighted Works that are products of the Company or which the Company otherwise purports to own.     (f)  Except as set forth in Schedule 4.14(f), all Company Intellectual Property will be fully transferable, alienable or licensable by Company and/or Buyer without restriction except that any such transfer, alienation or license shall be subject to non-exclusive licenses granted to end user customers in the Ordinary Course of Business of the Company prior to the closing of the transactions contemplated hereby and without payment of any kind to any third party other than 16 -------------------------------------------------------------------------------- royalties and fees payable in the Ordinary Course of Business of the Company prior to the closing of the transactions contemplated hereby.     (g) To the extent that any Company Technology has been developed or created by a third party for the Company, the Company has a written agreement with such third party with respect thereto and the Company thereby either (i) has obtained ownership of, and is the exclusive owner of, or (ii) has obtained a license (sufficient for the conduct of its business as currently conducted and as proposed to be conducted) to all such third party's Intellectual Property Rights in such Technology by operation of law or by valid assignment, to the fullest extent it is legally possible to do so.     (h) Except as set forth on Schedule 4.14(h) and with the exception of "shrink-wrap" or similar widely-available commercial end-user licenses, all Technology used in or necessary to the conduct of Company's business as presently conducted or currently contemplated to be conducted by the Company was written and created solely by either (i) employees of the Company acting within the scope of their employment or (ii) by third parties who have validly and irrevocably assigned all of their rights, including Intellectual Property Rights therein, to the Company, and no third party owns or has any rights to any of the Company Intellectual Property.     (i)  All current and former employees of the Company and current and former consultants and contractors engaged by the Company have entered into a valid and binding written proprietary information confidentiality and assignment agreement with the Company sufficient to vest title in the Company of all Technology, including all accompanying Intellectual Property Rights, created by such employee in the scope of his or her employment with the Company.     (j)  Except as set forth on Schedule 4.14(j), and with the exception of "shrink-wrap" or similar widely-available commercial end-user licenses, no person who has licensed Technology or Intellectual Property Rights to the Company has ownership rights or license rights to improvements made by the Company in such Technology or Intellectual Property Rights.     (k) The Company has not transferred ownership of, or granted any exclusive license of or right to use, or authorized the retention of any exclusive rights to use or joint ownership of, any Technology or Intellectual Property Right that is or was Company Intellectual Property, to any other person.     (l)  Other than inbound "shrink-wrap" and similar publicly available commercial binary code end-user licenses and outbound "shrink-wrap" licenses in the form set forth on Schedule 4.14(l), Schedule 4.14(l) lists all contracts, licenses and agreements to which the Company is a party with respect to any Technology or Intellectual Property Rights. The Company is not in breach of nor has the Company failed to perform under, any of the foregoing contracts, licenses or agreements and, to the Company's knowledge, no other party to any such contract, license or agreement is in breach thereof or has failed to perform thereunder.     (m) Schedule 4.14(m) lists all contracts, licenses and agreements between the Company and any other person wherein or whereby the Company have agreed to, or assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur any obligation or liability or provide a right of rescission with respect to the infringement or misappropriation by the Company or such other person of the Intellectual Property Rights of any person other than the Company.     (n) To the knowledge of the Company, there are no contracts, licenses or agreements between the Company and any other person with respect to Company Intellectual Property under which there is any dispute regarding the scope of such agreement, or performance under such agreement, including with respect to any payments to be made or received by the Company thereunder. 17 --------------------------------------------------------------------------------     (o) To the knowledge of the Company, the operation of the business of the Company as it currently is conducted or is contemplated to be conducted by the Company, including but not limited to the design, development, use, import, branding, advertising, promotion, marketing, manufacture and sale of the products, technology or services (including products, technology or services currently under development) of the Company does not and will not and will not when conducted by Buyer and/or Company (post-closing) in substantially the same manner following the Closing, infringe or misappropriate any Intellectual Property Right of any person, violate any right of any person (including any right to privacy or publicity) or constitute unfair competition or trade practices under the laws of any jurisdiction, and the Company has not received notice from any person claiming that such operation or any act, product, technology or service (including products, technology or services currently under development) of the Company infringes or misappropriates any Intellectual Property Right of any person or constitutes unfair competition or trade practices under the laws of any jurisdiction (nor does the Company have knowledge of any basis therefor).     (p) To the Company's knowledge, no person is infringing or misappropriating any Company Intellectual Property Right.     (q) No Company Intellectual Property or service of the Company is subject to any proceeding or outstanding decree, order, judgment or settlement agreement or stipulation that restricts in any manner the use, transfer or licensing thereof by the Company or may affect the validity, use or enforceability of such Company Intellectual Property.     (r) No (i) product, technology, service or publication of the Company, (ii) material published or distributed by the Company or (iii) conduct or statement of the Company constitutes obscene material, a defamatory statement or material, false advertising or, to the Company's knowledge, otherwise violates in any material respect any law or regulation, except where such publication, distribution, conduct or statement would not have a Material Adverse Effect.     (s) To the Company's knowledge, except as set forth on Schedule 4.14(s), and except for Technology or Intellectual Property subject to "shrink wrap" or similar widely available commercial end user licenses, the Company Intellectual Property constitutes all the Technology and Intellectual Property Rights used in and/or necessary to the conduct of the business of the Company as it currently is conducted, including, without limitation, the design, development, manufacture, use, import and sale of products, technology and performance of services.     (t)  Except to the extent resulting from the continuation of contracts and licenses of the Company following the Closing on the terms applicable prior to the Closing, neither this Agreement nor the transactions contemplated by this Agreement, including the assignment to Buyer or Company (post-closing), by operation of law or otherwise, of any contracts or agreements to which the Company is a party, will result in (i) either Buyer's or the Company's granting to any third party any right to or with respect to any Technology or Intellectual Property Right owned by, or licensed to, either of them, (ii) either the Buyer's or the Company's being obligated to pay any royalties or other amounts to any third party in excess of those payable by the Company or Buyer, respectively, prior to the Closing.     (u) The Company's products and services as marketed to the public on the Closing Date shall not fail to perform any function specified in the product specifications therefor, or otherwise be adversely affected in any material respect, solely as a result of the date change from December 31, 1999 to January 1, 2000, including without limitation, date data century recognition, calculations which accommodate same century and multi-century formulas and date values, and date data interface values which reflect the correct century. In addition, to the Company's knowledge, all of the products and services upon which the Company relies, either individually or in the aggregate, including, without limitation, information technology systems such as financial and order entry systems, non-information technology systems such as phones and facilities, third party licensed 18 -------------------------------------------------------------------------------- software and the products and services of the Company's customers, vendors and suppliers are designed to be used prior to, during, and after calendar year 2000 A.D., and such products and services will operate during each such time period without error relating to date data, including without limitation any error relating to, or the product of, date data that represents or references different centuries or more than one century.     4.15 Product Warranties; Defects; Liabilities. Each Company product or service has been in all material respects in conformity with all applicable contractual commitments and all applicable express and implied warranties. The Company does not have any liability or obligation (and to the Company's knowledge, there is no current reasonable basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand against the Company giving rise to any liability or obligation) for replacement or repair thereof or other damages in connection therewith except liabilities or obligations incurred in the Ordinary Course of Business which do not have a Material Adverse Effect on the Company. Except as disclosed in Schedule 4.15, no Company product or service is subject to any guaranty, warranty or other indemnity beyond the applicable standard terms and conditions of sale, license or lease or beyond that implied or imposed by applicable law. The Company has provided to Buyer a copy of the standard terms and conditions of sale, license or lease for each of the Company products and services and copies of the Company's standard forms of merchant agreements, portal agreements and professional services agreements.     4.16 Agreements, Contracts and Commitments. As of the date hereof, except as set forth on Schedule 4.16(a), the Company does not have, is not a party to nor is it bound by:     (a) any collective bargaining agreements;     (b) any employment or consulting agreement, contract or commitment with any officer, director, employee or member of the Company's Board of Directors, other than those that are terminable by the Company without liability of financial obligation of the Company;     (c) any employment or consulting agreement with an employee or individual consultant or salesperson or consulting or sales agreement, under which a firm or other organization provides services to the Company;     (d) any agreement or plan, including, without limitation, any stock option plan, stock appreciation rights plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement;     (e) any fidelity or surety bond or completion bond;     (f)  any lease of personal property having a value individually in excess of $5,000;     (g) any agreement of indemnification or guaranty other than standard indemnification terms contained in contracts with resellers and distributors and licensees of the Company's products;     (h) any agreement, contract or commitment containing any covenant limiting in any respect the right of Company to engage in any line of business or to compete with any person or granting any exclusive distribution rights;     (i)  any agreement relating to capital expenditures and involving future payments in excess of $5,000;     (j)  any agreement, contract or commitment currently in force relating to the disposition or acquisition by the Company after the date of this Agreement of a material amount of assets not in the Ordinary Course of Business or pursuant to which the Company has any ownership interest in any corporation, partnership, joint venture or other business enterprise; 19 --------------------------------------------------------------------------------     (k) any mortgages, indentures, loans or credit agreements, security agreements or other agreements or instruments relating to the borrowing of money or extension of credit, including guaranties referred to in clause (g) hereof;     (l)  any purchase order or contract involving $5,000 or more;     (m) any construction contracts;     (n) any dealer, distribution, joint marketing (including any pilot program), development, content provider, destination site or merchant agreement;     (o) any agreement pursuant to which the Company has granted or may be obligated to grant in the future, to any party a source-code license or option or other right to use or acquire source-code, including any agreements which provide for source code escrow arrangements;     (p) any sales representative, original equipment manufacturer, value added, remarketer or other agreement for distribution of the Company's products or services or the products or services of any other person or entity;     (q) any agreement pursuant to which the Company has advanced or loaned any amount to any shareholder of the Company or any director, officer, employee or consultant other than business travel advances in the ordinary course of business consistent with past practice;     (r) any settlement agreement entered into since January 1, 1997 that provides for continuing obligations of the Company; or     (s) any other agreement that involves $5,000 or more or is not cancelable without penalty within thirty (30) days. Except as set forth on Schedule 4.16(b), the Company has not breached, violated or defaulted under, or received notice that it has breached, violated or defaulted under, any of the terms or conditions of any agreement, contract or commitment required to be set forth on Schedule 4.16(a) or Schedule 4.14 (any such agreement, contract or commitment, a "Contract"). Each Contract is in full force and effect and, except as otherwise disclosed in Schedule 4.16(b), is not subject to any default thereunder of which the Company has knowledge by any party obligated to the Company pursuant thereto.     4.17 Interested Party Transactions. No employee, officer or director of the Company or member of his or her immediate family is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any of them. To the best of the Company's knowledge, none of such persons has any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation that competes with the Company. No member of the immediate family of any officer or director of the Company is directly or indirectly interested in any contract with the Company. There are no receivables of the Company owing by any director, officer, employee or consultant to the Company (or any ancestor, sibling, descendant, or spouse of any such persons, or any trust, partnership or corporation in which any of such persons has an economic interest), other than advances in the ordinary and usual course of business for reimbursable business expenses (as determined in accordance with the Company's established employee reimbursement policies and consistent with past practice). None of the Company shareholders has agreed to, or assumed, any obligation or duty to guaranty or otherwise assume or incur any obligation or liability of the Company.     4.18 Compliance with Laws. The Company is in compliance with each order, judgment and decree, and to its knowledge, each law, rule and regulation, applicable to the Company or by which its properties are bound or affected, except to the extent such non-compliance will not have a Material Adverse Effect. To the knowledge of the Company, no investigation or review by any governmental or regulatory body or authority is pending or threatened against the Company, nor has any governmental 20 -------------------------------------------------------------------------------- or regulatory body or authority indicated an intention to conduct the same, other than, in each such case, those the outcome of which could not, individually or in the aggregate, reasonably be expected to have the effect of prohibiting or impairing any business practice of the Company, any acquisition of property by the Company or the conduct of business by the Company.     4.19 Litigation. There is no action, suit or proceeding of any nature pending or to the Company's knowledge threatened against the Company, its properties or any of its officers, directors or employees (in their capacities as officers, directors or employees, as the case may be), nor, to the knowledge of the Company, is there any reasonable basis therefor. There is no investigation pending or, to the Company's knowledge, threatened against the Company, its properties or any of its officers, directors or employees (in their capacities as officers, directors or employees, as the case may be) by or before any Governmental Entity. No Governmental Entity has at any time challenged or questioned the legal right of the Company to conduct its operations as presently or previously conducted.     4.20 Insurance. With respect to the insurance policies and fidelity bonds covering the assets, business, equipment, properties, operations, employees, officers and directors of the Company, there is no claim by the Company pending under any of such policies or bonds as to which coverage has been denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid and the Company is otherwise in material compliance with the terms of such policies and bonds (or other policies and bonds providing substantially similar insurance coverage). The Company has no knowledge of any threatened termination of, or premium increase with respect to, any of such policies.     4.21 Minute Books. The minute books of the Company made available to Buyer and its counsel are the only minute books of the Company and contain an accurate summary of all meetings of directors (or committees thereof) and shareholders, in their respective capacities as such, or actions by written consent since the time of incorporation of the Company through the date hereof.     4.22 Environmental Matters. Except where the failure would not have a Material Adverse Effect, the Company (a) has obtained all applicable and material permits, licenses and other authorizations that are required under Environmental Laws; (b) to the Company's knowledge, is in compliance with all material terms and conditions of such required permits, licenses and authorizations, and also is in compliance with all other material limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in such laws or contained in any regulation, code, plan, order, decree, judgment, notice or demand letter issued, entered, promulgated or approved thereunder; (c) is not aware of and has not received notice of any event, condition, circumstance, activity, practice, incident, action or plan that is reasonably likely to interfere with or prevent continued compliance or that would give rise to any common law or statutory liability, or otherwise form the basis of any Environmental Claim with respect to the Company or any person or entity whose liability for any Environmental Claim the Company has retained or assumed either contractually or by operation of law; (d) has not disposed of, released, discharged or emitted any Hazardous Materials into the soil or groundwater at any properties owned or leased at any time by the Company, or at any other property, or exposed any employee or other individual to any Hazardous Materials or condition in such a manner as would result in any material liability or result in any corrective or remedial action obligation; and (e) has taken all actions necessary under Environmental Laws to register any products or materials required to be registered by the Company (or any of its agents) thereunder. To the Company's knowledge, no Hazardous Materials are present in, on or under (or, to the knowledge of the Company, in the vicinity of) any properties owned, leased or used at any time (including both land and improvements thereon) by the Company so as to give rise to any material liability or corrective or remedial obligation of the Company under any Environmental Laws. For the purposes of this Section 4.22, "Environmental Claim" means any notice, claim, act, cause of action or investigation by any person alleging potential liability (including potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property 21 -------------------------------------------------------------------------------- damages, personal injuries or penalties) arising out of, based on or resulting from (a) the presence, or release into the environment, of any Hazardous Materials or (b) any violation, or alleged violation, of any Environmental Laws. "Environmental Laws" means all federal, state, local and foreign laws and regulations relating to pollution or the environment (including ambient air, surface water, ground water, land surface or subsurface strata) or the protection of human health and worker safety, including, without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of Hazardous Materials, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials. "Hazardous Materials" means chemicals, pollutants, contaminants, wastes, toxic substances, radioactive and biological materials, asbestos-containing materials (ACM), hazardous substances, petroleum and petroleum products or any fraction thereof, excluding, however, Hazardous Materials contained in products typically used for office and janitorial purposes properly and safely maintained in accordance with Environmental Laws.     4.23 Brokers' and Finders' Fees. The Company has not incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby.     4.24 Employee Matters and Benefit Plans.     (a) Definitions. With the exception of the definition of "Affiliate" set forth in Section 4.24(a)(i) below (such definition shall only apply to this Section 4.24), for purposes of this Agreement, the following terms shall have the meanings set forth below:     (i)  "Affiliate" shall mean any other person or entity under common control with the Company within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations thereunder;     (ii) "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended;     (iii) "Company Employee Plan" shall refer to any plan, program, policy, practice, contract, agreement or other arrangement providing for compensation, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits or other employee benefits or remuneration of any kind, whether written or otherwise, funded or unfunded, including without limitation, each "employee benefit plan", within the meaning of Section 3(3) of ERISA which is or has been maintained, contributed to, or required to be contributed to, by the Company or any Affiliate for the benefit of any Employee (as defined below), or with respect to whether the Company has or may have any liability or obligation;     (iv) "DOL" shall mean the United States Department of Labor.     (v) "Employee" shall include any current, former or retired employee, officer, director or consultant of the Company or any Affiliate;     (vi) "Employee Agreement" shall include each management, employment, indemnification, severance, termination, consulting, relocation, repatriation, expatriation, visa, work permit or other agreement, contract or understanding between the Company or any Affiliate and any Employee;     (vii) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended;     (viii) "FMLA" shall mean the Family Medical Leave Act of 1993, as amended; 22 --------------------------------------------------------------------------------     (ix) "IRS" shall mean the Internal Revenue Service;     (x) "Multiemployer Plan" shall mean any "Pension Plan" (as defined below) which is a "multiemployer plan", as defined in Section 3(37) of ERISA; and     (xi) "Pension Plan" shall refer to each Company Employee Plan which is an "employee pension benefit plan", within the meaning of Section 3(2) of ERISA.     (b) Schedule. Schedule 4.24(b) contains an accurate and complete list of each Company Employee Plan and each Employee Agreement. The Company does not have any plan or commitment to establish any new Company Employee Plan or Employee Agreement, to modify any Company Employee Plan or Employee Agreement (except to the extent required by law or to conform any such Company Employee Plan or Employee Agreement to the requirements of any applicable law, in each case as previously disclosed to Parent in writing, or as required by this Agreement), or to enter into any Company Employee Plan or Employee Agreement nor does it have any intention or commitment to do any of the foregoing.     (c) Documents. The Company has provided or made available to Buyer (i) correct and complete copies of all documents embodying or relating to each Company Employee Plan and each Employee Agreement including, without limitation, all amendments thereto, all related trust documents and written interpretations thereof; (ii) the most recent annual actuarial valuations, if any, prepared for each Company Employee Plan; (iii) the three most recent annual reports (Series 5500 and all schedules and financial statements attached thereto), if any, required under ERISA or the Code in connection with each Company Employee Plan or related trust; (iv) if the Company Employee Plan is funded, the most recent annual and periodic accounting of Company Employee Plan assets; (v) the most recent summary plan description together with the most recent summary(ies) of material modifications thereto, if any, required under ERISA with respect to each Company Employee Plan; (vi) all IRS determination, opinion, notification and advisory letters and rulings relating to Company Employee Plans and copies of all applications and correspondence to or from the IRS, DOL or any other governmental agency with respect to any Company Employee Plan; (vii) all material written agreements and contracts relating to each Company Employee Plan, including, but not limited to, administrative service agreements, ERISA fidelity bonds, group annuity contracts and group insurance contracts; (viii) all communications material to any Employee or Employees relating to any Company Employee Plan and any proposed Company Employee Plans, in each case, relating to any amendments, terminations, establishments, increases or decreases in benefits, acceleration of payments or vesting schedules or other events which would result in any liability to the Company; (ix) all correspondence to or from any governmental agency relating to any Company Employee Plan; (x) all COBRA forms and related notices; (xi) all policies pertaining to fiduciary liability insurance covering the fiduciaries of for each Company Employee Plan; (xii) all discrimination tests for each Company Employee Plan for the most recent plan year; and (xiii) all registration statements, annual reports (Form 11-K and all attachments thereto) and prospectuses prepared in connection with each Company Employee Plan.     (d) Employee Plan Compliance. Except as set forth on Schedule 4.24(d), (i) the Company has performed in all material respects all obligations required to be performed by it under, is not in default or violation of, and has no knowledge of any default or violation of any other party to, each Company Employee Plan, and each Company Employee Plan has been established and maintained in all material respects in accordance with its terms and in compliance with all applicable laws, statutes, orders, rules and regulations, including but not limited to ERISA or the Code; (ii) each Company Employee Plan intended to qualify under Section 401(a) of the Code and each trust intended to qualify under Section 501(a) of the Code is qualified and has received a favorable determination letter from the IRS with respect to each such Company Employee Plan as to its qualified status under the Code, including all amendments to the Code required by the Tax 23 -------------------------------------------------------------------------------- Reform Act of 1986 and subsequent legislation, or has a period of time remaining under applicable Treasury regulations or IRS pronouncements in which to apply for such a letter and make any retroactive amendments necessary to obtain a favorable determination as to the qualified status of each such Company Employee Plan; (iii) no "prohibited transaction," within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred with respect to any Company Employee Plan; (iv) there are no actions, suits or claims pending, or, to the knowledge of the Company, threatened (other than routine claims for benefits) against any Company Employee Plan or against the assets of any Company Employee Plan; and (v) each Company Employee Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without liability to the Company, Parent or any of its Affiliates (other than ordinary administration expenses typically incurred in a termination event); (vi) there are no audits, inquiries or proceedings pending or, to the knowledge of the Company or any Affiliates, threatened by the IRS or DOL with respect to any Company Employee Plan; and (vii) neither the Company nor any Affiliate is subject to any penalty or tax with respect to any Company Employee Plan under Section 501(i) of ERISA or Section 4975 through 4980 of the Code.     (e) Pension Plans. Neither the Company nor any Affiliate has ever maintained, established, sponsored, participated in, or contributed to, any Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code, and no Pension Plan is a "top-heavy plan" within the meaning of Section 416 of the Code.     (f)  Multiemployer Plans. At no time has the Company or any Affiliate contributed to or been requested to contribute to any Multiemployer Plan.     (g) No Post-Employment Obligations. Except as set forth in Schedule 4.24(g), no Company Employee Plan provides, or reflects or represents any liability to provide, life insurance, health or other employee benefits to any person upon his or her retirement or termination of employment for any reason, except as may be required by statute, and the Company has never represented, promised or contracted (whether in oral or written form) to any Employee (either individually or to Employees as a group) that such Employee(s) or any other person would be provided with life insurance, health or other employee welfare benefits upon their retirement or termination of employment, except to the extent required by statute.     (h) COBRA. Neither the Company nor any Affiliate has, prior to the Effective Time, violated any of the health care continuation requirements of COBRA, the requirements of FMLA, the requirements of the Women's Healthcare Cancer Rights Act, the requirements of the Newborns' and Mothers' Health Protection Act of 1996 or any similar provisions of state law applicable to its Employees.     (i)  Effect of Transaction.     (i)  Except as set forth on Schedule 4.24(i)(i), the execution of this Agreement and the consummation of the transactions contemplated hereby will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Company Employee Plan, Employee Agreement, trust or loan that will or may result in any current or future payment (whether of severance or termination pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, indemnification, increase in benefits or obligation to fund benefits with respect to any Employee.     (ii) Except as set forth on Schedule 4.24(i)(ii), no payment or benefit which will or may be made by the Company or Parent or any of their respective affiliates with respect to any Employee resulting from the transactions contemplated by this Agreement or otherwise will be 24 -------------------------------------------------------------------------------- characterized as a "parachute payment", within the meaning of Section 280G(b)(2) of the Code.     (j)  Employment Matters. Schedule 4.24(j) lists all current officers, directors and employees of the Company as of the date hereof. The Company (i) to its knowledge, is in compliance in all material respects with all applicable foreign, federal, state and local laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to Employees (including any immigration laws with respect to the same); (ii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; and (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for Employees (other than routine payments to be made in the normal course of business and consistent with past practice). Schedule 4.24(j) also sets forth all outstanding offers of employment, whether written or oral, made to any employee or prospective employee, which offer has not been rejected by the offeree.     (k) Labor. No work stoppage or labor strike against the Company is pending, or to the Company's knowledge, threatened. The Company does not know of any activities or proceedings of any labor union to organize any Employees. Except as set forth in Schedule 4.24(k), there are no actions, suits, claims, labor disputes or grievances pending, or, to the knowledge of the Company, threatened relating to any labor, safety or discrimination matters involving any Employee, including, without limitation, charges of unfair labor practices or discrimination complaints, which, if adversely determined, would, individually or in the aggregate, result in any liability to the Company. The Company has not engaged in any unfair labor practices within the meaning of the National Labor Relations Act. Except as set forth in Schedule 4.24(k), the Company is not presently, nor has it been in the past, a party to, or bound by, any collective bargaining agreement or union contract with respect to Employees and no collective bargaining agreement is being negotiated by the Company.     (l)  No Interference or Conflict. To the knowledge of the Company, no shareholder, officer, employee or consultant of the Company is obligated under any contract or agreement subject to any judgment, decree or order of any court or administrative agency that would interfere with such person's efforts to promote the interests of the Company or that would interfere with the Company's business. Neither the execution nor delivery of this Agreement, nor the carrying on of the Company's business as presently conducted nor any activity of such officers, directors, employees or consultants in connection with the carrying on of the Company's business as presently conducted, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract or agreement under which any of such officers, directors, employees or consultants is now bound.     4.25 Bank Accounts. Schedule 4.25 constitutes a full and complete list of all the bank accounts and safe deposit boxes of the Company, the number of each such account or box, and the names of the persons authorized to draw on such accounts or to access such boxes. All cash in such accounts is held in demand deposits and is not subject to any restriction or documentation as to withdrawal.     4.26 Indemnification Obligations. The Company has no knowledge of any action, proceeding or other event pending or threatened against any officer or director of the Company that would give rise to any indemnification obligation of the Company to its officers and directors under its Certificate or Articles of Incorporation, Bylaws or any agreement between the Company and any of its officers or directors.     4.27 Representations Complete. None of the representations or warranties made by the Company herein (as modified by any Disclosure Schedules), nor any statement made in any Schedule or certificate furnished by the Company pursuant to this Agreement, (to the extent that such documents 25 -------------------------------------------------------------------------------- were prepared by or include information provided by the Company), contains or will contain, on and as of the Closing Date, any untrue statement of a material fact, or omits or will omit, on and as of the Closing Date, to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which made, not misleading. 5. Pre-Closing Covenants. The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing:     5.1 General. Each of the Parties will use its reasonable best efforts to take all action and to do all things necessary in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Section 7 below).     5.2 Notices and Consents. The Sellers will cause the Company to give any notices to third parties, and will cause the Company to use its reasonable best efforts to obtain any third party consents, necessary or advisable in order to consummate the transaction contemplated hereby. Each of the Parties will (and the Sellers will cause the Company to) give any notices to, make any filings with, and use its reasonable best efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies necessary or advisable in order to consummate the transaction contemplated hereby. Without limiting the generality of the foregoing, each of the Parties will file (and the Sellers will cause the Company to file) any Notification and Report Forms and related material that he or it may be required to file with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice under the Hart-Scott-Rodino Act, will use reasonable best efforts to obtain (and the Sellers will cause the Company to use its reasonable best efforts to obtain) a waiver from the applicable waiting period, and will make (and the Sellers will cause the Company to make) any further filings pursuant thereto that may be necessary, proper, or advisable in connection therewith.     5.3 Operation of Business. The Sellers will not cause or permit the Company to engage in any practice, take any action, or enter into any transaction (other than those contemplated by this Agreement) outside the Ordinary Course of Business. Without limiting the generality of the foregoing, the Sellers will not cause or permit the Company to (i) declare, set aside, or pay any dividend or make any distribution with respect to its capital stock or redeem, purchase, or otherwise acquire any of its capital stock, or (ii) grant any increase in the base compensation of the Sellers outside the Ordinary Course of Business.     5.4 Access. The Sellers will permit, and the Sellers will cause each of the Company and Hixson to permit, representatives of the Buyer to have access at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Company or Hixson, to all premises, properties, books, records (including tax records), contracts, and documents of or pertaining to the Company or Hixson; provided, however, that the Buyer shall not directly or indirectly have any discussions, contact or communication of any type with any employee, agent, representative, franchisee or customer of the Company or Hixson without the Sellers' prior written consent in each specific instance. The Buyer will treat and hold as such any Confidential Information it receives from any of the Sellers, the Company or Hixson in the course of the reviews contemplated by this Section, will not use any of the Confidential Information except in connection with this Agreement, and, if this Agreement is terminated for any reason whatsoever, will return to the Sellers and the Company all tangible embodiments (and all copies) of the Confidential Information which are in its possession.     5.5 Notice of Developments. Each Party will give prompt written notice to the others of any material adverse development causing a breach of any of his or its own representations and warranties in Section 3 or 4 above.     5.6 Exclusivity. The Sellers will not (and the Sellers will not cause or permit any of the Company to): (i) solicit, initiate, or encourage the submission of any proposal or offer from any Person relating 26 -------------------------------------------------------------------------------- to the acquisition of all or substantially all of the capital stock or assets of any of the Company (including any acquisition structured as a merger, consolidation, or share exchange) or (ii) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing.     5.7 Balance Sheet. On the day prior to the Closing Date, the Sellers shall deliver to the Buyer a draft of the Current Company Balance Sheet, which shall include a statement as to the amount of the Funded Debt and Working Capital, as determined by such balance sheet.     5.8 Hixson Agreement-Technology Sale Agreement; Royalty Agreements. Sellers agree to cause the Company to acquire substantially all of the assets of Hixson, including it Auto-DOC and Auto-PILOT product lines (the "Hixson Acquisition"), immediately prior to the Closing, in accordance with the terms set forth in the Hixson Asset Purchase Agreement attached hereto as Exhibit A (the "Hixson Agreement"). In addition, pursuant to the Technology Sale Agreement, certain source code owned by Mr. Hartsell shall be transferred to the Company simultaneously with the Closing and pursuant to an Assignment of Trademark, certain trademarks owned by Sellers, shall be transferred to the Company prior to the Closing. 6. Post-Closing Covenants. The Parties agree as follows with respect to the period following the Closing:     6.1 General. In case at any time after the Closing any further action is necessary to implement the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefor under Section 8 below).     6.2 Litigation Support. In the event and for so long as any Party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving the Company, each of the other Parties will cooperate with such Party and its counsel in the contest or defense, make available their personnel, and provide such testimony and access to their books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under Section 8 below).     6.3 Access to Records and Files. After the Closing Date, the Buyer will retain and preserve for five years or for the applicable statute of limitations with respect to tax matters, if longer, and, on any Seller's request and cost, make available to the Sellers during normal business hours for any proper purpose, any records relating to the Company's business prior to Closing. Additionally, the Buyer will, and will cause the Company to, permit the Sellers to make copies and extracts therefrom and will provide originals to the Sellers where reasonably required for any lawful purpose. The Buyer will not, and will cause the Company not to, dispose of or destroy such records without first giving the Sellers prior notice and a reasonable opportunity, at the Sellers' expense, to segregate and remove any of such records as any Seller may select. Notwithstanding the foregoing, the Buyer waives, and shall cause the Company to waive, any and all rights with respect to the Attorney Records, which the Buyer agrees will belong to the Sellers.     6.4 Sellers' Health and Welfare Benefits. The Buyer shall, and shall cause the Company to, maintain at a minimum the Company's current level of employee benefits as of the Closing Date, and the Buyer shall not, and shall cause the Company not to, adversely change, alter or modify in any way such employee benefits for six (6) months from the Closing Date without the Sellers' prior written consent. 27 --------------------------------------------------------------------------------     6.5 Company Operating Budget and Salaries. The Sellers acknowledge that the Company will become a product development Subsidiary of Buyer at the close of the transaction contemplated hereby. An initial draft of the budget for the Company's product development activities shall be submitted to Buyer prior to Closing. This budget shall cover expenses in the following areas: (a)salaries for technical and support staff; (b)technology seminars and conferences; (c)travel; and (d)technology and office supplies.     6.6 Royalty Agreements. On or before April 30, 2000, Sellers shall cause all outstanding royalty agreements relating to Hixson to be settled or terminated.     6.7 Non-Compete. Each Seller agrees that for a period of two years after the expiration of the term of Seller's Employment Agreement, or three years after the Closing Date, whichever is later, Seller shall not, directly or indirectly, within the United States, engage or participate or make any financial investments in, or become employed by, or act as an agent, consultant or principal of, or render advisory or other services to or for, any person, firm or corporation (other than Buyer) that is engaged, directly or indirectly, in the business of developing software for hand-held computers for use by physicians and other healthcare professionals which include those functionalities demonstrated to the Buyer on the PocketRx prototype, including without limitation, patient charting and billing and communicating and reporting among laboratories and pharmacies regarding patient information, or the business of developing, or selling end-user licenses of, software and hardware for hand-held and desktop computers for patient charting and health care reporting for chiropractors and similar medical practitioners (a "Competing Enterprise"). Nothing herein contained shall restrict Sellers from (a) engaging in the activities contemplated by the Stock Purchase Agreement, and (b) holding investments in not more than three percent of the voting securities of any Competing Enterprise whose stock is listed on a national securities exchange or is actively traded on the National Association of Securities Dealers Automated Quotation System, so long as in connection with such investments Sellers do not render services to a Competing Enterprise. Each Seller acknowledges that the chronologic, geographic and business restrictions set forth in this Section are reasonable in light of the competitive nature of the businesses of the Company and Buyer, and consents to the imposition thereof in order to induce Buyer to enter into this Agreement. 7. Conditions to Obligation to Close.     7.1 Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:     (a) the representations and warranties set forth in Section 3.1 and Section 4 above shall be true and correct in all material respects at and as of the Closing Date;     (b) the Company and the Sellers shall have performed and complied with all of their respective covenants under this Agreement in all material respects, including without limitation, all covenants relating to the Hixson Acquisition, through the Closing;     (c) the Sellers shall have delivered to the Buyer an Officer's Certificate to the effect that each of the conditions specified above in Section 7.1(a) and (b) is satisfied in all respects;     (d) the Company shall have procured any consents necessary for the consummation of the transactions set forth herein; 28 --------------------------------------------------------------------------------     (e) no action, suit, or proceeding shall be pending before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (C) affect adversely the right of the Buyer to own the Company Shares and to control the Company, or (D) affect materially and adversely the right of the Company to own its assets and to operate its businesses (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);     (f)  all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated and the Parties, the Company shall have received all other material authorizations, consents, and approvals of governments and governmental agencies referred to in Section 4.6 above;     (g) the Buyer shall have received the resignation(s) of all of the directors of the Company;     (h) the Buyer shall have received from counsel to the Sellers an opinion in form and substance as set forth in Exhibit B-1 attached hereto, addressed to the Buyer, and dated as of the Closing Date;     (i)  the Hixson Agreement and the Technology Sale Agreement shall have been fully executed and delivered to Buyer, together with any and all documents relating thereto, and the transactions contemplated in such Agreements shall have been fully consummated.     (j)  all actions to be taken by the Sellers in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer. The Buyer may waive any condition specified in this Section 7.1 if it executes a writing so stating at or prior to the Closing.     7.2 Conditions to Obligation of the Sellers. The obligation of the Sellers to consummate the transactions to be performed by them in connection with the Closing is subject to satisfaction of the following conditions:     (a) the representations and warranties set forth in Section 3.2 above shall be true and correct in all material respects at and as of the Closing Date;     (b) the Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing;     (c) the Buyer shall have delivered to the Sellers an Officer's Certificate to the effect that each of the conditions specified above in Section 7.2(a) and (b) is satisfied in all respects;     (d) no action, suit, or proceeding shall be pending before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);     (e) Sellers shall have received from counsel to Buyer an opinion in form and substance as set forth in Exhibit B-2 attached hereto, addressed to Sellers, and dated as of the Closing Date;     (f)  each of the Sellers shall have received from the Buyer an executed Employment Agreement in the form or substantially in the form of the attached as Exhibit C. 29 --------------------------------------------------------------------------------     (g) all actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Sellers. The Sellers may waive any condition specified in this Section 7.2 if they execute a writing so stating at or prior to the Closing. 8. Remedies for Breaches of this Agreement.     8.1 Survival of Representations and Warranties. All of the representations and warranties of the Sellers and of the Company contained in this Agreement shall survive the Closing hereunder (unless the Buyer knew of any misrepresentation or breach of warranty at the time of Closing) and shall continue in full force and effect for one year thereafter; provided, however, that (i) the representations and warranties of the Sellers and the Company contained in Sections 3.1(d) and 4.3 shall survive the Closing and shall continue in full force and effect until the expiration of any applicable statute of limitations; and (ii) the representations and warranties of the Sellers and the Company contained in Section 4.14 shall survive the Closing and shall continue in full force and effect for two years thereafter.     8.2 Indemnification Provisions for Benefit of the Buyer.     (a) In the event that: (i) the Sellers and/or the Company breach any of their representations, warranties, or covenants contained in this Agreement, or (ii) any Adverse Consequence is suffered by the Buyer or the Company as a result of any current or pending litigation disclosed on the schedules to the Hixson Agreement, or (iii) any party other than the Company breaches any representation, warranty or covenant contained in the Hixson Agreement or the Technology Sale Agreement, then the Sellers agree jointly and severally to indemnify the Buyer from and against any Adverse Consequences the Buyer or its affiliates may suffer through and after the date of the claim for indemnification (including any Adverse Consequences the Buyer or its affiliates may suffer after the end of any applicable survival period) resulting from, arising out of, relating to, in the nature of, or caused by the breach; provided, however, that (A)  the Sellers shall not have any obligation to indemnify the Buyer (x) from and against any Adverse Consequences amounting to less than $5,000 arising from a single breach or (y) until the Buyer has suffered Adverse Consequences by reason of all such breaches in excess of $25,000 in the aggregate (after which point the Sellers will be obligated to indemnify the Buyer for all of the Adverse Consequences without regard to such threshold), (B) the Sellers' maximum obligation to indemnify the Buyer from and against Adverse Consequences pursuant to this Agreement shall not exceed $7,000,000 and (C) the Sellers shall have no indemnity obligation related to any claim for indemnification that is not made by the Buyer to the Sellers in writing within one year of the Closing Date or, with respect to an indemnity claim arising from a breach of the representations and warranties in Section 3.1(d), 4.3 or 4.14, within the applicable survival period described in Section 8.1.     (b) Subject to the terms of the Escrow Agreement, the Holdback shall be available to Buyer and its affiliates in payment of any claim for indemnification under this Section 8.2.     8.3 Indemnification Provisions for Benefit of the Sellers. In the event the Buyer breaches any of its representations, warranties, or covenants contained in this Agreement, then the Buyer agrees to indemnify the Sellers from and against the entirety of any Adverse Consequences any Seller may suffer, through and after the date of the claim for indemnification resulting from, arising out of, relating to, in the nature of, or caused by the breach thereof on and after the Closing Date. The Buyer agrees to indemnify and reimburse the Sellers for all Adverse Consequences any Seller may suffer arising out of or relating to any liability or obligation of the Company reflected on the Financial Statements or assumed by the Buyer or the Company (other than liabilities or obligations which the Company failed 30 -------------------------------------------------------------------------------- to disclose in breach of its obligations under this Agreement) under this Agreement whether arising out of nonpayment or otherwise.     8.4 Matters Involving Third Parties.     (a) If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against any other Party (the "Indemnifying Party") under this Section 8, then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is prejudiced.     (b) Any Indemnifying Party will have the right to assume the defense of the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party at any time within 15 days after the Indemnified Party has given notice of the Third Party Claim; provided, however, that the Indemnifying Party must conduct the defense of the Third Party Claim actively and diligently thereafter in order to preserve its rights in this regard; and provided further that the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim.     (c) So long as the Indemnifying Party has assumed and is conducting the defense of the Third Party Claim in accordance with Section 8.4(b) above, (A) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld unreasonably) unless the judgment or proposed settlement involves only the payment of money damages by one or more of the Indemnifying Parties and does not impose an injunction or other equitable relief upon the Indemnified Party and (B) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld unreasonably).     (d) In the event none of the Indemnifying Parties assumes and conducts the defense of the Third Party Claim in accordance with Section 8.4(b) above, however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner he or it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith) and (B) the Indemnifying Parties will remain responsible for any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Section 8.     8.5 Determination of Adverse Consequences. The Parties shall make appropriate adjustments for tax consequences, insurance coverage, rate adjustments, indemnification agreements, and similar arrangements and take into account the time cost of money (using the Applicable Rate as the discount rate) in determining Adverse Consequences for purposes of this Section 8. The Buyer shall cause the Company to make reasonable efforts to enforce the indemnity provisions in the Hixson Agreement and the Technology Sale Agreement to mitigate any Adverse Consequences related to any claim for indemnity under this Agreement. All indemnification payments under this Section 8 shall be deemed adjustments to the Purchase Price.     8.6 Exclusive Remedy. The Buyer acknowledges and agrees that the foregoing indemnification provisions in this Section 8 shall be the sole and exclusive remedy of the Buyer for any inaccuracy or breach of the representations, warranties, or covenants in this Agreement of any Seller or the Company. 31 -------------------------------------------------------------------------------- 9. Cooperation on Tax Matters.     9.1 Pre-Closing Returns. Consistent with the Company's past elections and methods, Buyer shall prepare or cause to be prepared and file or cause to be filed any and all Tax Returns for the Company for all periods (i) ending on or before the Closing Date that are filed after the Closing Date (other than income Tax Returns with respect to periods for which a consolidated, unitary or combined income Tax Return of any Seller will include the operations of the Company) and (ii) beginning before the Closing Date and ending after the Closing Date. Buyer shall permit Sellers to review and comment on each such Tax Return described in the preceding sentence prior to filing and shall make such revisions to such Tax Returns as are reasonably requested by the Sellers.     9.2 Post-Closing Returns. Buyer, the Company and the Sellers shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns filed after the Closing Date and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon any Party's request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Company and the Sellers agree (i) to retain all books and records with respect to Tax matters pertinent to the Company relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Buyer or the Sellers, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (ii) to give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so requests, the Company or the Sellers, as the case may be, shall allow the other Party to take possession of such books and records.     9.3 Government Certificates. Buyer and the Sellers further agree, upon request, to use their reasonable best efforts to obtain any certificate or other document from any governmental authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not limited to, with respect to the transactions contemplated hereby).     9.4 Section 6043 Reports. Buyer and the Sellers further agree, upon request, to provide the other Parties with all information that any Party may be required to report pursuant to Section 6043 of the Code and all Treasury Department Regulations promulgated thereunder. 10. Termination.     10.1 Termination of Agreement. Certain of the Parties may terminate this Agreement as provided below:     (a) the Buyer and all of the Sellers, as a group, may terminate this Agreement by mutual written consent at any time prior to the Closing;     (b) the Buyer may terminate this Agreement by giving written notice to the Sellers at any time prior to the Closing (A) in the event the Company and/or the Sellers have breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Sellers of the breach, and the breach has continued without cure for a period of 30 days after the notice of breach or (B) if the Closing shall not have occurred on or before April 30, 2000, by reason of the failure of any condition precedent under Section 7.1 hereof (unless the failure results primarily from the Buyer itself breaching any representation, warranty, or covenant contained in this Agreement); and     (c) the Sellers, as a group, may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing (A) in the event the Buyer has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the 32 -------------------------------------------------------------------------------- Sellers have notified the Buyer of the breach, and the breach has continued without cure for a period of 30 days after the notice of breach or (B) if the Closing shall not have occurred on or before April 30, 2000, by reason of the failure of any condition precedent under Section 7.2 hereof (unless the failure results primarily from the Sellers themselves breaching any representation, warranty, or covenant contained in this Agreement).     10.2 Effect of Termination. If any Party terminates this Agreement pursuant to Section 10.1 above, all rights and obligations of the Parties under this Agreement shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach); provided, however, that the confidentiality provisions contained in Section 5.4 above shall survive termination. 11. Miscellaneous.     11.1 Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement prior to the Closing without the prior written approval of the Buyer and the Sellers.     11.2 No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns.     11.3 Entire Agreement. This Agreement (including the documents referred to in this Agreement) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they related in any way to the subject matter of this Agreement.     11.4 Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations under this Agreement without the prior written approval of the Buyer and the Sellers.     11.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.     11.6 Headings. The sections headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.     11.7 Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to the Sellers:   Bryan D. Hixson Harold Hartsell 3528 El Camino Real Atascadero, California 93422 Tel: (800) 884-8268 Fax: (805) 460-1928 Copy to:   Sinsheimer, Schiebelhut & Baggett Attention: M. Suzanne Fryer PO Box 31 1010 Peach Street San Luis Obispo, California 93506/93401 Tel: (805) 541-2800 Fax: (805) 541-2802 33 -------------------------------------------------------------------------------- If to the Buyer:   MedicaLogic, Inc. Attention: Annie Masullo, General Counsel 101 Green Street (@ Battery) San Francisco, CA 94111 Tel: (415) 678-3203 Fax: (415) 678-3300 Copy to:   Stoel Rives LLP Attention: Todd A. Bauman, Esq. 900 SW Fifth Avenue, Suite 2600 Portland, Oregon 97204-1268 Tel: (503) 294-9812 Fax: (503) 220-2480 Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner set forth in this Agreement.     11.8 Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of California without giving effect to any choice or conflict of law provision, rule or principle (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California.     11.9 Dispute Resolution. If a dispute arises from or relates to this Agreement or the breach of this Agreement and if such dispute cannot be settled through direct discussions, the Parties agree to first endeavor to settle the dispute in an amicable manner by mediation to be held in San Francisco, California under the Commercial Mediation Rules of the American Arbitration Association before resorting to arbitration. Thereafter, any unresolved controversy or claim arising from or relating to this Agreement, or breach of this Agreement, shall be settled by arbitration to be held in San Francisco, California. The arbitration will be governed by the Commercial Arbitration Rules of the American Arbitration Association, and the Parties shall be allowed discovery in accordance with the Federal Rules of Civil Procedure. In addition, in the event of a dispute between the Parties, Buyer agrees to provide Sellers with access to the Company's books and records or any of Buyer's books and records relating to the Company. If Buyer and the Sellers cannot jointly select a single arbitrator to determine the matter, one arbitrator shall be chosen by each of Buyer and the Sellers (or, if a party fails to make a choice, by the American Arbitration Association on behalf of such party) and the two arbitrators so chosen will select a third. The decision of the single arbitrator jointly selected by Buyer and the Sellers, or, if three arbitrators are selected, the decision of any two of them, will be final and binding on the parties and the judgment of a court of competent jurisdiction may be entered on such decision. Fees of the arbitrators and costs of arbitration shall be borne by Buyer and the Sellers in such manner as shall be determined by the arbitrator or arbitrators. The arbitrators shall prepare and provide to the parties a written decision on all matters subject to the arbitration, including factual findings and the reasons that form the basis of the arbitrators' decision. The arbitrator(s) shall not have the power to commit errors of law or legal reasoning, and the award of the arbitrator(s) shall be vacated or corrected for any such error or any other grounds specified in Code of Civil Procedure section 1286.2 or section 1286.6. The award of the arbitrators shall be mailed to the parties no later than thirty (30) days after the close of the arbitration hearing. The arbitration proceedings shall be reported by a certified shorthand court reporter. Written transcripts of the proceedings shall be prepared and made available to the parties. 34 --------------------------------------------------------------------------------     11.10 Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer, the Sellers and the Company. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.     11.11 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.     11.12 Expenses. Except for expenses and filing fees arising under or relating to the filings made under the Hart-Scott-Rodino Act, which the Buyer will incur, each of the Parties will bear its or its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. The Sellers agree that, after the date of this Agreement, the Company will bear any of the Sellers' costs and expenses (including any of its legal fees and expenses) incurred in connection with this Agreement or any of the transactions contemplated by this Agreement.     11.13 Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation.     11.14 Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated into this Agreement by reference and made a part of this Agreement.     [Signature page follows] 35 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date set forth in the preface to this Agreement. MEDICALOGIC, INC., an Oregon corporation     By: -------------------------------------------------------------------------------- Name: Title:     ANYWHEREMD.COM, INC., a California corporation By: -------------------------------------------------------------------------------- Name: Title:     SELLERS:     -------------------------------------------------------------------------------- Bryan D. Hixson     -------------------------------------------------------------------------------- Harold Hartsell     36 -------------------------------------------------------------------------------- QuickLinks TABLE OF CONTENTS LIST OF SCHEDULES AND EXHIBITS STOCK PURCHASE AGREEMENT

Exhibit 10.16(n) EMPLOYMENT AGREEMENT       This Employment Agreement (“Agreement”) is made and entered into by and between John Banas (“Executive”) and RURAL/METRO CORPORATION, its subsidiaries, affiliates, joint ventures and partnerships (“Rural/Metro”). The Effective Date of this Agreement is April 23, 2001. RECITALS   A.   The Board of Directors of Rural/Metro believes it is in the best interests of Rural/Metro to employ Executive as the Senior Vice President and General Counsel of Rural/Metro.     B.   Rural/Metro has decided to offer Executive an employment agreement, the terms and provisions of which are set forth below. NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED AS FOLLOWS:   1.   POSITION AND DUTIES.                    Executive will be employed as the Senior Vice President and General Counsel of Rural/Metro and shall report to the Chief Executive Officer and the Board of Directors of Rural/Metro (the “Board”). Executive shall perform the duties of his position, as determined by the Chief Executive Officer or his designee (“CEO”), in accordance with the policies, practices and bylaws of Rural/Metro. Executive also presently serves, and shall continue to serve, as the Assistant Secretary for the Company. For the duration of his employment, Executive shall be invited and entitled to attend all meetings of the Board of Directors.                   Executive shall serve Rural/Metro faithfully, loyally, honestly and to the best of his ability. Executive will devote his best efforts to the performance of his duties for, and in the business and affairs of, Rural/Metro.                   Rural/Metro reserves the right, in its sole discretion, to change or modify Executive’s position, title and duties during the term of this Agreement, subject to Executive’s rights under Section 7. 1 --------------------------------------------------------------------------------   2.   COMPENSATION.                   As of the Effective Date, Executive’s annual compensation will be Two Hundred and Forty Thousand Dollars ($240,000) (“Base Salary”). Executive’s Base Salary will be paid in substantially equal periodic installments, as determined by Rural/Metro. Executive’s Base Salary will be reviewed at least annually in accordance with Rural/Metro’s executive compensation review policies and practices, all as determined by the CEO, in his sole discretion.   3.   MANAGEMENT INCENTIVE PROGRAM.                   Executive shall be eligible to participate in the Rural/Metro Management Incentive Program (“MIP”) (or any other plan that is designated by the Board as replacing the MIP) and to receive such additional compensation as may be provided by the MIP from time to time.   4.   OTHER AGREEMENTS.                   Nothing in this Agreement is intended to alter or modify the Indemnity Agreement, the Stock Option Agreements or the Change of Control Agreement previously entered into by the parties, which shall continue in full force and effect following the execution of this Agreement.   5.   TERM AND TERMINATION.                   This Agreement will continue in full force and effect until it is terminated by the parties. This Agreement may be terminated in any of the following ways: (a) it may be renegotiated and replaced by a written agreement signed by both parties; (b) Rural/Metro may elect to terminate this Agreement with or without “Cause”, as defined below; (c) Executive may elect to terminate this Agreement with or without “Good Reason”, as defined below; or (d) either party may serve notice on the other of its desire to terminate this Agreement at the end of the “Initial Term” or any “Renewal Term”.                   The “Initial Term” of this Agreement shall expire by its terms two (2) years from the Effective Date, unless sooner terminated in accordance with the provisions of this 2 -------------------------------------------------------------------------------- Agreement. This Agreement will be renewed at the end of the Initial Term for additional one-year periods (a “Renewal Term”), unless either party serves notice of its desire not to renew or of its desire to modify this Agreement on the other. Such notice must be given at least forty-five (45) days before the end of the Initial Term or the applicable Renewal Term.                   If Rural/Metro notifies Executive of its desire not to renew this Agreement pursuant to this paragraph 5 and at the time of such notification Rural/Metro does not have “Cause” to terminate this Agreement pursuant to paragraph 6A, Executive shall receive Severance Benefits pursuant to paragraph 9.                   If Executive notifies Rural/Metro of his desire not to renew this Agreement pursuant to this paragraph 5 and at the time of such notification Executive has Good Reason to terminate this Agreement pursuant to paragraph 7A, Executive shall receive Severance Benefits pursuant to paragraph 9. Executive also shall receive Severance Benefits pursuant to paragraph 9 if Rural/Metro proposes to modify this Agreement in a manner that gives rise to Good Reason pursuant to paragraph 7A for Executive’s termination of employment and Executive rejects such proposed modifications. Severance Benefits will not be payable pursuant to the preceding sentence if Rural/Metro rescinds the proposed modifications and offers Executive a new agreement that does not include any proposed modifications that give rise to Good Reason for Executive’s termination of employment.   6.   TERMINATION BY RURAL/METRO.   A.   Termination For Cause.                               Rural/Metro may terminate this Agreement and Executive’s employment for Cause at any time upon written notice. This means that Rural/Metro has the right to terminate the employment relationship for Cause at any time should there be Cause to do so.                               For purposes of this Agreement, “Cause” shall be limited to discharge resulting from a determination by an affirmative vote of 75% of the members of the Board of 3 -------------------------------------------------------------------------------- Directors then in office that Executive: (a) has been convicted of (or has pleaded guilty or no contest to) a felony involving dishonesty, fraud, theft or embezzlement; (b) has repeatedly failed or refused, in a material respect to follow reasonable policies or directives established by Rural/Metro, if the failure or refusal has not been cured within thirty (30) days after Rural/Metro has provided written notice to Executive of the specific conduct constituting such failure or refusal; (c) has willfully and persistently failed or refused to attend to material duties or obligations imposed upon him under this Agreement, if the failure or refusal has not been cured within thirty (30) days after Rural/Metro has provided written notice to Executive of the specific conduct constituting such failure or refusal; or (d) has misrepresented or concealed a material fact for purposes of securing employment with Rural/Metro or this Employment Agreement.                               The existence of “Cause” shall not be determined until Executive has been given prior notice and an opportunity to be heard.                               Because Executive is in a position which involves great responsibilities, Rural/Metro is not required to utilize its progressive discipline policy. In addition, no generally applicable grievance policy shall apply to grievances by Executive regarding his employment relationship with Rural/Metro.                               If this Agreement and Executive’s employment is terminated for Cause, Executive shall receive no Severance Benefits.   B.   Termination Without Cause.                                Rural/Metro also may terminate this Agreement and Executive’ s employment without Cause at any time. In the event this Agreement and Executive’s employment are terminated by Rural/Metro without Cause, Executive shall receive Severance Benefits pursuant to paragraph 9. Rural/Metro may place Executive on a paid administrative leave, and bar or restrict Executive’s access to Rural/Metro facilities, contemporaneously with or at any time following the delivery of the written notice to Executive. 4 --------------------------------------------------------------------------------   7.   TERMINATION BY EXECUTIVE.                   Executive may terminate this Agreement and his employment with or without “Good Reason” in accordance with the provisions of this paragraph 7.   A.   Termination For Good Reason.                                Executive may terminate this Agreement and his employment for “Good Reason” by giving written notice to Rural/Metro within sixty (60) days, or such longer period as may be agreed to in writing by Rural/Metro, of Executive’s receipt of notice of the occurrence of any event constituting “Good Reason”, as described below.                                Executive shall have “Good Reason” to terminate this Agreement and his employment upon the occurrence of any of the following events: (a) Executive is assigned duties inconsistent with the positions, duties, responsibility and status of Senior Vice President and General Counsel of Rural/Metro; (b) Executive is required to relocate to an employment location that is more than fifty (50) miles from his current employment location (which the parties agree is Rural/Metro’s present Scottsdale headquarters); (c) Executive’s Base Salary rate is reduced to a level that is at least ten percent (10%) less than the salary paid to Executive during any prior calendar year, unless Executive has agreed to said reduction or unless Rural/Metro makes an across-the-board reduction that applies to all executives; or (d) the potential incentive compensation (or bonus) to which Executive may become entitled under the MIP at any level of performance by Executive or Rural/Metro is reduced by seventy-five percent (75%) or more as compared to any prior year.                                Notwithstanding the above provisions, Executive shall not have “Good Reason” to terminate this Agreement and his employment if, within thirty (30) days of the written notice of Good Reason provided to Rural/Metro by Executive, Rural/Metro corrects, remedies or reverses any event which resulted in Good Reason.                                If Executive terminates this Agreement and his employment for Good Reason, Executive shall be entitled to receive Severance Benefits pursuant to paragraph 9. 5 --------------------------------------------------------------------------------   B.   Termination Without Good Reason.                                Executive also may terminate this Agreement and his employment without Good Reason at any time by giving sixty (60) days notice to Rural/Metro. If Executive terminates this Agreement and his employment without Good Reason, Executive shall not receive Severance Benefits pursuant to paragraph 9.   C.   Administrative Leave.                                Rural/Metro may place Executive on a paid administrative leave, and bar or restrict Executive’s access to Rural/Metro facilities, contemporaneously with or at any time following the delivery of the written notice of termination by Executive pursuant to paragraph 7A or 7B.   8.   DEATH OR DISABILITY.                   This Agreement will terminate automatically on Executive’s death. Any compensation or other amounts due to Executive for services rendered prior to his death shall be paid to Executive’s surviving spouse, or if Executive does not leave a surviving spouse, to Executive’s estate. If Executive is receiving Severance Benefits at the time of his death, Executive’s Base Salary shall be paid to Executive’s surviving spouse, or if Executive does not leave a surviving spouse, to Executive’s estate, for the balance of the Severance Period (as defined in Section 9) remaining at the time of Executive’s death. In addition, if, at the time of his death, Executive is receiving Severance Benefits including the continuation of health insurance benefits (as described in Section 9), and Executive’s surviving spouse is covered by a group health insurance policy through Rural/Metro at the time of Executive’s death, the health insurance coverage of Executive’s surviving spouse shall continue throughout the balance of the Severance Period. No other benefits shall be payable to Executive’s heirs pursuant to this Agreement, but amounts may be payable pursuant to any life insurance or other benefit plans maintained by Rural/Metro. 6 --------------------------------------------------------------------------------                   In the event Executive becomes “Disabled”, Executive’s employment hereunder and Rural/Metro’s obligation to pay Executive’s Base Salary (less any amounts payable to Executive pursuant to any long-term disability insurance policy paid for by Rural/Metro) shall continue for a period of six (6) months from the date as of which Executive is determined to have become Disabled, at which point, Executive’s employment hereunder shall automatically cease and terminate. Executive shall be considered “Disabled” or to be suffering from a “Disability” for purposes of this paragraph 8 if Executive is unable, after any reasonable accommodations required by the Americans with Disabilities Act or other applicable law, to perform the essential functions of his position because of a physical or mental impairment. In the absence of agreement between Rural/Metro and Executive as to whether Executive is Disabled or suffering from a Disability (and the date as of which Executive became Disabled) will be determined by a licensed physician selected by Rural/Metro. If a licensed physician selected by Executive disagrees with the determination of the physician selected by Rural/Metro, the two (2) physicians shall select a third (3rd) physician. The decision of the third (3rd) physician concerning Executive’s Disability then shall be binding and conclusive on all interested parties.   9.   SEVERANCE BENEFITS.                   If during the Initial Term or any Renewal Term, this Agreement and Executive’s employment are terminated without Cause by Rural/Metro pursuant to paragraph 6B prior to the last day of the Initial Term or any Renewal Term, or if Executive elects to terminate this Agreement for Good Reason pursuant to paragraph 7A, Executive shall receive the “Severance Benefits” provided by this paragraph. To the extent provided in paragraph 5, Executive also shall receive the Severance Benefits if this Agreement is not renewed. In addition, Executive also shall receive the Severance Benefits if his employment is terminated due to Disability pursuant to paragraph 8. 7 --------------------------------------------------------------------------------                   The Severance Benefits shall begin immediately following the effective date of termination of employment and, except as otherwise provided herein, will continue to be payable for a period of twenty-four (24) months thereafter (the “Severance Period”).                   Executive’s Severance Benefits shall consist of the continuation of Executive’s then Base Salary for the duration of the Severance Period, which shall be paid in lieu of any payments otherwise due for accrued sick leave, vacation time, etc. The Severance Benefits also shall consist of the continuation of any health, life, disability, or other insurance benefits that Executive was receiving as of his last day of active employment for the duration of the Severance Period. If a particular insurance benefit may not be continued for any reason, Rural/Metro shall pay a “Benefit Allowance” to Executive. The “Benefit Allowance” will equal 145% of the cost to Rural/Metro of providing the unavailable insurance benefit to a similarly situated employee. The Benefit Allowance shall be paid on a monthly basis or in a single lump sum. The cost of providing the unavailable benefit to a similarly situated employee and whether the Benefit Allowance will be paid in monthly installments or in a lump sum will be determined by Rural/Metro in the exercise of its discretion.                   In addition, any stock options that are vested on the effective date of the termination of employment, but have not yet been exercised, shall remain fully vested and exercisable until ninety days after the last day of the Severance Period; provided, however, that if the exercise period relating to an incentive stock option granted in compliance with Section 422 of the Internal Revenue Code would be exceeded by application of the foregoing, then the incentive stock option shall be considered to be a non-qualified stock option.                   If Executive voluntarily terminates this Agreement and his employment without Good Reason prior to the end of the Initial Term or any Renewal Term, or if Rural/Metro terminates the Agreement and Executive’s employment for Cause, no Severance Benefits shall 8 -------------------------------------------------------------------------------- be paid to Executive. No Severance Benefits are payable in the event of Executive’s death while in the active employ of Rural/Metro.                   Severance Benefits shall immediately cease if Executive commits a material violation of any of the terms of this Agreement relating to confidentiality and non-disclosure, as set forth in paragraph 11, or the Covenant-Not-To-Compete, as set forth in paragraph 12. Only material violations will result in the loss of Severance Benefits.                   The payment of Severance Benefits shall not be affected by whether Executive seeks or obtains other employment. Executive shall have no obligation to seek or obtain other employment and Executive’s Severance Benefits shall not be impacted by Executive’s failure to “mitigate.”                   In order to receive the Severance Benefits, Executive must execute any release reasonably requested by Rural/Metro of claims that Executive may have in connection with his employment with Rural/Metro.   10.   BENEFITS.   A.   Benefit Plans, Insurance, Options, etc.                                Executive will be entitled to participate in any benefit plans, including, but not limited to, retirement plans, stock option plans, disability plans, life insurance plans and health and dental plans available to other Rural/Metro executive employees, subject to any restrictions (including waiting periods) specified in said plans.   B.   Vacation.                                 Executive is entitled to four (4) weeks of paid vacation per calendar year, with such vacation to be scheduled and taken in accordance with Rural/Metro’s standard vacation policies. If Executive does not take the full vacation available in any year, the unused vacation may not be carried over to the next calendar year, and Executive will not be compensated for it. 9 --------------------------------------------------------------------------------   11.   CONFIDENTIALITY AND NON-DISCLOSURE.                   During the course of his employment, Executive will become exposed to a substantial amount of confidential and proprietary information, including, but not limited to financial information, annual reports, audited and unaudited financial reports, operational budgets and strategies, methods of operation, customer lists, strategic plans, business plans, marketing plans and strategies, new business strategies, merger and acquisition strategies, management systems programs, computer systems, personnel and compensation information and payroll data, and other such reports, documents or information (collectively the “Confidential and Proprietary Information”). In the event his employment is terminated by either party for any reason, Executive promises that he will not take with him any copies of such Confidential and Proprietary Information in any form, format, or manner whatsoever (including computer print-outs, computer tapes, floppy disks, CD-ROMs, etc.) nor will he disclose the same in whole or in part to any person or entity, in any manner either directly or indirectly. Excluded from this Agreement is information that is already disclosed to third parties and is in the public domain or that Rural/Metro consents to be disclosed, with such consent to be in writing. The provisions of this paragraph shall survive the termination of this Agreement.   12.   COVENANT-NOT-TO-COMPETE.   A.   Interests to be Protected.                                 The parties acknowledge that during the term of his employment, Executive will perform essential services for Rural/Metro, its employees and shareholders, and for clients of Rural/Metro. Therefore, Executive will be given an opportunity to meet, work with and develop close working relationships with Rural/Metro’s clients on a first-hand basis and will gain valuable insight as to the clients’ operations, personnel and need for services. In addition, Executive will be exposed to, have access to, and be required to work with, a considerable amount of Rural/Metro’s Confidential and Proprietary Information. 10 --------------------------------------------------------------------------------                                 The parties also expressly recognize and acknowledge that the personnel of Rural/Metro have been trained by, and are valuable to Rural/Metro, and that if Rural/Metro must hire new personnel or retrain existing personnel to fill vacancies it will incur substantial expense in recruiting and training such personnel. The parties expressly recognize that should Executive compete with Rural/Metro in any manner whatsoever, it could seriously impair the goodwill and diminish the value of Rural/Metro’s business.                                 The parties acknowledge that this covenant has an extended duration; however, they agree that this covenant is reasonable and it is necessary for the protection of Rural/Metro, its shareholders and employees.                                 For these and other reasons, and the fact that there are many other employment opportunities available to Executive if he should terminate, the parties are in full and complete agreement that the following restrictive covenants (which together are referred to as the “Covenant-Not-To-Compete”) are fair and reasonable and are freely, voluntarily and knowingly entered into. Further, each party has been given the opportunity to consult with independent legal counsel before entering into this Agreement.   B.   Devotion to Employment.                                 Executive shall devote substantially all his business time and efforts to the performance of his duties on behalf of Rural/Metro. During his term of employment, Executive shall not at any time or place or to any extent whatsoever, either directly or indirectly, without the express written consent of Rural/Metro, engage in any outside employment, or in any activity competitive with or adverse to Rural/Metro’s business, practice or affairs, whether alone or as partner, officer, director, employee, shareholder of any corporation or as a trustee, fiduciary, consultant or other representative. This is not intended to prohibit Executive from engaging in nonprofessional activities such as personal investments or conducting to a reasonable extent private business affairs which may include other boards of directors’ activity, as long as they do 11 -------------------------------------------------------------------------------- not conflict with Rural/Metro. Participation to a reasonable extent in civic, social or community activities is encouraged.   C.   Non-Solicitation of Clients.                                 During the term of Executive’s employment with Rural/Metro and for a period of twenty-four (24) months after the termination of employment with Rural/Metro, regardless of who initiates the termination and for whatever reason, Executive shall not directly or indirectly, for himself, or on behalf of, or in conjunction with, any other person(s), company, partnership, corporation, or governmental entity, in any manner whatsoever, call upon, contact, encourage, handle or solicit client(s) of Rural/Metro with whom he has worked as an employee of Rural/Metro at any time prior to termination, or at the time of termination, for the purpose of soliciting or selling such customer the same, similar, or related services that he provided on behalf of Rural/Metro.   D.   Non-Solicitation of Employees.                                 During the term of Executive’s employment with Rural/Metro and for a period of twenty-four (24) months after the termination of employment with Rural/Metro, regardless of who initiates the termination and for any reason, Executive shall not knowingly, directly or indirectly, for himself, or on behalf of, or in conjunction with, any other person(s), company, partnership, corporation, or governmental entity, seek to hire, and/or hire any of Rural/Metro’s personnel or employees for the purpose of having such employee engage in services that are the same, similar or related to the services that such employee provided for Rural/Metro.   E.   Competing Business.                                 During the term of this Agreement and for a period of twenty-four (24) months after the termination of employment with Rural/Metro, regardless of who initiates the termination and for any reason, Executive shall not, directly or indirectly, for himself, or on 12 -------------------------------------------------------------------------------- behalf of, or in conjunction with, any other person(s), company, partnership, corporation, or governmental entity, in any manner whatsoever, engage in the same or similar business as Rural/Metro, which would be in direct competition with any Rural/Metro line of business, in any geographical service area where Rural/Metro is engaged in business, or was considering engaging in business at any time prior to the termination or at time of termination. For the purposes of this provision, the term “competition” shall mean directly or indirectly engaging in or having a substantial interest in a business or operation which is, or will be, performing the same services provided by Rural/Metro.   F.   Automatic Reduction of Period.                                 The twenty-four (24) month period referred to in subparagraphs C, D and E will be shortened to twelve (12) months if Executive is not entitled to receive Severance Benefits pursuant to paragraph 9 at the time of his termination or employment.   G.   Judicial Amendment.                                 If the scope of any provision of this Agreement is found by the Court to be too broad to permit enforcement to its full extent, then such provision shall be enforced to the maximum extent permitted by law. The parties agree that the scope of any provision of this Agreement may be modified by a judge in any proceeding to enforce this Agreement, so that such provision can be enforced to the maximum extent permitted by law. If any provision of this Agreement is found to be invalid or unenforceable for any reason, it shall not affect the validity of the remaining provisions of this Agreement.   H.   Injunctive Relief, Damages and Forfeiture.                                 Due to the nature of Executive’s position with Rural/Metro, and with full realization that a violation of this Agreement will cause immediate and irreparable injury and damage, which is not readily measurable, and to protect Rural/Metro’s interests, Executive understands and agrees that in addition to instituting legal proceedings to recover damages 13 -------------------------------------------------------------------------------- resulting from a breach of this Agreement, Rural/Metro may seek to enforce this Agreement with an action for injunctive relief, to cease or prevent any actual or threatened violation of this Agreement on the part of Executive.   I.   Survival.                               The provisions of this paragraph 12 shall survive the termination of this Agreement.   13.   DEFERRAL OF AMOUNTS PAYABLE UNDER THIS AGREEMENT.                   A payment due pursuant to this Agreement or the MIP may be deferred if and to the extent that the payment does not satisfy the requirements to be “qualified performance-based compensation” (as such term is defined by the regulations issued under Section 162(m) of the Internal Revenue Code of 1986 (the “Code”)) and when combined with all other payments received during the year that are subject to the limitations on deductibility under Section 162(m) of the Code, the payment exceeds the limitations on deductibility under Section 162(m) of the Code. The deferral of payments shall be in the discretion of the Compensation Committee of Rural/Metro, and shall be made pursuant to a Deferred Compensation Agreement or Plan acceptable to Rural/Metro and Executive. Such deferred amounts, with interest at the rate of 8% per annum, shall be paid as soon as possible but in no event later than the sixtieth (60th) day after the end of the next succeeding calendar year, provided that such payment, when combined with any other payments subject to the Section 162(m) limitations received during the year, does not exceed the limitations on deductibility under Section 162(m) of the Code. If the payments in such succeeding calendar year exceed the limitations on deductibility under Section 162(m) of the Code, such payments shall continue to be deferred to the next succeeding year. The above procedure shall be repeated until such payments can be paid without exceeding the limitation on deductibility under Section 162(m) of the Code. 14 --------------------------------------------------------------------------------   14.   BUSINESS EXPENSES.                   Rural/Metro will reimburse Executive for any and all necessary, customary, and usual expenses, properly receipted in accordance with Rural/Metro’s policies, incurred by Executive on behalf of Rural/Metro.   15.   AMENDMENTS.                   This Agreement, Executive’s Stock Option Agreements and Executive’s Change of Control Agreement constitute the entire agreement between the parties as to the subject matter hereof. Accordingly, there are no side agreements or verbal agreements other than those which are stated above. Any amendment, modification or change in this Agreement must be committed to in writing and signed by both parties.   16.   SEVERABILITY.                   In the event a court or arbitrator declares that any provision of this Agreement is invalid or unenforceable, it shall not affect or invalidate any of the remaining provisions. Further, the court shall have the authority to re-write that portion of the Agreement it deems unenforceable, to make it enforceable.   17.   GOVERNING LAW.                   The law of the State of Arizona shall govern the interpretation and application of all of the provisions of this Agreement.   18.   INDEMNITY                   Executive shall be indemnified in his position to the fullest extent permitted or required by the laws of the State of Delaware.   19.   DISPUTE RESOLUTION   A.   Mediation.                                 Any and all disputes arising under, pertaining to or touching upon this Agreement or the statutory rights or obligations of either party hereto, shall, if not settled by negotiation, be subject to non-binding mediation before an independent mediator selected by the 15 -------------------------------------------------------------------------------- parties pursuant to paragraph 19D. Notwithstanding the foregoing, both Executive and Rural/Metro may seek preliminary judicial relief if such action is necessary to avoid irreparable damage during the pendency of the proceedings described in this paragraph 19. Any demand for mediation shall be made in writing and served upon the other party to the dispute, by certified mail, return receipt requested, at the business address of Rural/Metro, or at the last known residence address of Executive, respectively. The demand shall set forth with reasonable specificity the basis of the dispute and the relief sought. The mediation hearing will occur at a time and place convenient to the parties in Maricopa County, Arizona, within thirty (30) days of the date of selection or appointment of the mediator.   B.   Arbitration.                                 In the event that the dispute is not settled through mediation, the parties shall then proceed to binding arbitration before a single independent arbitrator selected pursuant to paragraph 19D. The mediator shall not serve as arbitrator. TO THE EXTENT ALLOWABLE UNDER APPLICABLE LAW, ALL DISPUTES INVOLVING ALLEGED UNLAWFUL EMPLOYMENT DISCRIMINATION, BREACH OF CONTRACT OR POLICY, OR EMPLOYMENT TORT COMMITTED BY RURAL/METRO OR A REPRESENTATIVE OF RURAL/METRO, INCLUDING CLAIMS OF VIOLATIONS OF FEDERAL OR STATE DISCRIMINATION STATUTES OR PUBLIC POLICY, SHALL BE RESOLVED PURSUANT TO THIS POLICY AND THERE SHALL BE NO RECOURSE TO COURT, WITH OR WITHOUT A JURY TRIAL. The arbitration hearing shall occur at a time and place convenient to the parties in Maricopa County, Arizona, within thirty (30) days of selection or appointment of the arbitrator. If Rural/Metro has adopted a policy that is applicable to arbitrations with executives, the arbitration shall be conducted in accordance with said policy to the extent that the policy is consistent with this Agreement and the Federal Arbitration Act, 9 U.S.C. §§ 1-16. If no such policy has been adopted, the arbitration shall be governed by the 16 -------------------------------------------------------------------------------- National Rules for the Resolution of Employment Disputes of AAA in effect on the date of the first notice of demand for arbitration. The arbitrator shall issue written findings of fact and conclusions of law, and an award, within fifteen (15) days of the date of the hearing unless the parties otherwise agree.   C.   Damages.                                 In cases of breach of contract or policy, damages shall be limited to contract damages. In cases of discrimination claims prohibited by statute, the arbitrator may direct payment consistent with the applicable statute. In cases of employment tort, the arbitrator may award punitive damages if proved by clear and convincing evidence. The arbitrator may award fees to the prevailing party and assess costs of the arbitration to the non-prevailing party. Issues of procedure, arbitrability, or confirmation of award shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16, except that Court review of the arbitrator’s award shall be that of an appellate court reviewing a decision of a trial judge sitting without a jury.   D.   Selection of Mediators or Arbitrators.                                 The parties shall select the mediator or arbitrator from a panel list made available by the AAA. If the parties are unable to agree to a mediator or arbitrator within ten (10) days of receipt of a demand for mediation or arbitration, the mediator or arbitrator will be chosen by alternatively striking from a list of five (5) mediators or arbitrators obtained by Rural/Metro from AAA. Executive shall have the first strike.                                 IN WITNESS WHEREOF, Rural/Metro and Executive have executed this Agreement on this day of April 23, 2001.   RURAL/METRO CORPORATION   By: /s/ Jack Brucker                                                        Jack Brucker       Its: Chief Executive Officer   EXECUTIVE   /s/ John Banas                                                            17

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.45 LOGO [g864306.jpg] Office of the President and Chief Executive Officer December 28, 2000 Mr. Thomas Gallagher Park Place Entertainment Company 3930 Howard Hughes Parkway Las Vegas, NV 89109 Dear Tom: In light of your new position, your employment will terminate from Hilton Hotels Corporation ("Hilton") on December 31, 2000. In consideration for all of the valuable services you rendered to Hilton during your career, and in full satisfaction of any rights that you may have accrued under the Company's 1996 Stock Incentive Plan (the "Option Plan") and the Company's Supplemental Retirement and Retention Plan (the "SRRP"), the Company will agree to provide you with the exit arrangement summarized below. If this is acceptable to you, please so indicate in the space provided below. This letter will then serve as our agreement as to your continuing entitlements under the Option Plan and the SRRP and confirm that there are no other benefits or rights due to you under either such plan. You and Hilton hereby agree as follows: 1.  Hilton will take all steps necessary to cause the stock options granted to you under the Option Plan on January 13, 2000 (for 200,000 shares) to be fully vested and exercisable (at $9.21875 per share) until January 12, 2006. All other options granted to you under the Option Plan will terminate with your termination of employment on December 31, 2000. 2.  You were originally credited with an interest in 279,065 shares under the SRRP. Hilton will also take all stops necessary to cause 48% of your entitlement under the SRRP (133,951 shares) to vest and be distributable to you in accordance with the terms of the SRRP. The balance of your interest under the SRRP (145,114 shares) will be forfeited with your termination of employment on December 31, 2000. -------------------------------------------------------------------------------- Mr. Thomas Gallagher December 28, 2000 Page Two If the foregoing accurately sets forth your understanding of the agreement between Hilton and you, please so indicate in the space provided below in the copy of this letter attached and return the same to me for our files. This letter will then constitute a binding obligation of both you and Hilton as to the matters described above. Sincerely yours, SIGNATURE [g618669.jpg] Hilton Hotels Corporation By: Stephen F. Bollenbach This letter accurately sets forth my agreement with Hilton Hotels Corporation as to the matters described. SIGNATURE [g376123.jpg] -------------------------------------------------------------------------------- Thomas Gallagher -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.45

EXHIBIT 10.51   MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, ENFORCEMENT OF THIS MORTGAGE IS LIMITED TO A DEBT AMOUNT OF $6,325,000.00 UNDER CHAPTER 287 OF MINNESOTA STATUTES. THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING (this “Mortgage”) is dated as of the 12th day of October, 2001, and is made by VISION-EASE LENS, INC., a Minnesota corporation (“Mortgagor”), in consideration of the premises and covenants hereinafter set forth to BANKERS TRUST COMPANY, a New York banking corporation (“Mortgagee”), not individually, but solely in its capacity as Administrative Agent pursuant to the Credit Agreement (defined below). W I T N E S S E T H: WHEREAS, BMC Industries, Inc. (the “Borrower”), Mortgagee, NBD Bank, as documentation agent, and certain Lenders have entered into that certain Credit Agreement dated as of May 15, 1998 (the “Original Credit Agreement”), as the same was amended and restated as of June 25, 1998, and as was amended from time to time thereafter prior to the date hereof (as so amended, the “First Amended and Restated Credit Agreement”); WHEREAS, pursuant to that certain Second Amendment and Restatement Agreement, dated as of the date hereof, the First Amended and Restated Credit Agreement was further amended (as used herein, the term “Credit Agreement” means the First Amended and Restated Credit Agreement, as in effect on the date hereof and as amended by that certain Second Amendment and Restatement Agreement described above, as the same may be amended, modified, extended, renewed, replaced, restated or supplemented from time to time, and including any agreement extending the maturity of or restructuring of all or any portion of the Indebtedness under such agreement or any successor agreements), and the financial institutions party thereto have severally agreed to make certain extensions of credit to or for the benefit of Borrower upon the terms and conditions set forth therein; WHEREAS, the Mortgagor is a Domestic Subsidiary of the Borrower; WHEREAS, in connection with the extensions of credit contemplated by the Original Credit Agreement, Mortgagor executed and delivered to Mortgagee that certain Subsidiary Guarantee Agreement dated as of May 15, 1998 (as amended, modified, supplemented, extended or renewed from time to time, the “Subsidiary Guarantee Agreement”); WHEREAS, the proceeds of the extensions of credit to be made under the Credit Agreement have been or will be used in part to enable the Borrower to make valuable transfers to Mortgagor in connection with the operation of its business; WHEREAS, the Borrower and the Mortgagor are engaged in related businesses, and Mortgagor will derive substantial direct and indirect benefit from the transactions contemplated by the Credit Agreement; WHEREAS, pursuant to the terms of the Credit Agreement, the obligations of Mortgagor under the Subsidiary Guarantee Agreement shall be secured by, among other things, a lien upon and perfected security interest in all estate, right, title and interest of the Mortgagor in and to the Mortgaged Property (as hereinafter defined) pursuant to the terms hereof; WHEREAS, it is a condition precedent to the making of the loans under the Credit Agreement that Mortgagor execute and deliver to Mortgagee this Mortgage; WHEREAS, Mortgagor is, or in the case of Mortgaged Property hereafter acquired will be, the owner of the Mortgaged Property; WHEREAS, capitalized terms used but not defined in this Mortgage have the meanings given them in the Subsidiary Guarantee Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Mortgagor agrees that to secure the prompt and complete payment and performance when due of all obligations and liabilities of Mortgagor which may arise under the Subsidiary Guarantee Agreement (the “Guaranteed Obligations”), the Mortgagor does hereby MORTGAGE, GRANT, BARGAIN, SELL, ASSIGN, WARRANT, TRANSFER and CONVEY unto the Mortgagee, its successors and assigns, forever, its fee simple interest in all the tracts or parcels of land (hereinafter called the “Land”), located in Anoka County, Minnesota, and described in Exhibit A attached hereto and made a part hereof, together with all right, title and interest of Mortgagor (including, but not limited to, after acquired title or reversion) in and to the following property:  (i) all of the buildings, structures and other improvements now standing or at any time hereafter constructed or placed upon the Land and all materials intended for construction, reconstruction, alteration and repair of all such buildings and improvements; and (ii) all lighting, heating, ventilating, air–conditioning, sprinkling and plumbing fixtures, water and power systems, engines and machinery, boilers, furnaces, oil burners, elevators and motors, communication systems, dynamos, transformers, electrical equipment and all other fixtures, equipment, goods, inventory, systems and articles of every description located in or on, or used, or intended to be used in connection with the Land or any building now or hereafter located thereon and any replacements thereof, accessions thereto and all proceeds thereof (excluding, however, fixtures owned by tenants occupying space in any building now or hereafter located on the Land); and (iii) all tenements, hereditaments, easements, appurtenances, riparian rights, rents, issues, profits, condemnation awards, mineral rights and water rights now or hereafter belonging or in any way pertaining to the Land or to any building now or hereafter located thereon, together with all estates, interests, rights, titles, claims or demands which Mortgagor now has or may hereinafter acquire in the Land, including, but not limited to, any and all claims, awards, proceeds or payments, including interest thereon, and the right to receive the same, which may be made to or for the account of Mortgagor with respect to the Land as a result of (A) the exercise of the right of eminent domain, (B) the alteration of the grade of any street, (C) any casualty or loss of or damage to any building or other improvement included in or on the Land, (D) any other injury to or decrease in the value of the Land, or (E) any refund due on account of the payment of real estate taxes, assessments or other charges levied against or imposed upon the Land; and (iv) all furniture, furnishings, maintenance equipment and all other personal property now or hereafter located in, or on, or used, or intended to be used in connection with the Land or any building now or hereafter located thereon and all replacements and additions thereto (excluding personal property owned by tenants occupying space in any building now or hereafter located on the Land); and (v) all leases, lettings, subleases, agreements for use and occupancy, concessions, licenses and contracts of or with respect to any or all of the Land, whether written or oral (collectively, “Leases”), and (A) all rents, issues and profits thereof accruing and to accrue from the Land and the avails thereof (which are pledged primarily and on a parity with said Land and not secondarily), (B) any and all guarantees of any and all covenants, agreements and obligations of tenants under each Lease, (C) all sums which may be due and payable under any guaranty of any Lease, including, but not limited to, all such rents, issues, profits which are or may become due and payable (including those which are or may accrue or be paid during or after the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) and (D) any and all security and other deposits made pursuant to or contemplated by the terms and provisions of each Lease (the matters referred to in clauses (A), (B), (C) and (D) above being collectively, “Rents”); it being the intention hereby to establish an absolute, unconditional and presently effective transfer and assignment of all Leases and all Rents thereunder (and not merely a security interest) and it shall not be necessary for Mortgagee to institute any type of legal proceedings or take any other legal action whatsoever to enforce the assignment provisions of this paragraph; and (vi) all after-acquired interests in and all additions, accessions, increases, parts, fittings, accessories, replacements, substitutions, betterments, repairs and proceeds to any and all of the foregoing together with all books and records (including computer records) relating to or employed in any business now or hereafter operated on the Land (all of the foregoing, together with the Land, are hereinafter referred to as the “Mortgaged Property”). To have and to hold the Mortgaged Property together with Mortgagor’s rents, issues and profits, unto the Mortgagee, its successors and assigns, forever, upon the terms and conditions set forth herein. The Mortgagor represents, warrants and covenants to and with the Mortgagee that it is lawfully seized of the Mortgaged Property in fee simple and has good right and full power and authority under all applicable provisions of law and under its governing documents to execute this Mortgage and to mortgage the Mortgaged Property; that the Mortgaged Property is free from all liens, security interests and encumbrances except as listed in Schedule B of the Mortgage Policy (as defined in the Credit Agreement); that the Mortgagor will warrant and defend the title to the Mortgaged Property and the lien and priority of this Mortgage against all claims and demands of all persons whomsoever, whether now existing or hereafter arising, not listed in the Mortgage Policy.  The covenants and warranties of this paragraph shall survive foreclosure of this Mortgage and shall run with the Land. The Mortgagor further covenants and agrees as follows: 1.             PAYMENT OF THE GUARANTEED OBLIGATIONS.  THE MORTGAGOR WILL DULY AND PUNCTUALLY SATISFY THE GUARANTEED OBLIGATIONS, WHEN AND AS DUE AND PAYABLE PER THE SUBSIDIARY GUARANTEE AGREEMENT. 2.             PAYMENT OF TAXES, ASSESSMENTS AND OTHER CHARGES.  SUBJECT TO PARAGRAPH 7 RELATING TO CONTESTS, THE MORTGAGOR SHALL PAY WHEN DUE ALL TAXES AND ASSESSMENTS AND ALL OTHER CHARGES WHATSOEVER LEVIED UPON OR ASSESSED OR PLACED AGAINST THE MORTGAGED PROPERTY, EXCEPT THAT ASSESSMENTS MAY BE PAID IN INSTALLMENTS SO LONG AS NO FINE OR PENALTY IS ADDED TO ANY INSTALLMENT FOR THE NONPAYMENT THEREOF, AND WILL UPON DEMAND FURNISH TO MORTGAGEE PROOF OF SUCH PAYMENT.  THE MORTGAGOR SHALL LIKEWISE PAY ANY AND ALL GOVERNMENTAL LEVIES OR ASSESSMENTS SUCH AS MAINTENANCE CHARGES, OWNER ASSOCIATION DUES OR CHARGES OR FEES, LEVIES OR CHARGES RESULTING FROM COVENANTS, CONDITIONS AND RESTRICTIONS AFFECTING THE MORTGAGED PROPERTY, WHICH ARE ASSESSED OR IMPOSED UPON THE MORTGAGED PROPERTY OR ANY PART THEREOF OR BECOME DUE AND PAYABLE, AND WHICH CREATE, MAY CREATE OR APPEAR TO CREATE A LIEN UPON THE MORTGAGED PROPERTY, OR ANY PART THEREOF.  THE MORTGAGOR SHALL LIKEWISE PAY ALL TAXES, ASSESSMENTS AND OTHER CHARGES, LEVIED UPON OR ASSESSED, PLACED OR MADE AGAINST, OR MEASURED BY, THIS MORTGAGE, OR THE RECORDATION HEREOF, OR THE GUARANTEED OBLIGATIONS.  IN THE EVENT OF ANY LEGISLATIVE ACTION OR JUDICIAL DECISION AFTER THE DATE OF THIS MORTGAGE, IMPOSING UPON THE MORTGAGEE THE OBLIGATION TO PAY ANY SUCH TAXES, ASSESSMENTS OR OTHER CHARGES, OR DEDUCTING THE AMOUNT SECURED BY THIS MORTGAGE FROM THE VALUE OF THE MORTGAGED PROPERTY FOR THE PURPOSE OF TAXATION, OR CHANGING IN ANY WAY THE LAWS NOW IN FORCE FOR THE TAXATION OF MORTGAGES, DEEDS OF TRUST OR DEBTS SECURED THEREBY, OR THE MANNER OF THE OPERATION OF ANY SUCH TAXES SO AS TO AFFECT THE INTERESTS OF THE MORTGAGEE, THEN, AND IN SUCH EVENT, THE MORTGAGOR SHALL BEAR AND PAY THE FULL AMOUNT OF SUCH TAXES, ASSESSMENTS OR OTHER CHARGES.  MORTGAGOR WILL, UPON WRITTEN REQUEST OF THE MORTGAGEE, FURNISH PROPER RECEIPTS EVIDENCING PAYMENTS MADE PURSUANT TO THIS PARAGRAPH 2.  UPON MORTGAGOR’S FAILURE TO PAY THE TAXES AND ASSESSMENTS AS PROVIDED ABOVE, MORTGAGEE IS HEREBY AUTHORIZED TO MAKE OR ADVANCE, IN THE PLACE AND STEAD OF MORTGAGOR, ANY PAYMENT RELATING TO SUCH TAXES AND ASSESSMENTS, UNLESS SUCH TAXES AND ASSESSMENTS ARE THEN BEING CONTESTED BY MORTGAGOR PURSUANT TO PARAGRAPH 7 HEREOF.  MORTGAGOR FURTHER COVENANTS TO HOLD HARMLESS AND AGREES TO INDEMNIFY MORTGAGEE, ITS SUCCESSORS OR ASSIGNS, AGAINST ANY LIABILITY INCURRED BY REASON OF THE IMPOSITION OF ANY MORTGAGE REGISTRATION TAX OR SIMILAR TAX ON THE ISSUANCE OF THE SUBSIDIARY GUARANTY AGREEMENT OR THE RECORDING OF THIS MORTGAGE. 3.             PAYMENT OF UTILITY CHARGES.  SUBJECT TO PARAGRAPH 7 RELATING TO CONTESTS, THE MORTGAGOR SHALL PAY ALL CHARGES (EXCLUSIVE OF CHARGES WHICH ARE THE OBLIGATIONS OF TENANTS, IF ANY, TO PAY) MADE BY UTILITY COMPANIES, WHETHER PUBLIC OR PRIVATE, FOR ELECTRICITY, GAS, HEAT, WATER, OR SEWER, FURNISHED OR USED IN CONNECTION WITH THE MORTGAGED PROPERTY OR ANY PART THEREOF, AND WILL, UPON WRITTEN REQUEST OF THE MORTGAGEE, FURNISH PROPER RECEIPTS EVIDENCING SUCH PAYMENT. 4.             LIENS.  SUBJECT TO PARAGRAPH 7 RELATING TO CONTESTS, THE MORTGAGOR SHALL NOT CREATE, INCUR OR SUFFER TO EXIST ANY LIEN, ENCUMBRANCE OR CHARGE ON THE MORTGAGED PROPERTY OR ANY PART THEREOF OTHER THAN PERMITTED LIENS AND PERMITTED REAL PROPERTY ENCUMBRANCES.  THE MORTGAGOR SHALL PAY, WHEN FIRST DUE, THE CLAIMS OF ALL PERSONS SUPPLYING LABOR OR MATERIALS TO OR IN CONNECTION WITH THE MORTGAGED PROPERTY. 5.             COMPLIANCE WITH LAWS.  SUBJECT TO PARAGRAPH 7 RELATING TO CONTESTS, THE MORTGAGOR SHALL COMPLY WITH ALL PRESENT AND FUTURE STATUTES, LAWS, RULES, ORDERS, REGULATIONS AND ORDINANCES AFFECTING THE MORTGAGED PROPERTY, ANY PART THEREOF OR THE USE THEREOF. 6.             HAZARDOUS SUBSTANCES.  THE MORTGAGOR SHALL NOT USE, OR PERMIT THE USE OF, THE MORTGAGED PROPERTY FOR THE HANDLING, STORAGE, TRANSPORTATION, MANUFACTURE, RELEASE OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES.  IN ADDITION, THE MORTGAGOR SHALL NOT INSTALL OR MAINTAIN, OR PERMIT THE INSTALLATION OR MAINTENANCE OF, ANY ABOVE-GROUND OR UNDERGROUND STORAGE TANKS FOR THE STORAGE OF PETROLEUM, PETROLEUM BY–PRODUCTS OR OTHER HAZARDOUS SUBSTANCES IN, ABOUT OR UNDER THE MORTGAGED PROPERTY UNLESS (A) THE MORTGAGOR HAS OBTAINED THE PRIOR WRITTEN CONSENT OF THE MORTGAGEE FOR SUCH INSTALLATION AND MAINTENANCE AND (B) THE MORTGAGOR INSTALLS AND MAINTAINS SUCH ABOVE–GROUND OR UNDERGROUND STORAGE TANKS IN COMPLIANCE WITH ALL APPLICABLE ENVIRONMENTAL LAWS.  NOTWITHSTANDING THE FOREGOING, THE MORTGAGOR OR ANY TENANT OF THE MORTGAGOR MAY USE OR STORE IMMATERIAL AMOUNTS OF COMMONLY KNOWN AND USED MATERIALS WHICH MAY BE DEEMED HAZARDOUS SUBSTANCES HEREUNDER, PROVIDED THAT ANY SUCH USE OR STORAGE (I) DOES NOT CONSTITUTE A REMUNERATIVE ACTIVITY OF THE MORTGAGOR OR ANY TENANT, (II) IS INCIDENTAL TO THE MORTGAGOR’S OR SUCH TENANT’S PRIMARY USE OF THE MORTGAGED PROPERTY AND DOES NOT CONSTITUTE A PRIMARY USE THEREOF, AND (III) COMPLIES AT ALL TIMES WITH ALL APPLICABLE ENVIRONMENTAL LAWS.  “HAZARDOUS SUBSTANCES” MEANS ANY CONTAMINANT (AS DEFINED IN THE CREDIT AGREEMENT), ASBESTOS, UREAFORMALDEHYDE, POLYCHLORINATED BIPHENYLS, NUCLEAR FUEL OR MATERIAL, CHEMICAL WASTE, RADIOACTIVE MATERIAL, EXPLOSIVES, KNOWN CARCINOGENS, PETROLEUM PRODUCTS AND BY–PRODUCTS AND OTHER DANGEROUS, TOXIC OR HAZARDOUS POLLUTANTS, CONTAMINANTS, CHEMICALS, MATERIALS OR SUBSTANCES LISTED OR IDENTIFIED IN, OR REGULATED BY, ANY ENVIRONMENTAL LAWS.  EACH OF THE AGREEMENTS SET FORTH IN SECTION 7.9 OF THE CREDIT AGREEMENT ARE HEREBY INCORPORATED BY REFERENCE HEREIN WITH THE SAME EFFECT AS IF SUCH AGREEMENTS HAD BEEN SET FORTH HEREIN. 7.             PERMITTED CONTESTS.  THE MORTGAGOR SHALL NOT BE REQUIRED TO (A) PAY ANY TAX, ASSESSMENT OR OTHER CHARGE REFERRED TO IN PARAGRAPH 2 HEREOF, (B) PAY ANY CHARGE REFERRED TO IN PARAGRAPH 3 HEREOF, (C) DISCHARGE OR REMOVE ANY LIEN, ENCUMBRANCE OR CHARGE REFERRED TO IN PARAGRAPH 4 HEREOF, OR (D) COMPLY WITH ANY STATUTE, LAW, RULE, REGULATION OR ORDINANCE REFERRED TO IN PARAGRAPH 5 HEREOF, SO LONG AS THE MORTGAGOR SHALL (I) CONTEST, IN GOOD FAITH AND WITH REASONABLE DILIGENCE, THE EXISTENCE, AMOUNT OR THE VALIDITY THEREOF, THE AMOUNT OF DAMAGES CAUSED THEREBY OR THE EXTENT OF ITS LIABILITY THEREFOR, BY APPROPRIATE PROCEEDINGS WHICH SHALL OPERATE DURING THE PENDENCY THEREOF TO PREVENT (A) THE COLLECTION OF, OR OTHER REALIZATION UPON THE TAX, ASSESSMENT, CHARGE OR LIEN, ENCUMBRANCE OR CHARGE SO CONTESTED AND (B) ANY INTERFERENCE WITH THE USE OR OCCUPANCY OF THE MORTGAGED PROPERTY OR ANY PART THEREOF, AND (II) SHALL GIVE SUCH SECURITY TO THE MORTGAGEE AS MAY BE DEMANDED BY THE MORTGAGEE TO ENSURE COMPLIANCE WITH THE FOREGOING PROVISIONS OF THIS PARAGRAPH 7.  MORTGAGOR SHALL PAY ANY SUCH CONTESTED AMOUNT IF SUCH PAYMENT IS REQUIRED TO PREVENT SUCH CONTEST FROM HAVING THE EFFECT OF PREVENTING THE SALE OR FORFEITURE OF THE MORTGAGED PROPERTY OR ANY PART THEREOF.  THE MORTGAGOR SHALL GIVE WRITTEN NOTICE TO THE MORTGAGEE PRIOR TO THE COMMENCEMENT OF ANY CONTEST REFERRED TO IN THIS PARAGRAPH 7. 8.             INSURANCE; CASUALTY.  THE MORTGAGOR, AT ITS SOLE COST AND EXPENSE, WILL MAINTAIN INSURANCE COVERAGE WITH RESPECT TO THE MORTGAGED PROPERTY OF THE TYPES AND IN THE AMOUNTS REQUIRED BY THE CREDIT AGREEMENT.  IF THE MORTGAGED PROPERTY SHALL BE DAMAGED OR DESTROYED IN WHOLE OR IN PART BY CASUALTY, MORTGAGOR SHALL GIVE PROMPT WRITTEN NOTICE TO MORTGAGEE GENERALLY DESCRIBING THE NATURE AND EXTENT OF SUCH CASUALTY, AND ALL INSURANCE PROCEEDS TO WHICH MORTGAGOR MAY BE ENTITLED AS A RESULT OF SUCH CASUALTY SHALL BE DISTRIBUTED AND APPLIED IN ACCORDANCE WITH THE CREDIT AGREEMENT. 9.             CONDEMNATION.  IF ANY PROCEEDING IN EMINENT DOMAIN IS COMMENCED WITH RESPECT TO THE MORTGAGED PROPERTY, OR ANY PORTION THEREOF, MORTGAGOR SHALL GIVE PROMPT WRITTEN NOTICE THEREOF TO MORTGAGEE, AND ALL CONDEMNATION AWARDS TO WHICH MORTGAGOR MAY BE ENTITLED AS A RESULT OF SUCH CASUALTY SHALL BE DISTRIBUTED AND APPLIED IN ACCORDANCE WITH THE CREDIT AGREEMENT. 10.           PRESERVATION AND MAINTENANCE OF THE MORTGAGED PROPERTY.  THE MORTGAGOR (A) SHALL KEEP THE BUILDINGS AND OTHER IMPROVEMENTS NOW OR HEREAFTER ERECTED ON THE LAND IN SAFE AND GOOD REPAIR AND CONDITION, ORDINARY WEAR AND TEAR EXCEPTED; (B) SHALL, UPON DAMAGE TO OR DESTRUCTION OF THE MORTGAGED PROPERTY OR ANY PART THEREOF BY FIRE OR OTHER CASUALTY, RESTORE, REPAIR, REPLACE OR REBUILD THE MORTGAGED PROPERTY THAT IS DAMAGED OR DESTROYED TO THE CONDITION IT WAS IN IMMEDIATELY PRIOR TO SUCH DAMAGE OR DESTRUCTION, TO THE EXTENT INSURANCE PROCEEDS ARE AVAILABLE OR SUFFICIENT FOR SUCH PURPOSE; (C) SHALL CONSTANTLY MAINTAIN THE PARKING AND LANDSCAPED AREAS OF THE MORTGAGED PROPERTY; (D) SHALL NOT COMMIT WASTE OR PERMIT IMPAIRMENT OR DETERIORATION OF THE MORTGAGED PROPERTY; (E) SHALL NOT ALTER OR PERMIT THE ALTERATION BY ANY TENANT OF THE DESIGN OR STRUCTURAL CHARACTER OF ANY BUILDING NOW OR HEREAFTER ERECTED ON THE LAND OR HEREAFTER CONSTRUCT, OR PERMIT ANY TENANT TO CONSTRUCT, ADDITIONS TO EXISTING BUILDINGS OR ADDITIONAL BUILDINGS ON THE LAND WITHOUT THE PRIOR WRITTEN CONSENT OF THE MORTGAGEE; AND (F) SHALL NOT REMOVE FROM THE LAND ANY OF THE FIXTURES AND PERSONAL PROPERTY INCLUDED IN THE MORTGAGED PROPERTY UNLESS THE SAME IS IMMEDIATELY REPLACED WITH PROPERTY OF AT LEAST EQUAL VALUE AND UTILITY, AND THIS MORTGAGE BECOMES A VALID FIRST LIEN ON SUCH PROPERTY. 11.           INSPECTION.  THE MORTGAGEE AND ITS AGENT SHALL HAVE THE RIGHT AT ALL REASONABLE TIMES TO ENTER UPON THE MORTGAGED PROPERTY FOR THE PURPOSES OF INSPECTING THE MORTGAGED PROPERTY OR ANY PART THEREOF, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO GO UPON THE MORTGAGED PROPERTY TO CONDUCT HAZARDOUS SUBSTANCE AND OTHER INSPECTIONS, AND MAY MAKE SUCH EXAMINATIONS AND PENETRATIONS OF THE MORTGAGED PROPERTY AS THE MORTGAGEE OR ITS AGENTS MAY CONSIDER NECESSARY OR APPROPRIATE FOR THAT PURPOSE.  THE MORTGAGEE SHALL, HOWEVER, HAVE NO DUTY TO MAKE SUCH INSPECTION. 12.           PROTECTION OF THE MORTGAGEE’S SECURITY.  SUBJECT TO THE RIGHTS OF THE MORTGAGOR UNDER PARAGRAPH 7 HEREOF, IF THE MORTGAGOR FAILS TO PERFORM ANY OF THE COVENANTS AND AGREEMENTS CONTAINED IN THIS MORTGAGE OR IF ANY ACTION OR PROCEEDING IS COMMENCED WHICH AFFECTS THE MORTGAGED PROPERTY OR THE INTEREST OF THE MORTGAGEE THEREIN, OR THE TITLE THERETO, THEN THE MORTGAGEE, AT MORTGAGEE’S OPTION, MAY PERFORM SUCH COVENANTS AND AGREEMENTS, DEFEND AGAINST AND/OR INVESTIGATE SUCH ACTION OR PROCEEDING, AND TAKE SUCH OTHER ACTION AS THE MORTGAGEE DEEMS NECESSARY TO PROTECT THE MORTGAGEE’S INTEREST.  THE MORTGAGEE SHALL BE THE SOLE JUDGE OF THE LEGALITY, VALIDITY AND PRIORITY OF ANY CLAIM, LIEN, ENCUMBRANCE, TAX, ASSESSMENT, CHARGE AND PREMIUM PAID BY IT AND OF THE AMOUNT NECESSARY TO BE PAID IN SATISFACTION THEREOF.  THE MORTGAGEE IS HEREBY GIVEN THE IRREVOCABLE POWER OF ATTORNEY (WHICH POWER IS COUPLED WITH AN INTEREST AND IS IRREVOCABLE) TO ENTER UPON THE MORTGAGED PROPERTY AS THE MORTGAGOR’S AGENT IN THE MORTGAGOR’S NAME TO PERFORM ANY AND ALL COVENANTS AND AGREEMENTS TO BE PERFORMED BY THE MORTGAGOR AS HEREIN PROVIDED.  ANY AMOUNTS OR EXPENSES DISBURSED OR INCURRED BY THE MORTGAGEE PURSUANT TO THIS PARAGRAPH 12, WITH INTEREST THEREON, SHALL BECOME ADDITIONAL INDEBTEDNESS OF THE MORTGAGOR SECURED BY THIS MORTGAGE.  UNLESS THE MORTGAGOR AND THE MORTGAGEE AGREE IN WRITING TO OTHER TERMS OF REPAYMENT, SUCH AMOUNTS SHALL BE IMMEDIATELY DUE AND PAYABLE, AND SHALL BEAR INTEREST FROM THE DATE OF DISBURSEMENT AT THE RATE STATED IN THE TERM NOTE, UNLESS COLLECTION FROM THE MORTGAGOR OF INTEREST AT SUCH RATE WOULD BE CONTRARY TO APPLICABLE LAW, IN WHICH EVENT SUCH AMOUNTS SHALL BEAR INTEREST AT THE HIGHEST RATE WHICH MAY BE COLLECTED FROM THE MORTGAGOR UNDER APPLICABLE LAW.  THE MORTGAGEE SHALL, AT ITS OPTION, BE SUBROGATED TO THE LIEN OF ANY MORTGAGE OR OTHER LIEN DISCHARGED IN WHOLE OR IN PART BY THE GUARANTEED OBLIGATIONS OR BY THE MORTGAGEE UNDER THE PROVISIONS HEREOF, AND ANY SUCH SUBROGATION RIGHTS SHALL BE ADDITIONAL AND CUMULATIVE SECURITY FOR THIS MORTGAGE.  NOTHING CONTAINED IN THIS PARAGRAPH 12 SHALL REQUIRE THE MORTGAGEE TO INCUR ANY EXPENSE OR DO ANY ACT HEREUNDER, AND THE MORTGAGEE SHALL NOT BE LIABLE TO THE MORTGAGOR FOR ANY DAMAGES OR CLAIMS ARISING OUT OF ACTION TAKEN BY THE MORTGAGEE PURSUANT TO THIS PARAGRAPH 12. 13.           NO SECONDARY FINANCING OR SUPERIOR LIENS.  THE MORTGAGOR SHALL NOT CREATE OR PERMIT TO BE CREATED OR TO REMAIN ANY SUBORDINATE LIEN ON THE MORTGAGED PROPERTY OR ANY PART THEREOF TO SECURE ANY INDEBTEDNESS FOR BORROWED MONEY, WITHOUT OBTAINING THE PRIOR WRITTEN CONSENT OF THE MORTGAGEE.  EXCEPT PERMITTED LIENS AND ANY LIEN REFERRED TO IN THE MORTGAGE POLICY (AS SUCH TERMS ARE DEFINED IN THE CREDIT AGREEMENT) AND EXCEPT AS OTHERWISE PROVIDED IN THE CREDIT AGREEMENT OR AS PROVIDED BY OPERATION OF THE LAWS OF THE STATE OF MINNESOTA, MORTGAGOR SHALL NOT CREATE, SUFFER, OR PERMIT TO BE CREATED OR FILED AGAINST THE MORTGAGED PROPERTY ANY MORTGAGE LIEN OR OTHER LIEN SUPERIOR TO THE LIEN CREATED BY THIS MORTGAGE. 14.           SECURITY INTEREST.  THIS MORTGAGE SHALL CONSTITUTE A SECURITY AGREEMENT WITH RESPECT TO (AND THE MORTGAGOR HEREBY GRANTS THE MORTGAGEE A SECURITY INTEREST IN) ALL PERSONAL PROPERTY AND FIXTURES INCLUDED IN THE MORTGAGED PROPERTY AS MORE SPECIFICALLY DESCRIBED IN PARAGRAPHS (II), (IV) AND (VI) OF THE GRANTING CLAUSE ABOVE.  THE MORTGAGOR WILL FROM TIME TO TIME, AT THE REQUEST OF THE MORTGAGEE, EXECUTE ANY AND ALL FINANCING STATEMENTS COVERING SUCH PERSONAL PROPERTY AND FIXTURES (IN A FORM SATISFACTORY TO THE MORTGAGEE) WHICH THE MORTGAGEE MAY REASONABLY CONSIDER NECESSARY OR APPROPRIATE TO PERFECT ITS SECURITY INTEREST. 15.           EVENTS OF DEFAULT.  EACH OF THE FOLLOWING OCCURRENCES SHALL CONSTITUTE AN EVENT OF DEFAULT HEREUNDER (HEREIN CALLED AN “EVENT OF DEFAULT”): (A)           THE MORTGAGOR SHALL FAIL TO DULY AND PUNCTUALLY PAY ANY OF THE GUARANTEED OBLIGATIONS. (B)           THE OCCURRENCE OF AN “EVENT OF DEFAULT” UNDER THE CREDIT AGREEMENT, INCLUDING, IF APPLICABLE, THE EXPIRATION OF ANY GRACE PERIOD PROVIDED THEREIN. (C)           FAILURE OF MORTGAGOR TO PERFORM OR OBSERVE ANY OTHER COVENANT, AGREEMENT, REPRESENTATION, WARRANTY OR OTHER PROVISION CONTAINED IN THIS MORTGAGE. (D)           THE MORTGAGOR SHALL DEFAULT IN THE PERFORMANCE OF OR BREACH ITS AGREEMENT CONTAINED IN PARAGRAPH 13 HEREOF. (E)           THE MORTGAGOR SHALL FAIL TO DULY AND PUNCTUALLY PAY WHEN AND AS DUE ANY PAYMENT FOR TAXES AND ASSESSMENTS REQUIRED BY PARAGRAPH 2 TO BE PAID OR SHALL FAIL TO PROVIDE THE INSURANCE COVERAGE REQUIRED BY PARAGRAPH 8 OR TO PAY ANY UTILITY REQUIRED UNDER PARAGRAPH 3. (F)            THE MORTGAGOR SHALL FAIL DULY TO PERFORM OR OBSERVE ANY OF THE COVENANTS OR AGREEMENTS CONTAINED IN THIS MORTGAGE (OTHER THAN A COVENANT OR AGREEMENT OR DEFAULT IN WHICH IS ELSEWHERE IN THIS PARAGRAPH 15 SPECIFICALLY DEALT WITH) OR ANY OTHER INSTRUMENT WHICH SECURES PAYMENT OF THE GUARANTEED OBLIGATIONS AND SUCH FAILURE SHALL CONTINUE UNREMEDIED FOR 30 CALENDAR DAYS. (G)           ANY REPRESENTATION OR WARRANTY MADE BY THE MORTGAGOR HEREIN SHALL PROVE TO HAVE BEEN UNTRUE IN ANY MATERIAL RESPECT OR MATERIALLY MISLEADING AS OF THE TIME SUCH REPRESENTATION OR WARRANTY WAS MADE. (H)           THE MORTGAGOR SHALL MAKE AN ASSIGNMENT FOR THE BENEFIT OF ITS CREDITORS, OR THE MORTGAGOR SHALL GENERALLY NOT BE PAYING ITS DEBTS AS THEY BECOME DUE, OR A PETITION SHALL BE FILED BY OR AGAINST THE MORTGAGOR UNDER THE UNITED STATES BANKRUPTCY CODE, OR THE MORTGAGOR SHALL SEEK OR CONSENT TO OR ACQUIESCE IN THE APPOINTMENT OF ANY TRUSTEE, RECEIVER OR LIQUIDATOR OF A MATERIAL PART OF ITS PROPERTIES OR OF THE MORTGAGED PROPERTY OR SHALL NOT, WITHIN 30 DAYS AFTER THE APPOINTMENT (WITHOUT ITS CONSENT OR ACQUIESCENCE) OF A TRUSTEE, RECEIVER OR LIQUIDATOR OF ANY MATERIAL PART OF ITS PROPERTIES OR OF THE MORTGAGED PROPERTY, HAVE SUCH APPOINTMENT VACATED. (I)            A JUDGMENT, WRIT OR WARRANT OF ATTACHMENT OR EXECUTION, OR SIMILAR PROCESS SHALL BE ENTERED AND BECOME A LIEN ON, ISSUED OR LEVIED AGAINST, THE MORTGAGED PROPERTY OR ANY PART THEREOF AND SHALL NOT BE RELEASED, VACATED OR FULLY BONDED WITHIN 30 DAYS AFTER ITS ENTRY, ISSUE OR LEVY. (J)            THE MORTGAGED PROPERTY, OR ANY PART THEREOF, SHALL BE SOLD, CONVEYED, TRANSFERRED, ENCUMBERED OR FULL POSSESSORY RIGHTS THEREIN TRANSFERRED, WHETHER VOLUNTARILY, INVOLUNTARILY OR BY OPERATION OF LAW; THIS PROVISION SHALL APPLY TO EACH AND EVERY SALE, TRANSFER, CONVEYANCE OR ENCUMBRANCE REGARDLESS OF WHETHER OR NOT THE MORTGAGEE HAS CONSENTED OR WAIVED ITS RIGHTS, WHETHER BY ACTION OR OMISSION, IN CONNECTION WITH ANY PREVIOUS SALE, TRANSFER, CONVEYANCE OR ENCUMBRANCE. 16.           REMEDIES.  UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT, THE MORTGAGEE MAY, AT ITS OPTION, EXERCISE ONE OR MORE OF THE FOLLOWING RIGHTS AND REMEDIES (AND ANY OTHER RIGHTS AND REMEDIES AVAILABLE TO IT): (A)           THE MORTGAGEE SHALL HAVE AND MAY EXERCISE WITH RESPECT TO ALL PERSONAL PROPERTY AND FIXTURES WHICH ARE PART OF THE MORTGAGED PROPERTY, ALL THE RIGHTS AND REMEDIES ACCORDED UPON DEFAULT TO A SECURED PARTY UNDER THE UNIFORM COMMERCIAL CODE, AS IN EFFECT IN THE STATE OF MINNESOTA, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO PROCEED UNDER THE UNIFORM COMMERCIAL CODE PROVISIONS GOVERNING DEFAULT AS TO ANY PERSONAL PROPERTY SEPARATELY FROM THE REAL ESTATE INCLUDED WITHIN THE LAND, OR TO PROCEED AS TO ALL OF THE LAND IN ACCORDANCE WITH ITS RIGHTS AND REMEDIES IN RESPECT OF SAID REAL ESTATE.  IF MORTGAGEE SHOULD ELECT TO PROCEED SEPARATELY AS TO SUCH PERSONAL PROPERTY, MORTGAGOR AGREES TO MAKE SUCH PERSONAL PROPERTY AVAILABLE TO MORTGAGEE AT A PLACE OR PLACES REASONABLY ACCEPTABLE TO MORTGAGEE.  IF NOTICE TO THE MORTGAGOR OF INTENDED DISPOSITION OF SUCH PROPERTY IS REQUIRED BY LAW IN A PARTICULAR INSTANCE, SUCH NOTICE SHALL BE DEEMED COMMERCIALLY REASONABLE IF GIVEN TO THE MORTGAGOR (IN THE MANNER SPECIFIED IN PARAGRAPH 20) AT LEAST 10 CALENDAR DAYS PRIOR TO THE DATE OF INTENDED DISPOSITION.  THE MORTGAGOR SHALL PAY ON DEMAND ALL COSTS AND EXPENSES INCURRED BY THE MORTGAGEE IN EXERCISING SUCH RIGHTS AND REMEDIES, INCLUDING WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES AND LEGAL EXPENSES. (B)           THE MORTGAGEE MAY ACCELERATE THE MATURITY OF ALL OF THE GUARANTEED OBLIGATIONS (OR TAKE ANY OTHER ACTION PROVIDED IN THE CREDIT AGREEMENT OR AT LAW OR EQUITY) AND THEN MAY (AND IS HEREBY AUTHORIZED AND EMPOWERED TO) FORECLOSE THIS MORTGAGE BY JUDICIAL PROCEEDING OR BY ADVERTISEMENT WITH POWER OF SALE BEING HEREBY GRANTED TO THE MORTGAGEE TO SELL THE MORTGAGED PROPERTY AT PUBLIC AUCTION AND CONVEY THE SAME TO THE PURCHASER IN FEE SIMPLE, PURSUANT TO THE STATUTES OF THE STATE OF MINNESOTA, AND, OUT OF THE PROCEEDS ARISING FROM SUCH SALE AND FORECLOSURE, TO SATISFY ALL GUARANTEED OBLIGATIONS TOGETHER WITH ALL SUCH SUMS OF MONEY AS THE MORTGAGEE SHALL HAVE EXPENDED OR ADVANCED PURSUANT TO THIS MORTGAGE OR PURSUANT TO STATUTE TOGETHER WITH INTEREST THEREON AS HEREIN PROVIDED AND ALL COSTS AND EXPENSES OF SUCH FORECLOSURE, INCLUDING THE MAXIMUM LAWFUL ATTORNEYS’ FEES, WITH THE BALANCE, WHICH COSTS, CHARGES AND FEES THE MORTGAGOR AGREES TO PAY.  ALL EXPENDITURES AND EXPENSES OF THE NATURE IN THIS SECTION MENTIONED AND SUCH EXPENSES AND FEES AS MAY BE INCURRED IN THE PROTECTION OF THE LAND AND THE MAINTENANCE OF THE LIEN OF THIS MORTGAGE, INCLUDING, BUT NOT LIMITED TO, THE FEES AND EXPENSES OF ANY ATTORNEYS EMPLOYED BY MORTGAGEE IN ANY LITIGATION OR PROCEEDING AFFECTING THIS MORTGAGE, THE GUARANTEED OBLIGATIONS OR THE LAND, INCLUDING BANKRUPTCY OR PROBATE PROCEEDINGS, OR IN THE PREPARATION FOR THE COMMENCEMENT OR DEFENSE OF ANY PROCEEDING OR THREATENED SUIT OR PROCEEDING, SHALL BE IMMEDIATELY DUE AND PAYABLE BY MORTGAGOR, WITH INTEREST THEREON AT THE DEFAULT RATE (AS DEFINED IN THE CREDIT AGREEMENT), AND SHALL BE SECURED BY THIS MORTGAGE. (C)           MORTGAGEE SHALL HAVE THE RIGHT TO OBTAIN THE APPOINTMENT OF A RECEIVER AND MAY APPLY FOR THE APPOINTMENT OF A RECEIVER TO THE DISTRICT COURT FOR THE COUNTY WHERE THE LAND OR ANY PART THEREOF IS LOCATED, BY AN ACTION SEPARATE FROM ANY FORECLOSURE OF THIS MORTGAGE PURSUANT TO MINNESOTA STATUTES CHAPTER 580 OR PURSUANT TO MINNESOTA STATUTES CHAPTER 581, OR AS A PART OF THE FORECLOSURE ACTION UNDER SAID CHAPTER 581 (IT BEING AGREED THAT THE EXISTENCE OF A FORECLOSURE PURSUANT TO SAID CHAPTER 580 OR A FORECLOSURE ACTION PURSUANT TO SAID CHAPTER 581 IS NOT A PREREQUISITE TO ANY ACTION FOR A RECEIVER HEREUNDER).  MORTGAGEE SHALL BE ENTITLED TO THE APPOINTMENT OF A RECEIVER WITHOUT REGARD TO WASTE, ADEQUACY OF THE SECURITY OR SOLVENCY OF MORTGAGOR.  UNTIL THE GUARANTEED OBLIGATIONS ARE FULLY PAID AND SATISFIED AND, IN THE CASE OF A FORECLOSURE SALE, DURING THE ENTIRE REDEMPTION PERIOD, THE RECEIVER, WHO SHALL BE AN EXPERIENCED PROPERTY MANAGER, SHALL HAVE POWER: (I) TO COLLECT THE RENTS DURING THE PENDENCY OF SUCH FORECLOSURE SUIT AND, IN CASE OF A SALE AND A DEFICIENCY, DURING THE FULL STATUTORY PERIOD OF REDEMPTION, IF ANY, WHETHER THERE BE REDEMPTION OR NOT, AS WELL AS DURING ANY FURTHER TIMES WHEN MORTGAGOR, EXCEPT FOR THE INTERVENTION OF SUCH RECEIVER, WOULD BE ENTITLED TO COLLECT SUCH RENTS; (II) TO EXTEND OR MODIFY ANY LEASES AND TO MAKE NEW LEASES, WHICH EXTENSIONS, MODIFICATIONS AND NEW LEASES MAY PROVIDE FOR TERMS TO EXPIRE, OR FOR OPTIONS TO LESSEES TO EXTEND OR RENEWAL TERMS TO EXPIRE, BEYOND THE MATURITY DATE OF THE INDEBTEDNESS HEREUNDER AND BEYOND THE DATE OF THE ISSUANCE OF A DEED OR DEEDS TO A PURCHASER OR PURCHASERS AT A FORECLOSURE SALE, IT BEING UNDERSTOOD AND AGREED THAT ANY SUCH LEASES, AND THE OPTIONS OR OTHER SUCH PROVISIONS TO BE CONTAINED THEREIN, SHALL BE BINDING UPON MORTGAGOR AND ALL PERSONS WHOSE INTERESTS IN THE LAND ARE SUBJECT TO THE LIEN HEREOF AND UPON THE PURCHASER OR PURCHASERS AT ANY FORECLOSURE SALE, NOTWITHSTANDING ANY REDEMPTION FROM ANY JUDGMENT OR DECREE OF FORECLOSURE, DISCHARGE OF THE MORTGAGE INDEBTEDNESS, SATISFACTION OF ANY FORECLOSURE DECREE, OR ISSUANCE OF ANY CERTIFICATE OF SALE OR DEED TO ANY PURCHASER; AND (III) ALL OTHER POWERS WHICH MAY BE NECESSARY OR ARE USUAL IN SUCH CASES FOR THE PROTECTION, POSSESSION, CONTROL, MANAGEMENT AND OPERATION OF THE LAND DURING THE WHOLE OF SAID PERIOD, INCLUDING WITHOUT LIMITATION THE RIGHTS OF RECEIVER PURSUANT TO MINN. STAT. § 576.01, AS AMENDED.  ALL RENTS COLLECTED BY THE MORTGAGEE OR THE RECEIVER EACH MONTH SHALL BE APPLIED AS FOLLOWS: (I)            TO PAYMENT OF ALL REASONABLE FEES OF THE RECEIVER APPROVED BY THE COURT; (II)           TO REPAYMENT OF ALL TENANT SECURITY DEPOSITS THEN OWING TO TENANTS UNDER ANY OF THE LEASES PURSUANT TO THE PROVISIONS OF MINN. STAT. § 504B.178; (III)          TO PAYMENT OF ALL PRIOR OR CURRENT REAL ESTATE TAXES AND SPECIAL ASSESSMENTS WITH RESPECT TO THE MORTGAGED PROPERTY, OR IF THIS MORTGAGE OR ANY OTHER INSTRUMENT RELATING TO THE GUARANTEED OBLIGATIONS REQUIRES PERIODIC ESCROW PAYMENTS FOR SUCH TAXES AND ASSESSMENTS, TO THE ESCROW PAYMENTS THEN DUE; (IV)          TO PAYMENT OF ALL PREMIUMS THEN DUE FOR THE INSURANCE REQUIRED WITH RESPECT TO THE MORTGAGED PROPERTY, OR IF THIS MORTGAGE OR ANY OTHER INSTRUMENT RELATING TO THE GUARANTEED OBLIGATIONS REQUIRES PERIODIC ESCROW PAYMENTS FOR SUCH PREMIUMS, TO THE ESCROW PAYMENTS THEN DUE; (V)           TO PAYMENT OF EXPENSES INCURRED FOR NORMAL MAINTENANCE OF THE MORTGAGED PROPERTY; (VI)          THE BALANCE TO MORTGAGEE (A) IF RECEIVED PRIOR TO THE COMMENCEMENT OF A FORECLOSURE, TO BE APPLIED TO THE GUARANTEED OBLIGATIONS, IN SUCH ORDER AS MORTGAGEE MAY ELECT AND (B) IF RECEIVED AFTER THE COMMENCEMENT OF A FORECLOSURE, TO BE APPLIED TO THE AMOUNT REQUIRED TO BE PAID TO EFFECT A REINSTATEMENT PRIOR TO FORECLOSURE SALE, OR, AFTER A FORECLOSURE SALE TO ANY DEFICIENCY AND THEREAFTER TO THE AMOUNT REQUIRED TO BE PAID TO EFFECT A REDEMPTION, ALL PURSUANT TO MINN. STAT. §§ 580.30, 580.23 AND 581.10, WITH ANY EXCESS TO BE PAID TO MORTGAGOR.  PROVIDED, THAT IF THIS MORTGAGE IS NOT REINSTATED NOR THE LAND REDEEMED AS PROVIDED BY SAID SECTIONS 580.30, 580.23 OR 581.10, THE ENTIRE AMOUNT PAID TO MORTGAGEE PURSUANT THERETO SHALL BE THE PROPERTY OF MORTGAGEE TOGETHER WITH ALL OR ANY PART OF THE LAND ACQUIRED THROUGH FORECLOSURE (D)           MORTGAGEE SHALL HAVE THE RIGHT, AT ANY TIME AND WITHOUT LIMITATION, AS PROVIDED IN MINN. STAT. § 582.03, TO ADVANCE MONEY TO THE RECEIVER TO PAY ANY PART OR ALL OF THE ITEMS WHICH THE RECEIVER SHOULD OTHERWISE PAY IF CASH WERE AVAILABLE FROM THE LAND AND SUMS SO ADVANCED, WITH INTEREST AT THE DEFAULT RATE SET FORTH IN THE CREDIT AGREEMENT, SHALL BE SECURED HEREBY, OR IF ADVANCED DURING THE PERIOD OF REDEMPTION SHALL BE PART OF THE SUM REQUIRED TO BE PAID TO REDEEM FROM THE SALE. (E)           MORTGAGEE SHALL HAVE THE RIGHT TO COLLECT THE RENTS FROM THE LAND AND APPLY THE SAME IN THE MANNER HEREINBEFORE PROVIDED WITH RESPECT TO A RECEIVER.  FOR THAT PURPOSE, MORTGAGEE MAY ENTER AND TAKE POSSESSION OF THE LAND AND MANAGE AND OPERATE THE SAME AND TAKE ANY ACTION WHICH, IN MORTGAGEE’S JUDGMENT, IS NECESSARY OR PROPER TO COLLECT THE RENTS AND TO CONSERVE THE VALUE OF THE LAND.  MORTGAGEE MAY ALSO TAKE POSSESSION OF, AND FOR THESE PURPOSES USE, ANY AND ALL OF THE PERSONAL PROPERTY.  THE EXPENSE (INCLUDING ANY RECEIVER’S FEES, ATTORNEYS’ FEES AND COSTS) INCURRED PURSUANT TO THE POWERS HEREIN CONTAINED SHALL BE SECURED BY THIS MORTGAGE.  MORTGAGEE SHALL NOT BE LIABLE TO ACCOUNT TO MORTGAGOR FOR ANY ACTION TAKEN PURSUANT HERETO OTHER THAN TO ACCOUNT FOR ANY RENTS ACTUALLY RECEIVED BY MORTGAGEE.  ENFORCEMENT HEREOF SHALL NOT CAUSE MORTGAGEE TO BE DEEMED A MORTGAGEE IN POSSESSION UNLESS MORTGAGEE ELECTS IN WRITING TO BE A MORTGAGEE IN POSSESSION. (F)            MORTGAGEE SHALL HAVE THE RIGHT TO ENTER AND TAKE POSSESSION OF THE LAND AND MANAGE AND OPERATE THE SAME IN CONFORMITY WITH ALL APPLICABLE LAWS AND TAKE ANY ACTION WHICH, IN MORTGAGEE’S JUDGMENT, IS NECESSARY OR PROPER TO CONSERVE THE VALUE OF THE LAND. (G)           MORTGAGEE SHALL HAVE THE RIGHT TO FILE PROOF OF CLAIM AND  OTHER DOCUMENTS AS MAY BE NECESSARY OR ADVISABLE IN ORDER TO HAVE ITS CLAIMS ALLOWED IN ANY RECEIVERSHIP, INSOLVENCY, BANKRUPTCY, REORGANIZATION, ARRANGEMENT, ADJUSTMENT, COMPOSITION OR OTHER JUDICIAL PROCEEDINGS AFFECTING MORTGAGOR, ITS CREDITORS OR ITS PROPERTY, FOR THE ENTIRE AMOUNT DUE AND PAYABLE BY MORTGAGOR IN RESPECT OF THE OBLIGATIONS AT THE DATE OF THE INSTITUTION OF SUCH PROCEEDINGS, AND FOR ANY ADDITIONAL AMOUNTS WHICH MAY BECOME DUE AND PAYABLE BY MORTGAGOR AFTER SUCH DATE. Each remedy herein specifically given shall be in addition to every other right now or hereafter given or existing at law or in equity, and each and every right may be exercised from time to time and as often and in such order as may be deemed expedient by Mortgagee and the exercise or the beginning of the exercise of one right shall not be deemed a waiver of the right to exercise at the same time or thereafter any other right.  Mortgagee shall have all rights and remedies available under the law in effect now and/or at the time such rights and remedies are sought to be enforced, whether or not they are available under the law in effect on the date hereof.  The exercise of any of the foregoing rights or remedies and the application of the revenues pursuant to this paragraph 16, shall not cure or waive any Event of Default (or notice of default) or invalidate any act done pursuant to such notice.  The rights and powers of the Mortgagee and receivers under this Mortgage and the application of rents under this paragraph 16 shall continue until expiration of the redemption period from any foreclosure sale, whether or not any deficiency remains after a foreclosure sale. 17.           FORBEARANCE NOT A WAIVER; RIGHTS AND REMEDIES CUMULATIVE.  NO DELAY BY THE MORTGAGEE IN EXERCISING ANY RIGHT OR REMEDY PROVIDED HEREIN OR OTHERWISE AFFORDED BY LAW OR EQUITY SHALL BE DEEMED A WAIVER OF OR PRECLUDE THE EXERCISE OF SUCH RIGHT OR REMEDY, AND NO WAIVER BY THE MORTGAGEE OF ANY PARTICULAR PROVISION OF THIS MORTGAGE SHALL BE DEEMED EFFECTIVE UNLESS IN WRITING SIGNED BY THE MORTGAGEE.  ALL SUCH RIGHTS AND REMEDIES PROVIDED FOR HEREIN OR WHICH THE MORTGAGEE MAY HAVE OTHERWISE, AT LAW OR IN EQUITY, SHALL BE DISTINCT, SEPARATE AND CUMULATIVE AND MAY BE EXERCISED CONCURRENTLY, INDEPENDENTLY OR SUCCESSIVELY IN ANY ORDER WHATSOEVER, AND AS OFTEN AS THE OCCASION THEREFOR ARISES.  THE MORTGAGEE’S TAKING ACTION PURSUANT TO PARAGRAPH 11 SHALL NOT IMPAIR ANY RIGHT OR REMEDY AVAILABLE TO THE MORTGAGEE UNDER PARAGRAPH 16 HEREOF. 18.           EXPENSE OF EXERCISING RIGHTS, POWERS AND REMEDIES.  THE REASONABLE EXPENSES (INCLUDING ANY RECEIVER’S FEES, ATTORNEYS’ FEES, APPRAISERS’ FEES, ENVIRONMENTAL ENGINEERS’ AND/OR CONSULTANTS’ FEES, COSTS INCURRED FOR DOCUMENTARY AND EXPERT EVIDENCE, STENOGRAPHERS’ CHARGES, PUBLICATION COSTS, COSTS (WHICH MAY BE ESTIMATED AS TO ITEMS TO BE EXPENDED AFTER ENTRY OF THE DECREE OF FORECLOSURE) OF PROCURING ALL ABSTRACTS OF TITLE, CONTINUATIONS OF ABSTRACTS OF TITLE, TITLE SEARCHES AND EXAMINATIONS, TITLE INSURANCE POLICIES AND COMMITMENTS AND EXTENSIONS THEREFOR, UCC AND CHATTEL LIEN SEARCHES, AND SIMILAR DATA AND ASSURANCES WITH RESPECT TO TITLE AS MORTGAGEE MAY DEEM REASONABLY NECESSARY EITHER TO PROSECUTE ANY FORECLOSURE ACTION OR TO EVIDENCE TO BIDDERS AT ANY SALE WHICH MAY BE HAD PURSUANT TO ANY FORECLOSURE DECREE THE TRUE CONDITION OF THE TITLE TO OR THE VALUE OF THE LAND, AND AGENT’S COMPENSATION) INCURRED BY MORTGAGEE AFTER THE OCCURRENCE OF ANY EVENT OF DEFAULT AND/OR IN PURSUING THE RIGHTS, POWERS AND REMEDIES CONTAINED IN THIS MORTGAGE SHALL BE IMMEDIATELY DUE AND PAYABLE BY MORTGAGOR, WITH INTEREST THEREON FROM THE DATE INCURRED AT THE DEFAULT RATE (AS DEFINED IN THE CREDIT AGREEMENT), AND SHALL BE ADDED TO THE INDEBTEDNESS SECURED BY THIS MORTGAGE. 19.           NOTICE.  ANY NOTICE FROM THE MORTGAGEE TO THE MORTGAGOR UNDER THIS MORTGAGE SHALL BE IN WRITING AND SHALL BE MAILED OR DELIVERED IN THE MANNER SET FORTH IN THE SUBSIDIARY GUARANTEE. 20.           GOVERNING LAW; SEVERABILITY.  THIS MORTGAGE SHALL BE CONSTRUED, GOVERNED AND ENFORCED ACCORDING TO THE LAWS OF THE STATE OF NEW YORK, PROVIDED, HOWEVER, THAT MATTERS OF CREATION, PERFECTION, PRIORITY OR ENFORCEABILITY OF ANY AND ALL RIGHTS AND REMEDIES PROVIDED FOR HEREIN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA.  TO THE EXTENT THAT THIS MORTGAGE MAY OPERATE AS A SECURITY AGREEMENT UNDER THE CODE, MORTGAGEE SHALL HAVE ALL RIGHTS AND REMEDIES CONFERRED THEREIN FOR THE BENEFIT OF A SECURED PARTY AS SUCH TERM IS DEFINED IN THE CODE.  IN THE EVENT THAT ANY PROVISION OR CLAUSE OF THIS MORTGAGE CONFLICTS WITH APPLICABLE LAW, SUCH CONFLICT SHALL NOT AFFECT OTHER PROVISIONS OF THIS MORTGAGE WHICH CAN BE GIVEN EFFECT WITHOUT THE CONFLICTING PROVISIONS AND TO THIS END THE PROVISIONS OF THIS MORTGAGE ARE DECLARED TO BE SEVERABLE. 21.           COUNTERPARTS.  THIS MORTGAGE MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS, EACH OF WHICH SHALL BE AN ORIGINAL, BUT ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE INSTRUMENT. 22.           PRODUCTION OF DOCUMENTS.  THE MORTGAGOR SHALL, WHILE THIS MORTGAGE IS IN FULL FORCE AND EFFECT, FURNISH THE MORTGAGEE WITH SUCH DOCUMENTS, INSTRUMENTS AND PAPERS AS THE MORTGAGEE MAY REQUEST FROM TIME TO TIME IN ORDER FOR THE MORTGAGEE TO EFFECTUATE A SALE OR A PARTICIPATION IN THE LOAN EVIDENCED BY THE CREDIT AGREEMENT AND THIS MORTGAGE. 23.           WAIVER OF STATUTORY RIGHTS.  MORTGAGOR SHALL NOT APPLY FOR OR AVAIL ITSELF OF ANY APPRAISEMENT, VALUATION, REDEMPTION, STAY, EXTENSION, OR EXEMPTION LAWS, OR ANY SO-CALLED “MORATORIUM LAWS”, NOW EXISTING OR HEREAFTER ENACTED, IN ORDER TO PREVENT OR HINDER THE ENFORCEMENT OR FORECLOSURE OF THIS MORTGAGE, AND MORTGAGOR HEREBY WAIVES THE BENEFIT OF SUCH LAWS (TO THE EXTENT PERMITTED BY APPLICABLE LAW).  MORTGAGOR, FOR ITSELF AND ALL WHO MAY CLAIM THROUGH OR UNDER IT, WAIVES ANY AND ALL RIGHTS TO HAVE THE MORTGAGED PROPERTY AND ESTATES COMPRISING THE MORTGAGED PROPERTY MARSHALED UPON ANY FORECLOSURE OF THE LIEN OF THIS MORTGAGE, AND AGREES THAT ANY COURT HAVING JURISDICTION TO FORECLOSE SUCH LIEN MAY ORDER THE MORTGAGED PROPERTY SOLD IN ITS ENTIRETY.  MORTGAGOR FURTHER WAIVES ANY AND ALL RIGHTS OF REDEMPTION FROM FORECLOSURE AND FROM SALE UNDER ANY ORDER OR DECREE OF FORECLOSURE OF THE LIEN CREATED BY THIS MORTGAGE, FOR ITSELF AND ON BEHALF OF: (A) ANY TRUST ESTATE OF WHICH THE LAND ARE A PART, ALL BENEFICIALLY INTERESTED PERSONS; (B) EACH AND EVERY PERSON ACQUIRING ANY INTEREST IN THE MORTGAGED PROPERTY OR TITLE TO THE LAND SUBSEQUENT TO THE DATE OF THIS MORTGAGE; AND (C) ALL OTHER PERSONS TO THE EXTENT PERMITTED BY THE PROVISIONS OF LAWS OF THE STATE OF MINNESOTA. 24.           FIXTURE FILING.  FROM THE DATE OF ITS RECORDING, THIS MORTGAGE SHALL BE EFFECTIVE AS A FINANCING STATEMENT FILED AS A FIXTURE FILING WITH RESPECT TO ALL GOODS CONSTITUTING PART OF THE MORTGAGED PROPERTY (AS MORE PARTICULARLY DESCRIBED IN ITEM (II) OF THE GRANTING CLAUSE OF THIS MORTGAGE) WHICH ARE OR ARE TO BECOME FIXTURES RELATED TO THE REAL ESTATE DESCRIBED HEREIN.  FOR THIS PURPOSE, THE FOLLOWING INFORMATION IS SET FORTH: (A)           NAME AND ADDRESS OF DEBTOR: Vision-Ease Lens, Inc. One Meridian Crossing, Suite 850 Minneapolis, Minnesota 55423 (B)           NAME AND ADDRESS OF SECURED PARTY: Bankers Trust Company 130 Liberty Street New York, New York 10006 (C)           THIS DOCUMENT COVERS GOODS WHICH ARE OR ARE TO BECOME FIXTURES. (D)           THE NAME OF THE RECORD OWNER OF THE LAND IS THE DEBTOR DESCRIBED ABOVE. (E)           THE MORTGAGOR’S TAX IDENTIFICATION NUMBER IS:  41–1837709. (F)            THE MORTGAGOR IS A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF MINNESOTA. (G)           THE MORTGAGOR’S ORGANIZATIONAL IDENTIFICATION NUMBER IS:  9D–872. 25.           FEES AND EXPENSES.  EACH OF THE AGREEMENTS SET FORTH IN SECTION 22 OF THE SUBSIDIARY GUARANTY AGREEMENT REGARDING PAYMENT OF THE BENEFICIARIES’ FEES AND EXPENSES IS HEREBY INCORPORATED BY REFERENCE WITH THE SAME EFFECT AS IF SUCH AGREEMENTS HAD BEEN SET FORTH HEREIN.  THE AMOUNTS PAYABLE BY THE MORTGAGOR PURSUANT TO THIS PARAGRAPH 25, TOGETHER WITH INTEREST THEREON FROM THE DATE OF DEMAND BY THE MORTGAGEE AT THE RATE STATED IN THE TERM NOTE, SHALL BE GUARANTEED OBLIGATIONS. 26.           USURY LAW.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE SUBSIDIARY GUARANTEE AGREEMENT OR IN THIS MORTGAGE, ALL AGREEMENTS WHICH EITHER NOW ARE OR WHICH SHALL BECOME AGREEMENTS BETWEEN MORTGAGOR AND MORTGAGEE ARE HEREBY LIMITED SO THAT IN NO CONTINGENCY OR EVENT WHATSOEVER SHALL THE TOTAL LIABILITY FOR PAYMENTS IN THE NATURE OF INTEREST, ADDITIONAL INTEREST AND OTHER CHARGES EXCEED THE APPLICABLE LIMITS IMPOSED BY THE USURY LAWS OF THE STATE OF MINNESOTA.  IF ANY PAYMENTS IN THE NATURE OF INTEREST, ADDITIONAL INTEREST AND OTHER CHARGES MADE UNDER THE NOTE OR UNDER THIS MORTGAGE ARE HELD TO BE IN EXCESS OF THE APPLICABLE LIMITS IMPOSED BY THE USURY LAWS OF THE STATE OF MINNESOTA, IT IS AGREED THAT ANY SUCH AMOUNT HELD TO BE IN EXCESS SHALL BE CONSIDERED PAYMENT OF PRINCIPAL HEREUNDER, AND THE INDEBTEDNESS EVIDENCED HEREBY SHALL BE REDUCED BY SUCH AMOUNT SO THAT THE TOTAL LIABILITY FOR PAYMENTS IN THE NATURE OF INTEREST, ADDITIONAL INTEREST AND OTHER CHARGES SHALL NOT EXCEED THE APPLICABLE LIMITS IMPOSED BY THE USURY LAWS OF THE STATE OF MINNESOTA, IN COMPLIANCE WITH THE DESIRES OF MORTGAGOR AND MORTGAGEE.  THIS PROVISION SHALL NEVER BE SUPERSEDED OR WAIVED AND SHALL CONTROL EVERY OTHER PROVISION OF THE NOTE AND THIS MORTGAGE AND ALL AGREEMENTS BETWEEN MORTGAGOR AND MORTGAGEE, OR THEIR SUCCESSORS AND ASSIGNS. 27.           JURY TRIAL WAIVER.  EACH OF THE AGREEMENTS SET FORTH IN SECTION 21 OF THE SUBSIDIARY GUARANTEE AGREEMENT IS HEREBY INCORPORATED BY REFERENCE WITH THE SAME EFFECT AS IF SUCH AGREEMENTS HAD BEEN SET FORTH HEREIN. 28.           FURTHER ASSURANCES.  AT ANY TIME AND FROM TIME TO TIME UNTIL SATISFACTION OF THIS MORTGAGE, THE MORTGAGOR WILL, AT THE REQUEST OF THE MORTGAGEE, PROMPTLY EXECUTE AND DELIVER TO THE MORTGAGEE SUCH ADDITIONAL INSTRUMENTS AS MAY BE REASONABLY REQUIRED FURTHER TO EVIDENCE THE LIEN OF THIS MORTGAGE AND FURTHER TO PROTECT THE SECURITY INTEREST OF THE MORTGAGEE WITH RESPECT TO THE MORTGAGED PROPERTY, INCLUDING, WITHOUT LIMITATION, ADDITIONAL SECURITY AGREEMENTS, FINANCING STATEMENTS AND CONTINUATION STATEMENTS.  ANY EXPENSES INCURRED BY THE MORTGAGEE IN CONNECTION WITH THE PREPARATION AND RECORDATION OF ANY SUCH INSTRUMENTS, INCLUDING, BUT NOT LIMITED TO REASONABLE ATTORNEYS’ FEES, SHALL BECOME ADDITIONAL GUARANTEED OBLIGATIONS OF THE MORTGAGOR SECURED BY THIS MORTGAGE.  UNLESS THE MORTGAGOR AND THE MORTGAGEE AGREE IN WRITING TO OTHER TERMS OF REPAYMENT, SUCH AMOUNTS SHALL BE IMMEDIATELY DUE AND PAYABLE, AND SHALL BEAR INTEREST FROM THE DATE OF DISBURSEMENT AT THE ANNUAL RATE STATED IN THE TERM NOTE, UNLESS COLLECTING FROM THE MORTGAGOR OF INTEREST AT SUCH RATE WOULD BE CONTRARY TO APPLICABLE LAW, IN WHICH EVENT SUCH AMOUNTS SHALL BEAR INTEREST AT THE HIGHEST RATE WHICH MAY BE COLLECTED FROM THE MORTGAGOR UNDER APPLICABLE LAW. 29.           FUTURE ADVANCES. (A)           TO THE EXTENT THAT THIS MORTGAGE SECURES FUTURE ADVANCES, THE AMOUNT OF SUCH ADVANCES IS NOT CURRENTLY KNOWN.  THE ACCEPTANCE OF THIS MORTGAGE BY THE MORTGAGEE, HOWEVER, CONSTITUTES AN ACKNOWLEDGMENT THAT THE MORTGAGEE IS AWARE OF THE PROVISIONS OF MINN. STAT. § 287.05, SUBD. 5, AND INTENDS TO COMPLY WITH THE REQUIREMENTS CONTAINED THEREIN. (B)           THE MAXIMUM PRINCIPAL AMOUNT OF INDEBTEDNESS SECURED BY THIS MORTGAGE AT ANY ONE TIME, EXCLUDING ADVANCES MADE BY THE MORTGAGEE IN PROTECTION OF THE MORTGAGED PROPERTY OR THE LIEN OF THIS MORTGAGE, SHALL BE $6,325,000.00. (C)           THE REPRESENTATIONS CONTAINED IN THIS PARAGRAPH 29 ARE MADE SOLELY FOR THE BENEFIT OF COUNTY RECORDING AUTHORITIES IN DETERMINING THE MORTGAGE REGISTRY TAX PAYABLE AS A PREREQUISITE TO THE RECORDING OF THIS MORTGAGE.  THE MORTGAGOR ACKNOWLEDGES THAT SUCH REPRESENTATIONS DO NOT CONSTITUTE OR IMPLY AN AGREEMENT BY THE MORTGAGEE TO MAKE ANY FUTURE ADVANCES TO THE MORTGAGOR. (D)           NOTWITHSTANDING ANY OTHER PROVISION OF THIS MORTGAGE TO THE CONTRARY, ANY GUARANTEED OBLIGATIONS AS TO WHICH MORTGAGE REGISTRY TAX IS PAYABLE SHALL NOT BE SECURED BY THIS MORTGAGE UNLESS AND UNTIL THE TAX IS PAID. 30.           LIMITATION ON LIABILITY.  THE OBLIGATIONS OF THE MORTGAGOR HEREUNDER ARE SUBJECT TO THE LIMITATIONS ON LIABILITY IN THE SUBSIDIARY GUARANTEE AGREEMENT. 31.           REVOLVING LINE OF CREDIT.  THIS MORTGAGE SECURES A REVOLVING LINE OF CREDIT UNDER WHICH ADVANCES, PAYMENTS OR READVANCES MAY BE MADE FROM TIME TO TIME IN ACCORDANCE WITH THE CREDIT AGREEMENT.  MORTGAGOR HEREBY AGREES THAT, IF THE OUTSTANDING, UNPAID BALANCE OF THE REVOLVING LINE OF CREDIT UNDER THE CREDIT AGREEMENT IS EVER REDUCED TO ZERO, THE LIEN AND SECURITY INTEREST HEREOF SHALL BE DEEMED TO REMAIN IN FULL FORCE AND EFFECT TO SECURE ANY FUTURE ADVANCES MADE UNDER SAID REVOLVING LINE OF CREDIT, SUBJECT TO THE PROVISIONS HEREOF LIMITING ENFORCEMENT OF THIS MORTGAGE TO A DEBT AMOUNT OF $6,325,000 UNDER CHAPTER 287 OF MINNESOTA STATUTES. 32.           ASSIGNMENT OF LEASES AND RENTS.  ALL RIGHT, TITLE, AND INTEREST OF MORTGAGOR IN AND TO ALL PRESENT LEASES AFFECTING THE MORTGAGED PROPERTY AND INCLUDING AND TOGETHER WITH ANY AND ALL FUTURE LEASES, WRITTEN OR ORAL, UPON ALL OR ANY PART OF THE MORTGAGED PROPERTY AND TOGETHER WITH ALL OF THE RENTS, INCOME, RECEIPTS, REVENUES, ISSUES, AVAILS AND PROFITS FROM OR DUE OR ARISING OUT OF THE MORTGAGED PROPERTY ARE HEREBY TRANSFERRED AND ASSIGNED SIMULTANEOUSLY HEREWITH TO MORTGAGEE AS FURTHER SECURITY FOR THE PAYMENT OF THE GUARANTEED OBLIGATIONS.  ALL FUTURE LEASES AFFECTING THE MORTGAGED PROPERTY SHALL BE SUBMITTED BY MORTGAGOR TO MORTGAGEE FOR ITS APPROVAL PRIOR TO EXECUTION, WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED.  EACH LEASE, INCLUDING ALL FUTURE LEASES SHALL BE SUBORDINATE TO THIS MORTGAGE, PROVIDED THAT, UPON THE REQUEST OF THE MORTGAGOR AND THE LESSEE UNDER ANY SUCH LEASE, MORTGAGEE SHALL ENTER INTO A SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT (OR SIMILAR AGREEMENT) WITH SUCH LESSEE IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO MORTGAGEE, PURSUANT TO WHICH (I) MORTGAGEE WILL AGREE THAT SO LONG AS SUCH LEASE SHALL BE IN FULL FORCE AND EFFECT AND SUCH LESSEE IS NOT IN DEFAULT THEREUNDER, MORTGAGEE WILL NOT DISTURB, PURSUANT TO A FORECLOSURE ACTION OR OTHERWISE, SUCH LESSEE’S POSSESSION UNDER SUCH LEASE, AND (II) SUCH LESSEE SHALL AGREE THAT IF MORTGAGEE OR ANY FUTURE HOLDER OF THIS MORTGAGE SHALL BECOME THE OWNER OF THE MORTGAGED PROPERTY BY REASON OF FORECLOSURE OF THE MORTGAGE OR OTHERWISE, OR IF THE MORTGAGED PROPERTY SHALL BE SOLD AS A RESULT OF ANY FORECLOSURE ACTION OR DEED IN LIEU THEREOF, THEN SUCH LEASE SHALL CONTINUE IN FULL FORCE AND EFFECT AS A DIRECT LEASE BETWEEN SUCH LESSEE AND THE THEN OWNER OF THE MORTGAGED PROPERTY.  ALTHOUGH IT IS THE INTENTION OF THE PARTIES THAT THE ASSIGNMENT CONTAINED IN THIS SECTION SHALL BE A PRESENT AND ABSOLUTE ASSIGNMENT, IT IS EXPRESSLY UNDERSTOOD AND AGREED, ANYTHING TO THE CONTRARY NOTWITHSTANDING, THAT MORTGAGEE SHALL NOT EXERCISE ANY OF THE RIGHTS OR POWERS CONFERRED UPON IT BY THIS PARAGRAPH 32 UNTIL AN EVENT OF DEFAULT SHALL OCCUR UNDER THIS MORTGAGE.  FROM TIME TO TIME, MORTGAGOR SHALL FURNISH MORTGAGEE WITH EXECUTED COPIES OF EACH OF THE LEASES AND SHALL USE COMMERCIALLY REASONABLE EFFORTS TO FURNISH MORTGAGEE WITH ESTOPPEL LETTERS FROM EACH TENANT UNDER EACH OF THE LEASES IN A FORM SATISFACTORY TO MORTGAGEE WITHIN 30 DAYS AFTER MORTGAGEE’S WRITTEN DEMAND. (A)           FOLLOWING THE OCCURRENCE OF AN EVENT OF DEFAULT, (I) MORTGAGEE SHALL HAVE THE RIGHTS AND POWERS AS ARE PROVIDED HEREIN, (II) THIS MORTGAGE SHALL CONSTITUTE A DIRECTION TO EACH LESSEE UNDER THE LEASES AND EACH GUARANTOR THEREOF TO PAY ALL RENTS DIRECTLY TO MORTGAGEE WITHOUT PROOF OF THE EVENT OF DEFAULT, AND (III) MORTGAGEE SHALL HAVE THE AUTHORITY, AS MORTGAGOR’S ATTORNEY-IN-FACT (SUCH AUTHORITY BEING COUPLED WITH AN INTEREST AND IRREVOCABLE), TO SIGN THE NAME OF MORTGAGOR AND TO BIND MORTGAGOR ON ALL PAPERS AND DOCUMENTS RELATING TO THE OPERATION, LEASING AND MAINTENANCE OF THE MORTGAGED PROPERTY. (B)           IF MORTGAGOR, AS LESSOR UNDER ANY LEASE, SHALL NEGLECT OR REFUSE TO PERFORM, OBSERVE AND KEEP ALL OF THE COVENANTS, PROVISIONS AND AGREEMENTS CONTAINED IN SUCH LEASE, THEN MORTGAGEE MAY PERFORM AND COMPLY WITH ANY SUCH LEASE COVENANTS, AGREEMENTS AND PROVISIONS.  ALL COSTS AND EXPENSES INCURRED BY MORTGAGEE IN COMPLYING WITH SUCH COVENANTS, AGREEMENTS, AND PROVISIONS SHALL CONSTITUTE GUARANTEED OBLIGATIONS AND SHALL BE PAYABLE UPON DEMAND WITH INTEREST AT THE DEFAULT RATE (AS DEFINED IN THE CREDIT AGREEMENT). (C)           MORTGAGEE SHALL NOT BE OBLIGATED TO PERFORM OR DISCHARGE ANY OBLIGATION, DUTY OR LIABILITY UNDER ANY LEASE, AND MORTGAGOR SHALL AND DOES HEREBY AGREE, EXCEPT TO THE EXTENT OF MORTGAGEE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, TO INDEMNIFY AND HOLD MORTGAGEE HARMLESS OF AND FROM ANY AND ALL LIABILITY, LOSS OR DAMAGE WHICH IT MAY OR MIGHT INCUR UNDER ANY LEASE OR UNDER OR BY REASON OF THEIR ASSIGNMENTS AND OF AND FROM ANY AND ALL CLAIMS AND DEMANDS WHATSOEVER WHICH MAY BE ASSERTED AGAINST IT BY REASON OF ALL ALLEGED OBLIGATIONS OR UNDERTAKINGS ON ITS PART TO PERFORM OR DISCHARGE ANY OF THE TERMS, COVENANTS OR AGREEMENTS CONTAINED IN SUCH LEASE.  SHOULD MORTGAGEE INCUR ANY SUCH LIABILITY, LOSS OR DAMAGE UNDER ANY LEASE OR UNDER OR BY REASON OF ITS ASSIGNMENT, OR IN THE DEFENSE OF ANY CLAIMS OR DEMANDS, THE AMOUNT THEREOF, INCLUDING COSTS, EXPENSES AND REASONABLE ATTORNEYS’ FEES, SHALL BE SECURED HEREBY.  MORTGAGOR SHALL REIMBURSE MORTGAGEE THEREFOR IMMEDIATELY UPON DEMAND WITH INTEREST PAYABLE AT THE DEFAULT RATE (AS DEFINED IN THE CREDIT AGREEMENT). 33.           SUCCESSORS AND ASSIGNS BOUND; NUMBER; GENDER; AGENTS; CAPTIONS; AMENDMENTS.  THE COVENANTS AND AGREEMENTS HEREIN CONTAINED SHALL BIND, AND THE RIGHTS HEREUNDER SHALL INURE TO, THE RESPECTIVE HEIRS, LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF THE MORTGAGEE AND THE MORTGAGOR; PROVIDED, HOWEVER, THAT THIS PARAGRAPH 33 SHALL NOT LIMIT THE EFFECT OF PARAGRAPH 15(J).   WHEREVER USED, THE SINGULAR NUMBER SHALL INCLUDE THE PLURAL, AND THE PLURAL THE SINGULAR, AND THE USE OF ANY GENDER SHALL APPLY TO ALL GENDERS.  THE CAPTIONS AND HEADINGS OF THE PARAGRAPHS OF THIS MORTGAGE ARE FOR CONVENIENCE ONLY AND ARE NOT TO BE USED TO INTERPRET OR DEFINE THE PROVISIONS HEREOF.  NO AMENDMENT OF THIS MORTGAGE SHALL BE EFFECTIVE UNLESS IN A WRITING EXECUTED BY THE MORTGAGOR AND THE MORTGAGEE. 34.           NON-AGRICULTURAL USE.  MORTGAGOR REPRESENTS AND WARRANTS THAT AS OF THE DATE OF THIS MORTGAGE, THE MORTGAGED PROPERTY IS NOT IN AGRICULTURAL USE AS DEFINED IN MINN. STAT. § 40A.02, SUBD. 3 AND IS NOT USED FOR AGRICULTURAL PURPOSES. 35.           MATURITY DATE.  THE LATEST OBLIGATION SECURED BY THIS MORTGAGE MATURES ON MAY 15, 2003. 36.           Last Dollars Secured. This Mortgage secures only a portion of the Guaranteed Obligations owing or which may become owing by Mortgagor. The parties agree that any payments or repayments of such Guaranteed Obligations by Mortgagor shall be and be deemed to be applied first to the portion of the Guaranteed Obligations that is not secured hereby, it being the parties’ intent that the portion of the Guaranteed Obligations last remaining unpaid shall be secured hereby. 37.           Conflicts with Credit Agreement. Notwithstanding anything in this Mortgage to the contrary, in the event of a conflict or patent inconsistency between the terms of this Mortgage and the Credit Agreement, the terms of the Credit Agreement shall govern and apply. 38.           PROTECTIVE ADVANCES. (A)           WITHOUT LIMITING MORTGAGEE’S FORECLOSURE RIGHTS, ALL ADVANCES, DISBURSEMENTS AND EXPENDITURES MADE BY MORTGAGEE BEFORE AND DURING A FORECLOSURE, AND BEFORE AND AFTER JUDGMENT OF FORECLOSURE, AND AT ANY TIME PRIOR TO SALE, AND, WHERE APPLICABLE, AFTER SALE, AND DURING THE PENDENCY OF ANY RELATED PROCEEDINGS, MAY BE USED FOR THE FOLLOWING PURPOSES, IN ADDITION TO THOSE OTHERWISE AUTHORIZED BY THIS MORTGAGE (ALL SUCH ADVANCES, DISBURSEMENTS AND EXPENDITURES HERETOFORE AND HEREAFTER REFERRED TO IN THIS PARAGRAPH 38 AND ELSEWHERE IN THIS MORTGAGE, COLLECTIVELY, “PROTECTIVE ADVANCES”): (I)            ALL ADVANCES BY MORTGAGEE IN ACCORDANCE WITH THE TERMS OF THIS MORTGAGE TO: (A) PRESERVE OR MAINTAIN, REPAIR, RESTORE OR REBUILD THE LAND OR OTHER IMPROVEMENTS UPON THE LAND; (B) PRESERVE THE LIEN OF THIS MORTGAGE OR THE PRIORITY THEREOF; OR (C) ENFORCE THIS MORTGAGE; (II)           PAYMENTS BY MORTGAGEE OF: (A) WHEN DUE INSTALLMENTS OF PRINCIPAL, INTEREST OR OTHER OBLIGATIONS IN ACCORDANCE WITH THE TERMS OF ANY SENIOR MORTGAGE OR OTHER PRIOR LIEN OR ENCUMBRANCE; (B) WHEN DUE INSTALLMENTS OF REAL ESTATE TAXES AND ASSESSMENTS, GENERAL AND SPECIAL AND ALL OTHER TAXES AND ASSESSMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH ARE ASSESSED OR IMPOSED UPON THE LAND OR ANY PART THEREOF; (C) OTHER OBLIGATIONS AUTHORIZED BY THIS MORTGAGE; OR (D) WITH COURT APPROVAL, ANY OTHER AMOUNTS IN CONNECTION WITH OTHER LIENS, ENCUMBRANCES OR INTERESTS REASONABLY NECESSARY TO PRESERVE THE STATUS OF TITLE; (III)          ADVANCES BY MORTGAGEE IN SETTLEMENT OR COMPROMISE OF ANY CLAIMS ASSERTED BY CLAIMANTS UNDER SENIOR MORTGAGES OR ANY OTHER PRIOR LIENS; (IV)          REASONABLE ATTORNEYS’ FEES AND OTHER EXPENSES INCURRED: (A) IN CONNECTION WITH THE FORECLOSURE OF THIS MORTGAGE; (B) IN CONNECTION WITH ANY ACTION, SUIT OR PROCEEDING BROUGHT BY OR AGAINST THE MORTGAGEE FOR THE ENFORCEMENT OF THIS MORTGAGE OR ARISING FROM THE INTEREST OF THE MORTGAGEE HEREUNDER; OR (C) IN THE PREPARATION FOR THE COMMENCEMENT OR DEFENSE OF ANY SUCH FORECLOSURE OR OTHER ACTION; (V)           REASONABLE MORTGAGEE’S FEES AND COSTS, INCLUDING ATTORNEYS’ FEES, ARISING BETWEEN THE ENTRY OF JUDGMENT OF FORECLOSURE AND CONFIRMATION HEARING; (VI)          REASONABLE EXPENSES DEDUCTIBLE FROM PROCEEDS OF SALE; (VII)         REASONABLE EXPENSES INCURRED AND EXPENDITURES MADE BY MORTGAGEE FOR ANY ONE OR MORE OF THE FOLLOWING (IF APPLICABLE): (A) IF ANY INTEREST IN THE LAND IS A LEASEHOLD ESTATE UNDER A LEASE OR SUBLEASE, RENTALS OR OTHER PAYMENTS REQUIRED TO BE MADE BY THE LESSEE UNDER THE TERMS OF THE LEASE OR SUBLEASE; (B) PREMIUMS FOR CASUALTY AND LIABILITY INSURANCE PAID BY MORTGAGEE WHETHER OR NOT MORTGAGEE OR A RECEIVER IS IN POSSESSION, IF REASONABLY REQUIRED, IN REASONABLE AMOUNTS, AND ALL RENEWALS THEREOF, WITHOUT REGARD TO THE LIMITATION TO MAINTAINING OF EXISTING INSURANCE IN EFFECT AT THE TIME ANY RECEIVER OR MORTGAGEE TAKES POSSESSION OF THE LAND; (C) REPAIR OR RESTORATION OF DAMAGE OR DESTRUCTION IN EXCESS OF AVAILABLE INSURANCE PROCEEDS OR CONDEMNATION AWARDS; (D) PAYMENTS REQUIRED OR DEEMED BY MORTGAGEE TO BE FOR THE BENEFIT OF THE LAND OR REQUIRED TO BE MADE BY THE OWNER OF THE LAND UNDER ANY GRANT OR DECLARATION OF EASEMENT, EASEMENT AGREEMENT, AGREEMENT WITH ANY ADJOINING LAND OWNERS OR INSTRUMENTS CREATING COVENANTS OR RESTRICTIONS FOR THE BENEFIT OF OR AFFECTING THE LAND; (E) SHARED OR COMMON EXPENSE ASSESSMENTS PAYABLE TO ANY ASSOCIATION OR CORPORATION IN WHICH THE OWNER OF THE LAND IS A MEMBER IN ANY WAY AFFECTING THE LAND; AND (F) PURSUANT TO ANY LEASE OR OTHER AGREEMENT FOR OCCUPANCY OF THE LAND. (B)           ALL PROTECTIVE ADVANCES SHALL BE SO MUCH ADDITIONAL INDEBTEDNESS SECURED BY THIS MORTGAGE, AND SHALL BECOME IMMEDIATELY DUE AND PAYABLE WITHOUT NOTICE AND WITH INTEREST THEREON FROM THE DATE OF THE ADVANCE UNTIL PAID AT THE DEFAULT RATE (AS DEFINED IN THE CREDIT AGREEMENT).  THIS MORTGAGE SHALL BE A LIEN FOR ALL PROTECTIVE ADVANCES AS TO SUBSEQUENT PURCHASERS AND JUDGMENT CREDITORS FROM THE TIME THIS MORTGAGE IS RECORDED.  ALL PROTECTIVE ADVANCES SHALL, EXCEPT TO THE EXTENT, IF ANY, THAT ANY OF THE SAME IS CLEARLY CONTRARY TO OR INCONSISTENT WITH THE PROVISIONS OF ANY MINNESOTA STATUTE, APPLY TO AND BE INCLUDED IN:  (I) DETERMINATION OF THE AMOUNT OF GUARANTEED OBLIGATIONS SECURED BY THIS MORTGAGE AT ANY TIME; (II) THE INDEBTEDNESS FOUND DUE AND OWING TO THE MORTGAGEE IN THE JUDGMENT OF FORECLOSURE AND ANY SUBSEQUENT SUPPLEMENTAL JUDGMENTS, ORDERS, ADJUDICATIONS OR FINDINGS BY THE COURT OF ANY ADDITIONAL INDEBTEDNESS BECOMING DUE AFTER SUCH ENTRY OF JUDGMENT, IT BEING AGREED THAT IN ANY FORECLOSURE JUDGMENT, THE COURT MAY RESERVE JURISDICTION FOR SUCH PURPOSE; (III) DETERMINATION OF AMOUNTS DEDUCTIBLE FROM SALE; (IV) APPLICATION OF INCOME IN THE HANDS OF ANY RECEIVER OR MORTGAGEE IN POSSESSION; AND (V) COMPUTATION OF ANY DEFICIENCY JUDGMENT. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly executed as of the day and year first–above written.     VISION-EASE LENS, INC.                           By   /s/ Bradley D. Carlson     Its Treasurer     STATE OF MINNESOTA )   ) ss. COUNTY OF HENNEPIN )     The foregoing instrument was acknowledged before me this 10th day of October, 2001, by Bradley D. Carlson, the Treasurer of Vision-Ease Lens, Inc., a Minnesota corporation, on behalf of said corporation.     /s/ La Wayne Reuter Yaeger   Notary Public     This instrument was drafted by, and after recording, please return to:   Stephen N. Sher, Esq. Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601     EXHIBIT A TO MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING   Mortgagor:            VISION-EASE LENS, INC.   Mortgagee:           BANKERS TRUST COMPANY, not individually, but solely in its capacity as Collateral Agent pursuant to the Credit Agreement                                   The Land described in the referenced instrument is located in Anoka County, Minnesota, and is described as follows:   Lot 1, Block 1, A.E.C. Energy Park Second Addition, according to the recorded plat thereof, in the County of Anoka, State of Minnesota.

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.11 Office Lease Between Robert Sarno, Trustee and Frances Sarno, Trustee and Pacific Crest Bank, dated December 31, 1997 (Encino Branch) -------------------------------------------------------------------------------- Pacific Crest Lease   Lessor   RS --------------------------------------------------------------------------------   Lessee   [ILLEGIBLE] -------------------------------------------------------------------------------- LEASE AGREEMENT 1.  PARTIES  This Lease Agreement is made and entered into this 31 day of December, 1997 by and between ROBERT SARNO, TRUSTEE and FRANCES SARNO, TRUSTEE (hereinafter collectively referred to as "Lessor"), and PACIFIC CREST BANK (hereinafter referred to as "Lessee"). 2.  PREMISES  Lessor hereby leases to Lessee and Lessee hereby leases from Lessor, on the terms and conditions hereinafter set forth, the premises located at 17656 Ventura Blvd, Encino, California (hereinafter collectively referred to as the "Premises"). 3.  TERM  The term of this Lease shall be for a period of one hundred and twenty (120) months, commencing on January 1, 1998 and terminating on December 31, 2007. 4.  RENT  Lessee agrees to pay to Lessor the following minimum monthly rent during the term of the Lease:     4.1    Commencing on January 1, 1998 through December 31, 2007, the sum of Six Thousand Three Hundred Dollars ($6,300.00) per month, payable on the first day of each month without notice or demand;     4.2    For the period commencing January 1, 1998 and continuing through December 31, 2007, Lessee agrees that the minimum monthly rental of $6300.00 shall be adjusted upwards annually by the same percentage that the Consumer Price Index increases from January of the preceding year to January of the year in which the annual adjustment is to be made, however said adjustment shall not exceed four percent (4%) per annum. Said monthly rent shall be payable on the first day of each month without notice or demand. In no event, however, shall the minimum monthly rental after an annual adjustment ever be less than the minimum monthly rental that was due and payable in the month immediately before the adjustment.     4.3    For the purposes of calculating rental adjustment, the Consumer Price Index which shall be used is the Consumer Price Index for Urban Wage Earner's and Clerical Workers (CPI-W) as promulgated by the Bureau of Labor Statistics of the United States Department of Labor, using the year 1967 as a base of 100.     4.4    During the one hundred and twenty (120) month term of this lease, Lessee shall be entitled to a rent abatement of One Thousand Dollars ($1,000) per month which shalt be deducted from the then applicable monthly rent which is due under this lease. This rent abatement constitutes a total tenant improvement rent discount of $120,000.00 which has been pro rated over the one hundred and twenty month term of the lease. Notwithstanding the other provisions of this subparagraph 4.4, Lessee's continuing entitlement to the full rental abatement during the term of this lease as set forth in this subparagraph 4.4 shall be strictly contingent upon Lessee investing a minimum of $81,225,00 on the refurbishing or remodeling of the premises (such investment shall include the costs of planning/design, etc.) by no later than January 1, 1999. In the event that Lessee has not invested the full $81,225.00 on refurbishing or remodeling of the premises, then the scheduled monthly abatement of $1,000 per month shall be decreased in the same ratio as the actual amount which Lessee has invested bears to the sum of $81,225.00. By way of illustration, if Lessee invests a total of $40,612.50 (i.e. 1/2of $81,225.00) then Lessee's monthly abatement shall be decreased to $500.00 per month throughout the lease term, effective January 1, 1999. Lessee shall provide Lessor with proof of the sums which Lessee claims to have invested in the refurbishing or remodeling of the premises. In the event that Lessee has not made said investment in refurbishing or remodeling by January 1, 1999, or has not provided Lessor with proof of said investment, then 1 -------------------------------------------------------------------------------- Lessee's right to the monthly rental abatement called for in subparagraph 4.4 shall immediately extinguish, and Lessee shall pay the full scheduled monthly rent without any abatement.     4.5    For the month commencing January 1, 1998, tenant shall also be given a one time deduction from rent in the sum of $292.20. This payment shall constitute the remaining balance of the rental abatement for the four months from January 1998 through and including April 1998 at $73.55 per month, which is referred to in paragraph 4.5 of the lease dated March 24, 1995. 5.  USE  Lessee may use the Premises for any legal purpose during the term of the Lease.     5.1    Lessee shall not do or permit anything to be done in or about the Premises nor bring or keep anything therein which will in any way increase the premium of fire and other insurance policies existing as of the date of the execution of this Lease, or affect any fire or other insurance upon the Premises or any of its contents (unless Lessee shall pay any increased premium as a result of such use or acts), or cause a cancellation of any insurance policy covering the Premises, or the building in which the Premises is located, or any of the contents of the Premises.     5.2    Lessee shall not do or permit anything to be done in or about the Premises which will in any way materially obstruct or interfere with the rights of other Lessees at occupants of the property on which the Premises is located, or use or allow the Premises to be used for any unlawful purpose, nor shall Lessee cause, maintain or permit any nuisance in, on or about the Premises. Lessee shall not commit or allow to be committed any waste in or upon the Premises. Lessee shall keep the Premises in a clean and wholesome condition, free of any odors or nuisances. 6.  BUSINESS LICENSES AND PERMITS  Lessee hereby specifically agrees to comply with all licensing requirements of all governmental authorities and to obtain all necessary licenses and permits, and to do all such acts required of Lessee in order to lawfully maintain Lessee's use within Lessor's Premises. Lessee hereby agrees to indemnify Lessor for any failure to perform any acts required under this paragraph Six. 7.  UTILITIES  Lessee shall pay for all water, gas, heat, power, telephone and other utility services supplied to the Premises together with any taxes thereon. 8.  ALTERATIONS AND ADDITIONS  Lessee shall make no material alterations to the interior of Premises without first notifying Lessor as to the exact alterations by furnishing Lessor with plans and specifications or other detailed information covering such work and securing Lessor's approval and authorization in writing prior to the commencement of any work, which approval shall not be unreasonably withheld. All costs of any improvements shall be exclusively borne by the Lessee. All such alterations or additions which became permanently affixed to the Premises shall be and remain the property of Lessor. 9.  INDEMNITY  Lessee shall indemnify and hold Lessor harmless from and against any and all claims arising from Lessee's use or occupancy of the Premises or from the conduct of its business or from any activity, work, or things which may be permitted or suffered by Lessee in the Premises including all damages, costs, attorney's fees, expenses and liabilities incurred in the defense of any claim or action or proceeding arising therefrom except for any claims arising out of Lessor's negligence or intentional acts. Lessee hereby assumes all risk of damage to property or injury to person in or about the Premises from any cause, and Lessee hereby waives all claims in respect thereof against Lessor except for any claims arising out of Lessor's negligence or intentional acts.     Lessor shall not be liable for injury or damage which may be sustained by the person, goods, wares, merchandise or property of Lessee, its employees, invitees or customers, or any other person in or about the Premises, caused by or resulting from fire, steam, electricity, gas, water or rain, which may leak or flow from or into any part of the Premises, or from the breakage, leakage, obstruction or other 2 -------------------------------------------------------------------------------- defects of the pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, whether the damage or injury results from conditions arising upon the Premises or from any other source, except for damages or injuries arising out of Lessor's failure to perform his obligations to maintain the Premises as provided under this Lease. 10.  INSURANCE   (A)  LIABILITY INSURANCE       10.1    Lessee shall, at Lessee's sole expense, obtain and keep in force during the term of this Lease a policy of comprehensive public liability insurance insuring Lessor and Lessee against any liability arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto in a combined single limit of not less that $100,000-$300,000-$25,000 for bodily injury and/or property damage. The limits of such insurance shall not limit the liability of the Lessee hereunder. Lessee may provide this insurance under a blanket policy, provided that said insurance shall have a Lessor's liability endorsement attached thereto. If Lessee shall fall to produce and maintain said liability insurance, Lessor may, but shall not be required to, procure and maintain same, but at the expense of Lessee, and the cost thereof shall become due and payable as additional rental to Lessor together with Lessee's next rental installment. Insurance required hereunder shall be in companies qualified by the State of California. No policy required under this paragraph shall be cancellable or subject to reduction of coverage. All such policies shall be written as primary policies not contributing with, and not in excess of coverage which Lessor may carry. (B)  FIRE INSURANCE       10.2    During the term of this Lease, Lessor at its cost shall maintain a policy or policies of standard fire and extended coverage insurance on the Premises to the extent of at least ninety (90%) or full replacement value thereof. Said insurance policies shall be issued in the names of Lessor. If Lessor shall fail to produce and maintain said standard fire and extended coverage insurance, Lessee may, but shall not be required to, procure and maintain same, but at the expense of Lessor, and the cost thereof shall be deducted from Lessee's next rental installment.     10.3    The liability insurance policy secured and maintained by Lessee shall identify the Lessor as ROBERT SARNO, TRUSTEE and FRANCES SARNO.     10.4    Upon written demand by Lessor, Lessee shall be required within ten (10) days to provide Lessor with a copy of all insurance policies required under section 10.1 of this Lease.     10.5    Upon written demand by Lessee, Lessor shall be required within ten (10) days to provide Lessee with a copy of all insurance policies required under section 10.2 of this Lease. 11.  ASSIGNMENT AND SUBLETTING  Lessee shall not voluntarily or by operation of law, assign, transfer, sublet, mortgage, or otherwise transfer or encumber all or any part of Lessee's interest in this Lease or in the Premises without Lessor's prior written consent, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, lessee shall have the right, after notice to Lessor, to assign or sublease all of a portion the premises, or the leasehold, to an affiliate or successor of Lessee. For the purposes hereof, an "affiliate" or "successor" of Lessee is an entity under common control with or controlled by Lessee or Lessee's parent company, including an entity resulting from a merger, acquisition or consolidation by Lessee. Lessor's consent shall also not be required for a change in Lessee's name. 12.  SIGNS  Lessor grants Lessee the exclusive right to place signage for its business on the East and North sides of the building and on the shopping center's main pole sign with a two space minimum provided such signs are first approved by Lessor, which approval shall not be unreasonably withheld, and comply in all respects with all applicable legal requirements. Under no circumstances is Lessee 3 -------------------------------------------------------------------------------- permitted to install or maintain any signs on the roof of the building unless such roof sign is first expressly approved by the Lessor in writing, which approval shall not be unreasonably withheld. Lessor further grants Lessee exclusive signage rights on the side of the building immediately behind Lessee's premises co-extensive with the wall enclosing Lessee's premises on that side of the building, however, this grant of right shall not prevent other tenants of the center from placing signs on the back wall of their premises, nor shall this grant of right require any tenant from removing any signs which are currently on the building. 13.  OCCUPATIONAL SAFETY AND HEALTH ACT  Lessee covenants at all times during the term of the Lease to comply with the requirements of the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 et seq and any analogous legislation in California (collectively, the "Act"), to the extent that the Act applies to the Premises and any activities thereon. Without limiting the generality of the foregoing, Lessee covenants to maintain all working areas, all machinery, structures, electrical facilities and the like upon the Premises in a condition that fully complies with the requirements of the Act including such requirements as would be applicable with respect to agents, employees or contractors of Lessor who may from time to time be present on the Premises. Lessee agrees to indemnify and hold harmless Lessor from any liability, claims or damages arising as a result of a breach of the foregoing covenant and from all costs, expenses and charges arising therefrom including, without limitation, attorneys' fees and court costs incurred by Lessor in connection therewith, except for any claim arising from the negligence or intentional acts of Lessor. Said indemnity shall survive the expiration or the termination of this Lease. 14.  DEFAULT  The occurrence of any of the following shall constitute a default and breach of this Lease by Lessee:     14.1    Any failure by Lessee to pay the rent or any other monetary sums required to be paid hereunder, where such failure continues for five (5) days after written notice by Lessor to Lessee;     14.2    The making of any general assignment or arrangement for the benefit of creditors, or if Lessee shall take any action under any insolvency or Bankruptcy act unless the same is dismissed within sixty (60) days;     14.3    The failure of Lessee to observe or perform any other provision of this Lease to be observed or performed by Lessee where such failure continues for thirty (30) days after written notice thereof to Lessee provided however that if the nature of Lessee's default is such that more than thirty (30) days are reasonably necessary for its cure, then it shall not be deemed a default and breach of this Lease if Lessee commences such cure within said thirty (30) day period. 15.  LESSOR'S REMEDIES  In the event of any default or breach by Lessee, Lessor shall have the following remedies which are set forth in paragraphs 15.1 and 15.2 of this Lease. These remedies are not exclusive but are cumulative and in addition to any remedies now or hereafter allowed by law.     15.1    Maintain the Lease in full force and effect and recover the rent and other charges as they become due without terminating Lessee's right to possession, irrespective of whether Lessee shall have abandoned the Premises.     15.2    Terminate Lessee's right to possession by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession of the Premises to Lessor. In such event, Lessor shall be entitled to recover from Lessee all damages incurred by Lessor by reason of Lessee's default. 16.  MAINTENANCE AND REPAIRS       16.1    Lessor shall repair and maintain the structural portion of the Premises, including foundations, exterior walls and roof, existing fire sprinklers (if any), smoke detection system, plumbing, air conditioning units, parking lot, landscaping and storage utility areas, windows, plate 4 -------------------------------------------------------------------------------- glass and doors, unless such maintenance or repair is caused in whole or in part by the gross negligence of the Lessee, its agents, employees or invitees. Unless otherwise specified in this Lease, there shall be no abatement of rent and no liability of Lessor by reason of any injury to or interference with Lessee's business arising from the making of any repairs, alterations or improvements in or to any portion of the Premises, or the building provided however that in the event such interference shall continue for seventy-two (72) hours or more; Lessee shall be entitled to an abatement of rent until such interference has ceased. Lessor shall take reasonable efforts not to disturb Lessee during the course of any such repairs, alterations or improvements. Lessee waives the provisions of any law permitting Lessee to make repairs at Lessors expense.     16.2    Lessee shall maintain in good order, condition and repair the interior of the Premises, including all electrical equipment and plumbing installed therein, and all improvements and fixtures and equipment installed by the Lessee in the Premises. In addition, it shall be Lessee's sole obligation to repair all broken doors and looks.     16.3    In the event that Lessee fails to maintain the Premises in good order, condition and repair, Lessor shall give Lessee notice to do such acts as are reasonably required so to maintain the Premises. In the event Lessee fails promptly to commence such work or diligently prosecute the same to completion, Lessor may, but is not obligated to do such acts and expend such funds at the expense of Lessee as are reasonably required to perform such work and the cost thereof shall become due and payable as additional rental to Lessor together with Lessee's next rental installment.     16.4    In the event that Lessor fails to maintain the Premises in good order, condition and repair, Lessee shall give Lessee notice to do such acts as are reasonably required so to maintain the Premises. In the event Lessor fails promptly to commence such work or diligently prosecute the same to completion, Lessee may, but is not obligated to do such acts and expend such funds at the expense of Lessor as are reasonably required to perform such work and the reasonable cost thereof shall be deducted from Lessee's next rental installment.     16.5    Upon reasonable notice to Lessee, Lessor, or its officers or agents, shall have the right to enter the Premises to examine them, or to make such repairs, alterations, and additions as Lessor deems necessary for the safety, preservation and improvement of the Premises or the building as long as such repairs, alterations or additions do not interfere with Lessee's business. In addition, Lessor or its officers or agents may place on the exterior walls of the Premises, excluding however the windows or doors of the premises, a notice "to Rent" or "to Lease," for one month prior to the expiration of this Lease. 17.  ADDITIONAL RULES  Lessor reserves the right to make such other and further reasonable rules and regulations as in Lessor's reasonable discretion and judgment may from time to time be necessary for the safety, care and cleanliness of the building and for the preservation of good order in it.     17.1    Parking — Lessor agrees that Lessee's employees shall have the right to park six (6) cars on the parking lot of the Premises during working hours, however, Lessor in his discretion may designate which parking spaces are to be used by Lessee's employees and may, from time to time, change the location of those parking spaces or promulgate reasonable rules regarding the use of the parking lot for the safety and convenience of customers or other tenants. Except for the three (3) parking spaces currently reserved and marked for the use of the medical patients of the medical tenant occupying the premises at 17648 Ventura Blvd, no other parking spaces will be reserved or marked for the exclusive use of any of the present or future tenants of the shopping center, unless marked or reserved spaces are provided to each tenant of the center on a pro rata basis based on the proportion that the square footage of that tenant's premises bears to the total amount of the square footage of the center which, for this calculation is 12,000 square feet, 5 --------------------------------------------------------------------------------     17.2    Valet Parking — If, from time to time, valet parking is provided in the center's parking lot, the valet service parking sign shall include language indicating that the valet service includes all tenants of the shopping center. To the extent that any tenant pays a co-operative share of the expense of a valet parking service for the center, that tenant shall also be entitled to have its name specifically included on any valet service parking sign. Nothing herein shall constitute an obligation or duty on the part of Lessor to provide or maintain valet parking for the center. 18.  LIENS  Lessee shall keep the Premises and the property in which the Premises are situated free from any liens arising out of any work performed, materials furnished or obligations incurred by or on behalf of Lessee. 19.  SURRENDER  On the last day of the term of this Lease, Lessee shall surrender the Premises to Lessor in good condition, broom clean, ordinary wear and tear and damage by fire and elements excepted. Lessee shall remove his properly on or before the expiration date, or the termination date, whichever is applicable, and shall repair all material damage to the Premises or building caused by such removal.     If Lessee shall fail to remove all his property by the expiration date, or the termination date, whichever is applicable, or if Lessee abandons or surrenders the Premises, or is dispossessed by process of law, or otherwise, any of Lessee's property left on the Premises shall be deemed to be abandoned, and, at Lessor's option, title shall pass to Lessor under this Lease as by a bill of sale. If Lessor elects to remove all or any part of Lessee's property, then cost of removal, including repairing any material damage to the Premises caused by such removal shall be paid by Lessee. On the expiration date, or the termination day, whichever is applicable, Lessee shall surrender to Lessor all keys to the Premises. 20.  HOLDING OVER  This Lease shall terminate and become null and void without further notice upon the expiration of the term herein specified, and any holding over by Lessee after such expiration shall not constitute a renewal thereof or give Lessee any rights hereunder or in or to the Premises except as otherwise herein provided, it being understood and agreed that this Lease cannot be renewed, extended or in any manner modified except in writing signed by both parties hereto. If Lessee shall hold over for any period after the expiration of said term, Lessor may, at its option exercised by written notice to Lessee, treat Tenant as a Lessee from month to month commencing on the first day following the expiration of this Lease and subject to the terms and conditions herein contained except that the net guaranteed minimum monthly rental, which shall be payable in advance, shall be the minimum basic rent which was payable by Lessee in the month prior to expiration of the Lease. During any month-to-month possession of the Premises by the Lessee, the Lessee agrees that Lessee shall be subject to all the other covenants, conditions, obligations, and duties imposed under the provisions of this Lease. Futhermore, if Lessee fails to surrender the Premises upon expiration of this lease despite demand to do so by Lessor, Lessee shall indemnify and hold Lessor harmless from all loss or liability, including without limitation any claims made by any succeeding lessee founded on or resulting from such failure to surrender. 21.  BINDING ON SUCCESSORS AND ASSIGNS  Each provision of this Lease to be performed by Lessee shall be deemed both a covenant and condition. The terms, conditions and covenants of this Lease shall be binding upon and shall inure to the benefit of each of the parties hereto, their heirs, personal representatives, successors and assigns. 6 -------------------------------------------------------------------------------- 22.  NOTICE  Whenever under this Lease a provision is made for any demand, notice or declaration of any kind, it shall be in writing and sent by registered or certified United States mail, postage prepaid, return receipt requested, addressed as follows: TO LESSOR:   ROBERT SARNO, TRUSTEE 2064 N. New Hampshire Ave Los Angeles, CA 90027 TO LESSEE:   PACIFIC CREST BANK 30343 Canwood Street, Suite 100 Agoura Hills, CA 21301 Attention: LYLE C. LODWICK     Such notice shall be deemed to be received within forty-eight (48) hours from the time of mailing, if mailed as provided for in this paragraph. 23.  WAIVERS  Except to the extent that the Lessor may have otherwise agreed in writing, no waiver by Lessor of any breach by Lessee of any of Lessee's obligations, agreements or covenants hereunder shall be deemed to be a waiver of any subsequent or continuing breach of the same or any other covenant, agreement or obligation. Nor shall any forbearance by Lessor to seek a remedy for any breach by Lessor be deemed a waiver by Lessor of Lessor's rights or remedies with respect to such breach. 24.  TIME  Time is of the essence of this Lease. 25.  SEVERABILITY  The unenforceability, invalidity or illegality of any provision of this Lease shall not render any other provision hereof unenforceable, invalid or illegal. 26.  ESTOPPEL CERTIFICATES  Each party, within then (10) days after notice on the other party, shall execute and deliver to the other party a certificate stating that this Lease is unmodified and in full force and effect, or in full force and effect as modified, and stating the modification. The certificate shall also state the amount of minimum monthly rent, the dates to which rent has been paid in advance, and the amount of any security deposit or prepaid rent, if any, as well as acknowledging that there are not, to that party's knowledge, any uncured defaults on the part of the other party, or specifying such defaults, if any, which are claimed. Failure to deliver such a certificate within the ten (10) day period shall be conclusive upon the party failing to deliver the certificate to the benefit of the party requesting the certificate that this Lease is in full force and effect, that there are no uncured defaults hereunder, and that the Lease has not been modified. 27.  COVENANTS AND CONDITIONS  Each provision of this Lease performable by Lessee shall be deemed both a covenant and a condition. 28.  SINGULAR AND PLURAL  When required by the context of this Lease, the singular shall include the plural. 29.  ATTORNEY'S FEES  Reasonable attorney's fees and other expenses incurred by either party hereto in enforcing any provision of this Lease or in any action or proceeding in which either party hereto is successful by reason of a default by the other party, in complying with any requirement of this Lease shall be paid to the prevailing party. 30.  LATE CHARGES.  Lessor and Lessee agree that the fixing of actual damages for Lessee's breach of any of the provisions of this Lease including the late payment by Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur costs not contemplated by this Lease the exact amount of which will be extremely difficult or impracticable to ascertain. Accordingly, in the event any installment of rent or any other sum due from Lessee hereunder shall not be received by Lessor within ten (10) days after such amount may be due, Lessee shall pay to Lessor as liquidated damages, a late 7 -------------------------------------------------------------------------------- charge equal to One Hundred and Fifty Dollars ($150.00) per month, for as long as such installment of rent of any other sum due from Lessee remains unpaid. The parties hereby agree that said late charge represents a fair and reasonable estimate of the cost Lessor will incur by reason of late payment by Lessee. Acceptance of such late charge by Lessor shall not constitute a waiver of Lessee's default with respect to such overdue amount nor prevent Lessor from exercising any other rights and remedies provided for in the Lease or by application of law. 31.  LESSOR'S ACCESS TO PREMISES.  So long as Lessor does not unreasonably interfere with Lessee's business, Lessor shall at all reasonable times during Lessee's business hours have access to the Premises for the purpose of inspection or repair. 32.  TERMINATION OF PRIOR LEASE  Upon execution of this Lease, the prior Lease between the parties relating to the premises, dated March 26, 1995, which created a lease term commencing May 1, 1995 and terminating April 31, 1998, shall be immediately terminated and all rights and duties under that Lease shall be extinguished and thereafter all the rights and duties of the parties relating to the premises shall be superceded by the rights and duties as set forth in this Lease Agreement. 33.  ENTIRE AGREEMENT  This Lease constitutes the entire agreement between the parties and no portion of it may be modified except in writing, signed and dated by each of the parties to this agreement. Attached to this Lease is a six (6) page ADDENDUM initialed on each page by Lessor and Lessee which is hereby incorporated and made part of this Lease.     IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease Agreement in Los Angeles, California on the date set forth below. DATED:   Dec. 31 --------------------------------------------------------------------------------   , 1997       /s/ ROBERT SARNO    -------------------------------------------------------------------------------- ROBERT SARNO, TRUSTEE (Lessor) DATED:   Dec. 31 --------------------------------------------------------------------------------   , 1997       /s/ FRANCES SARNO    -------------------------------------------------------------------------------- FRANCES SARNO (Lessor) DATED:   Dec. 31 --------------------------------------------------------------------------------   , 1997   BY   /s/ LYLE C. LODWICK EVP    -------------------------------------------------------------------------------- PACIFIC CREST BANK (Lessee)     Lyle C. Lodwick     Executive Vice President 8 -------------------------------------------------------------------------------- ADDENDUM TO LEASE AGREEMENT DATED DECEMBER 31, 1997, BY AND BETWEEN ROBERT SARNO, TRUSTEE AND FRANCES SARNO, TRUSTEE, ("LESSOR") AND PACIFIC CREST INVESTMENT AND LOAN ("LESSEE") 34.  Compliance of Premises.   34.1Lessor represents, warrants, and COVENANTS that the Premises, and all improvements thereto, complies with any and all laws, ordinances, codes, rules, regulations, or order applicable in the municipality in which the Premises is located, or any other governmental or quasi-governmental authority by reason of Lessee's use of the Premises. Lessor shall be responsible for the compliance of the Premises and the means of access thereto from a public way with the requirements of the Americans with Disabilities Act (42 U.S.C. Section 12101 et.seq.) and the regulations and Accessibility Guidelines for Buildings and Facilities issued pursuant thereto. 34.2Lessor represents, warrants, and covenants that the existing plumbing, electrical, and HVAC system, if any, for the Premises is in good working order as of the date of this Lease. Notwithstanding anything to the contrary set forth in this Lease, in the event it is necessary to repair or replace any of the lighting, plumbing, air conditioning and/or heating systems or units servicing the Premises, Lessor shall pay for such costs. 35.  Without Utilities.       Notwithstanding anything to the contrary contained in the Lease or in the event Lessee is without utilities, including air conditioning and lighting, such that Lessee is unable to conduct business in the Premises for a period of forty-eight (48) hours or more, Lessee shall be entitled to an abatement of rent until such time as the utility services have been restored. 36.  Lessor Indemnity.       Lessor shall indemnify and hold harmless Lessee from and against any and all claims arising from Lessor's negligence or willful acts. 37.  Non-Disturbance.       As a condition precedent to entering into this Lease, Lessor shall obtain from Beneficiary a non-disturbance agreement in a form acceptable by Lessee which provides that if Lessor's interest in the Premises is sold or conveyed upon the exercise of any remedy provided in the mortgage, deed of trust, leasehold interest, or other encumbrance or lien ("Underlying Mortgage") or by deed in lieu thereof, or if the holder of the Underlying Mortgage takes possession of the Premises thereto, this Lease shall not be terminated, nor shall Lessee's possession of the Premises be disturbed, and Lessee shall be entitled the rights of quiet enjoyment. Lessor and Lessee acknowledge that the Premises are encumbered by a Deed of Trust in favor of RANCHO BANK ("Beneficiary') hereunder. 38.  Environmental.       Neither Lessor nor any previous owner, lessee, occupant, or user of the Premises, or the property it is located within ("Shopping Center") has used, generated, released, discharged, stored or disposed of any hazardous materials, on, under, in, or about the Premises, the Shopping Center, or transported any hazardous materials to or from the Premises, the Shopping Center. Lessor shall not cause or knowingly permit the presence, use, generation, release, discharge, storage or disposal of any hazardous materials on, under, in, or about, or in the transportation of any hazardous materials to or from the Premises, or the Shopping Center. The Premises and the Shopping Center, is not in violation of any hazardous materials laws. Lessee shall not be liable for the disposal of any materials used in the construction of the Premises or the Shopping Center which, in the future, may violate any hazardous materials laws. 9 -------------------------------------------------------------------------------- 39.  Competition.       Lessor shall not permit any other lessee in the Shopping Center to conduct any business which in any manner whatsoever engages in any activity as a bank, savings and loan, thrift, mortgage company, or any other financial institution. 40.  Additional Rights of Abatement of Rent and Termination of Lease.       If, during the term of the Lease, any event or circumstance of any nature whatsoever shall occur or arise rendering it impossible or impractical for Lessee to use the Premises, or any part thereof, for any purpose or purposes which Lessee may now, then, or at any other time during the term of this Lease contemplate or intend, whether such event or circumstance consists of the prohibition by law, ordinance, or other governmental act or authority of any use the Premises, or any part thereof, or consists of any injunction, or other local interference, by any private person, firm, or corporation, or consists of any other act or occurrence whatsoever, the occurring or arising of such event or circumstance shall allow the abatement of rent during such occurrence and in the event this occurrence shall occur for thirty (30) days, Lessee shall have the option to terminate this Lease. 41.  Damage and Destruction.   41.1.  Definitions.       "Premises Partial Damage" shall mean damage or destruction to the Premises, the repair costs of which damage or destruction is less than fifty percent (50%) of the then Replacement Cost (as defined herein) of the Premises.     "Premises Total Destruction" shall mean damage or destruction to the Premises, the repair cost of which damage or destruction is fifty percent (50%) or more of the Replacement Cost of the Premises prior to such damage or destruction.     "Insured Loss" shall mean damage or destruction to the Premises which was caused by an event required to be covered by the insurance described hereunder irrespective of any deductible amounts or coverage limits involved.     "Replacement Cost" shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of applicable building codes, ordinances or laws and without deduction for depreciation. 41.2.  Premises Partial Damage—Insured Loss.       If Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. In the event, however, that there is a shortage of insurance proceeds and such shortage is due to the fact that by reason of the unique nature of the improvements in the Premises, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have the obligation to pay for the shortage in insurance proceeds to fully restore the unique aspects of the Premises. If Lessor cannot repair the damage within ninety (90) days from the date of such occurrence, then Lessee shall have the option to cancel and terminate this Lease; provided, however, that in the event Lessor fails to repair the damage to the Premises in a timely manner, Lessee shall have the option to use the proceeds of such insurance obtained by Lessor to perform the repairs of the Premises. 41.3.  Premises Partial Damage—Uninsured Loss.       If Premises Partial Damage that is not Insured Loss occurs, unless caused by a negligent or willful act of Lessor (in which event Lessor shall make the repairs at Lessor's expense and this Lease shall continue in full force and effect), either party may, at their respective option either (i) repair such 10 -------------------------------------------------------------------------------- damage as soon as reasonably possible at its expense, in which event this Lease shall continue in full force and effect, or (ii) give written notice to the other party within thirty (30) days after the occurrence of such damage of the party's desire to terminate this Lease effective as of the date of occurrence of such damage. 41.4.  Damage Near End of Term.       If at any time during the last six (6) months of the term of this Lease there is damage for which the cost to repair exceeds one month's Rent, whether or not an Insured Loss, Lessor or Lessee may at their respective options terminate this Lease effective the date of occurrence of such damage by giving written notice to the other party of the party's election to do so within thirty (30) days after the date of occurrence of such damage; provided, however, that if Lessee at the time has an exercisable option to extend this Lease, then Lessee may preserve this Lease by exercising such option before the earlier of (i) within ten (10) days of Lessee's receipt of Lessor's written notice purporting to terminate this Lease, or (ii) the day prior to the date upon which such option expires. If Lessee duly exercises such an option during such period, Lessor shall, at Lessor's expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option then this Lease shall terminate as of the date set forth in the first sentence of this Paragraph; provided, however, that in the event Lessor fails to repair the damage to the Premises in a timely manner, Lessee shall have the option to use the proceeds of such insurance obtained by Lessor to perform the repairs of the Premises. 41.5.  Premises Total Destruction.       Notwithstanding any other provision hereof, if Premises Total Destruction occurs (including any destruction required by any authorized public authority), this Lease shall terminate effective the date of the occurrence of destruction of the Premises Total Destruction, whether or not the damage or destruction is an Insured Loss or was caused by a negligent or willful act of Lessee or Lessor. 41.6.  Abatement of Rent; Lessee's Remedies.       In the event of Premises Partial Damage or Premises Total Destruction, the Rent provided hereunder and any other charges, if any, payable by Lessee hereunder for the period during which such damage or condition, its repair, remediation, or restoration continues, shall be abated. 42.  Breach by Lessor.       Lessor shall not be deemed in breach of this Lease unless Lessor fails within ten (10) days after written notice to perform an obligation required to be performed by Lessor; provided, however, that if the nature of Lessor's obligation is such that more than ten (10) days after such notice is reasonably required for its performance, then Lessor shall not be in breach of this lease if performance is commenced within such ten (10) day period and thereafter diligently, pursued to completion. 43.  Condemnation.       If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (all of which are herein called condemnation"), this Lease shall terminate as to the part so taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than ten percent (10%) of the floor areas of the Premises, or more than twenty-five percent (25%) of the portion of the common areas designated for Lessee's parking is taken by condemnation, Lessee may, at Lessee's option, to be exercised in writing within ten (10) days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Rent shall be reduced in the same proportion as the 11 -------------------------------------------------------------------------------- rentable floor area of the Premises taken bears to the total rentable floor area of the Premises. Any award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Lessor, except for compensation for diminution of value of the leasehold; provided, however, that Lessee shall be entitled to any compensation, separately awarded to Lessee for Lessee's relocation expenses and/or loss of Lessee's trade fixtures. 44.  Representations and Warranties.       Lessee and Lessor reach represent and warrant to the other that it has had no dealings with any person, firm, broker, or finder in connection with the negotiation of this Lease and/or the consummation of the transaction contemplated hereby, and that no broker or other person, firm, or entity is entitled to any commission or finder's fee in connection with said transaction. Lessee and Lessor do each hereby agree to indemnify, protect, defend, and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder, or other similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses, and/or attorneys' fees reasonably incurred with respect thereto. 45.  Waiver of Subrogation.       Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other and waive their entire right to recover damages (whether in contract or in tort) against the other, for loss or damage to their property arising out of or incident to the perils required to be insured against under Paragraph 10. The effect of such releases and waivers of the right to recover damages shall not be limited by the amount of insurance carried or required, or by any deductibles applicable thereto. Lessor and Lessee agree to have their respective insurance companies issuing property damage insurance waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby. 12 -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.11 Office Lease Between Robert Sarno, Trustee and Frances Sarno, Trustee and Pacific Crest Bank, dated December 31, 1997 (Encino Branch) LEASE AGREEMENT

  Exhibit 10.1     STAGE II APPAREL CORP.   2001 Replacement Option Plan       1.       Background and Purpose.  (a)  Stage II Apparel Corp. (the “Company”) maintains four stock option plans adopted since 1994 (the “Old Plans”).  Three of the Old Plans are compensatory, designed to provide officers and key employees with stock options (“Old Compensatory Options”) as a means to supplement below market salaries.  Old Compensatory Options to purchase a total of 2,006,000 shares of the Company’s common stock (“Common Stock”) were outstanding at exercise prices ranging from $.30 to $1.00 per share on August 23, 2001, the date the Company entered into a Stock Purchase Agreement (the “SPA”) with Alpha Omega Group, Inc.  (“AOG”) for the issuance of 30 million shares of Common Stock to AOG at $.05 per share (the “Control Shares”).   (b)     The fourth Old Plan (the “Mirror Option Plan”) was adopted in May 1998 in connection with the purchase of a controlling interest in the Company from its original founders by Richard Siskind and his grant to the founders of options to reacquire from him up to 1.5 million shares of Common Stock at exercise prices ranging from $.50 to $1.50 per share (the “Founders Options”).  As part of the transaction, the Company issued to Mr. Siskind options to purchase up to 1.5 million newly issued shares of Common Stock on the same terms as the Founders Options, exercisable only to the extent the Founders Options are exercised (the “Mirror Options”).   (c)     The SPA provides for each employee of the Company to enter into a termination agreement with the Company upon the closing of the SPA (the “Closing”) to provide for employee’s termination of employment and for severance obligations comprised primarily of new stock options (“Replacement Options”) in exchange for each option outstanding under the Old Plans (“Old Options”), exercisable for three years after the Closing (the “Exercise Period”) for the same number of shares covered by the exchanged Old Option at an exercise price of $.50 per share or the exercise of the exchanged Old Option, if less than $.50 per share (the “Exercise Price”).  Because the issuance of the Control Shares will constitute a change of control triggering the immediate vesting of any unvested Old Options under the terms of the Old Plans, all of the Replacement Options will vest immediately upon issuance.   2.       The Plan.  The Company’s board of directors (the “Board”) has adopted this 2001 Replacement Option Plan (the “Plan”) in accordance with the requirements of the SPA to provide for the issuance to the holder of each Old Option outstanding at the Closing (each, a “Holder”) of a Replacement Option in exchange therefor.  Replacement Options granted under the Plan are intended to be treated as nonqualified stock options within the meaning of section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).   3.       Administration.   The Plan shall be administered by the Compensation Committee of the Board (the “Committee”), which shall have plenary authority in its discretion, subject only to the express provisions of the Plan, to adopt, amend and rescind rules and regulations for the administration of the Plan and for its own acts and proceedings and decide all questions and settle all controversies and disputes of general applicability that may arise in connection with the Plan.   4.       Effectiveness and Termination of Plan.  The Plan shall become effective as of the date of the Closing, provided it is approved by the shareholders of the Company prior thereto.  The Plan and all outstanding Replacement Options shall terminate on the earliest of (a) the end of the Exercise Period on the third anniversary of the Closing or (b) the date when all shares of Common Stock reserved for issuance under the Plan shall have been acquired through exercise of Replacement Options granted under the Plan.   5.       The Stock.  The aggregate number of shares of Common Stock issuable under the Plan shall be (a) 3,482,000 shares or (b) the number and kinds of shares of capital stock or other securities substituted therefor as provided in Section 8 (collectively, “Stock”).  The Stock may be set aside out of the authorized but unissued shares of Common Stock not reserved for any other purpose or out of shares of Common Stock held in or acquired for the treasury of the Company.  Shares of Stock subject to a Replacement Option that terminates unexercised for any reason may not thereafter be subjected to a new Replacement Option.   6.       Replacement Option Agreement.  Each Holder shall enter into a written agreement with the Company setting forth the terms and conditions of the Replacement Option issued to the Holder, consistent with the Plan.  The form of agreement to evidence Replacement Options is annexed hereto as Annex A.   7.       Issuance and Terms of Replacement Options.  (a)  Issuance at Closing.  Replacement Options shall be issued at the Closing to the Holders in the amounts set forth below, exercisable throughout the Exercise Period at the Exercise Prices indicated below.   Issuance of Replacement Options       Old Options   Replacement Options       Number       Number       NAME OF   of Shares   Exercise   of Shares   Exercise   Holder   Covered   Price   Covered   Price                       Richard Siskind   900,000   $ .7500   900,000   $ .5000       400,000   .8125   400,000   .5000       500,000 (1) 1.5000   500,000   .5000       500,000 (1) 1.0000   500,000   .5000       476,000 (1) .5000   476,000   .5000   Beverly Roseman   75,000   .8125   75,000   .5000       150,000   .6250   150,000   .5000   Jon Siskind   75,000   .8125   75,000   .5000       150,000   .6250   150,000   .5000   Neil Siskind   15,000   .4376   15,000   .4375       100,000   .3000   100,000   .3000   Alan Kanis   15,000   .4375   15,000   .4375       15,000   .3000   15,000   .3000   Ivan Burg   4,000   .8125   4,000   .5000   Jeffrey Greenblatt   4,000   .8125   4,000   .5000   Stacey Kasin   4,000   .8125   4,000   .5000   -------------------------------------------------------------------------------- (1)   Represents Mirror Options, which are exercisable only to the extent of any exercise of the corresponding Founders Options.   (b)   Payment for Stock.  The Exercise Price of an Replacement Option shall be paid in full at the time of exercise (i) in cash by check, (ii) with securities of the Company already owned by, and in the possession of, the Holder or (iii) any combination of cash and securities of the Company.  Securities of the Company used to satisfy the exercise price of an Replacement Option shall be valued at their fair market value determined in accordance with the rules set forth in Section 7(b).  The Exercise Price shall not be subject to adjustment, except as provided in Section 8.   (c)   Transferability of Replacement Option.  No Replacement Option shall be transferable except by will or the laws of descent and distribution.  A Replacement Option shall be exercisable during the Holder’s lifetime only by the Holder.   (d)   Modification of Replacement Options.  Subject to the terms and conditions and within the limitations of the Plan, the Committee may modify, extend or renew outstanding Replacement Options granted under the Plan, or accept the surrender of outstanding Replacement Options (to the extent not theretofore exercised) and authorize the granting of new Replacement Options in substitution therefor.  Notwithstanding the foregoing, however, no modification of an Replacement Option shall, without the consent of the Holder, alter or impair any rights or obligations under any Replacement Option theretofore granted under the Plan.   8.     Adjustment for Changes in the Stock.  In the event the shares of Stock, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of capital stock or other securities of the Company or of another Company (whether by reason of merger, consolidation, recapitalization, reclassification, split, reverse split, combination of shares or otherwise), then there shall be substituted for or added to each share of Stock theretofore or thereafter subject to an Replacement Option the number and kind of shares of capital stock or other securities into which each outstanding share of Stock shall be so changed, or for which each such share shall be exchanged, or to which each such share shall be entitled, as the case may be.  The price and other terms of outstanding Replacement Options shall also be appropriately amended to reflect the foregoing events.  In the event there shall be any other change in the number or kind of outstanding shares of the Stock, or of any capital stock or other securities into which the Stock shall have been changed or for which it shall have been exchanged, if the Committee shall, in its sole discretion, determine that the change equitably requires an adjustment in any Replacement Option theretofore granted or which may be granted under the Plan, then adjustments shall be made in accordance with its determination.  In addition, the Committee shall have the power, in the event of the disposition of all or substantially all of the assets of the Company, or the dissolution of the Company, or the merger or consolidation of the Company with or into any other Company, or the merger or consolidation of any other Company into the Company, or the making of a tender offer to purchase all or a substantial portion of outstanding Stock of the Company, to amend all outstanding Replacement Options (upon such conditions as it shall deem appropriate) to (a) permit the exercise of Replacement Options prior to the effective date of the transaction and to terminate all unexercised Replacement Options as of that date or (b) require the forfeiture of all Replacement Options, provided the Company pays to each Holder the excess of the fair market value of the Stock subject to the Replacement Option over its Exercise Price.   9.     Amendment of the Plan.  The Committee may not amend the Plan in any way that could impair the rights of any Hold under an outstanding Replacement Option.   10.   Application of Funds.  The proceeds received by the Company from the sale of Stock pursuant to this Plan shall be used for general corporate purposes.   11.   No Obligation to Exercise Replacement Option.  The granting of a Replacement Option shall impose no obligation upon the Holder to exercise the Replacement Option.   12.   Expenses of the Plan.  All of the expenses of administering the Plan shall be paid by the Company.   13.   Governing Law.  Except to the extent preempted by federal law, this Plan shall be construed and enforced in accordance with, and governed by, the laws of the State of New York.   Adopted as of August 23, 2001   ANNEX A   STAGE II APPAREL CORP.   Form of Replacement Option Agreement       This Option Agreement is entered into as of _____________ 2001 between Stage II Apparel Corp., a New York corporation (the “Company”), and _______________ (the “Holder”).   In exchange for an outstanding stock option issued by the Company to the Holder for the purchase of certain shares of common stock, $.01 par value, of the Company (the “Common Stock”), the Company has issued the Holder a new option under its 2001 Replacement Option Plan (the “Plan”) on the following terms and conditions.   1.     Grant of Option.  By Company hereby grants to the Holder the right and option (the “Option”) to purchase the aggregate number of shares of Common Stock listed on the signature page hereto (the “Shares”) at an exercise price of $.50 per share (the “Exercise Price”).   2.     Exercise Period.  The Option shall expire on the third anniversary of the date hereof (the “Exercise  Period”).   3.     Exercise of Option.  During the Exercise Period, the Holder may exercise the Option to purchase all or any portion of the Shares by delivering to the Company’s offices a written notice (an “Exercise Notice”) signed by the Holder stating the number of Shares that the Holder has elected to purchase and accompanied by payment (in the form prescribed by Section 4 hereof) of an amount equal to the full Exercise Price for the Shares to be purchased.  The Exercise Notice must also contain a statement (in a form acceptable to the Company) that the Holder is acquiring the Shares for investment.  Following receipt of the foregoing by the Company, it shall instruct its stock transfer agent to issue, as soon as practicable, a certificate representing the Shares so purchased in the name of the Holder and to deliver the certificate to the Holder, free of any restrictive legend.   4.     Payment Upon Exercise.  The Exercise Price for Shares purchased under the Option shall be payable either (a) by personal check or official bank check, (b) with shares of Common Stock already owned by, and in the possession of, the Holder or (c) any combination of the forms of payment referred to in clauses (a) and (b) above.  Any shares of Common Stock used to satisfy the Exercise Price of Shares purchased under the Option shall be valued at their fair market value on the date of the Exercise Notice. If the Holder elects to pay any portion of the Exercise Price for Shares in accordance with clause (b) above, the Exercise Notice shall state the number of shares of Common Stock to be applied toward the Exercise Price and shall be accompanied by the certificate(s) representing those shares of the Common Stock, together with stock powers therefor duly executed by the Holder.   5.     Non-Transferability of Option.  The Option shall not be transferable other than by will or by the laws of descent and distribution and may be exercised only by the Holder.   6.     Incorporation of Plan.  The Option is subject to, and governed by, the terms and conditions of the Plan, which are hereby incorporated by reference.  This Option Agreement, including the Plan incorporated by reference herein, is the entire agreement among the parties hereto with respect to the subject matter and supersedes all prior agreements and understandings.   7.     Adjustments Upon Changes in Common Stock.  The number of Shares covered by the Option and the exercise price of each Share shall be adjusted as provided in the Plan if the shares of Common Stock, as presently constituted, are changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation.   8.     Notices.  Any notice to be given by the Holder hereunder shall be sent to the Company at its principal offices, and any notice from the Company to the Holder shall be sent to the Holder at the address provided to the Company.  All notices shall be in writing and shall be delivered in person or by registered or certified mail.  Either party may change the address to which notices are to be sent by notice in writing given to the other in accordance with the terms hereof.   9.     Governing Law.  This Agreement, as well as the grant of the Option and issuance of the Shares, shall be governed by and construed in accordance with the laws of the State of New York.   IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.       Stage II Apparel Corp.           By:       Name:     Title:               Employee:               Print Name:           Number of Shares:           Exercise Price (if lower than $.50):      

          TERMINATION AND RELEASE   This Termination and Release ("Release") is entered into on this 1st of August, 2001 by and between Chesapeake Corporation ("Company") and the employee signing below ("Employee"). In consideration of the mutual promises and other consideration described in the Chesapeake Corporation Voluntary Separation Program for Eligible Salaried Employees Agreement and General Release, which Employee has executed, Company and Employee agree as follows: 1. Upon the signing of this Release by Company and Employee, the Executive Employment Agreement dated September 13, 1999 ("Agreement") is terminated, and each of the parties thereto shall be deemed to have released and discharged the other from all obligations and liabilities under the Agreement. 2. By signing this Release, Company and Employee acknowledge that they understand it and agree to its terms.             /s/ John F. Gillespie                                /s/ Thomas A. Smith                     Chesapeake Corporation             BY: John F. Gillespie   Thomas A. Smith         TITLE: Senior Vice President -   Vice President - Human Resources   Human Resources &       & Organizational Development   Vice President - Human Resources                      

QuickLinks -- Click here to rapidly navigate through this document AMENDMENT TO EMPLOYMENT AGREEMENT     This Amendment to Employment Agreement (the "Amendment") is made and entered into effective as of the 9th day of February, 2001, by and between NetZero, Inc., a Delaware corporation (the "Company"), with principal corporate offices at 2555 Townsgate Road, Westlake Village, CA 91361, and Brian Woods, whose address is 22722 Chimera Lane, Topanga, CA 90290 ("Employee"). All capitalized terms used but not otherwise defined herein shall have the meanings given to them in that certain Employment Agreement by and between the Company and Employee dated December 1, 1999 (the "Employment Agreement").     WHEREAS, the Company and Employee desire to modify certain terms of the Employment Agreement.     NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows: 1.The Term of the Employment Agreement is hereby extended through February 9, 2005. 2.Employee's Base Salary and Annual Bonus, as defined in the Employment Agreement, shall be increased to include any increases to Employee's base salary and annual bonus as approved by the Board. 3.Section 4.2 shall be replaced with the following:     4.2  Termination Without Cause.  If Employee's employment is terminated without "cause" as defined in Section 4.1(a), or if Employee is Involuntarily Terminated (as defined below), the Company (or its successor, as the case may be) shall pay to Employee (i) any accrued but unpaid Base Salary and vacation through the date of termination, (ii) reimbursement for any expenses as set forth in Section 3.5, through the date of termination and (iii) a severance payment in an amount equal to four times Employee's Base Salary and Annual Bonus, payable in one lump sum on the date of termination, subject to withholding as may be required by law. In addition, if Employee's employment is terminated without cause (other than if Employee is Involuntarily Terminated) or if Employee's employment is terminated due to death or permanent disability, Employee will be credited with an additional twelve (12) months of service toward vesting in the Option shares in addition to the service he has accrued toward vesting through the date of termination. If Employee is Involuntarily Terminated, vesting of all options to purchase shares of the Company's Common Stock and all restricted stock grants (subject to any vesting deferrals provided in any restricted stock grant) will be accelerated in full and all such options shall remain in effect for a one (1) year period following the date of termination. As used in this Section 4.2, Employee shall be deemed "Involuntarily Terminated" if (i) the Company or any successor to the Company terminates Employee's employment without cause in connection with or following a Corporate Transaction or Change of Control (as defined in the Company's 1999 Stock Incentive Plan); or (ii) in connection with or following a Corporate Transaction or Change of Control there is (a) a decrease in Employee's title or responsibilities (it being deemed to be a decrease in title and/or responsibilities if Employee is not offered the position of Senior Vice President and Chief Marketing Officer of the Company or its successor as well as the acquiring and ultimate parent entity, if any, following the Corporate Transaction or Change of Control), (b) a decrease in pay and/or benefits from those provided by the Company immediately prior to the Corporate Transaction or (c) a requirement that Employee re-locate out of the greater Los Angeles metropolitan area. 4.For the eighteen (18) month period following the termination of Employee's employment with the Company (the "Noncompetition Period"), Employee shall not directly engage in, or manage or direct persons engaged in, a Competitive Business Activity (as defined below) anywhere in the Restricted Territory (as defined below); provided, that the Noncompetition Period shall terminate if the Company terminates operations or if the Company no longer engages in any Competitive Business Activity. The term "Competitive Business Activity" shall -------------------------------------------------------------------------------- mean the business of providing consumers with dial-up Internet access services (free or pay). The term "Restricted Territory" shall mean each and every county, city or other political subdivision of the United States in which the Company is engaged in business or providing its services.  The Company agrees that providing services to a company or entity that is involved in a Competitive Business Activity but which services are unrelated to the Competitive Business Activity shall not be deemed a violation of this Amendment. 5.Company and Employee agree that, for the purposes of damages to the Company with respect to any breach of Section 5 above, the value of Employee's obligations to the Company under Section 5 equal 37.5% of the severance payment in paragraph 3 above. In the event that any amounts, benefits, and rights payable to Employee upon a termination of employment under Section 4 (CIC Benefits) would be deemed under Section 280G of the Internal Revenue Code (Code) to constitute parachute payments, then the Employee's CIC Benefits shall be payable either (a) in full, or (b) as to such lesser amount which would result in no portion of such CIC Benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Employee on an after-tax basis, of the greatest amount of benefits under Section 5 notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. The determination as to whether and to what extent payments under Section 5 are required to be reduced in accordance with the preceding sentence shall be made at the Company's expense by PricewaterhouseCoopers LLP or by such other nationally recognized certified public accounting firm, law firm, or benefits consulting firm as the Compensation Committee of the Company's Board of Directors may designate, subject to the reasonable approval of Employee. PricewaterhouseCoopers LLP (or such other firm as may have been designated in accordance with the preceding sentence) shall have the right to engage any service provider of their choosing to provide any assistance or services necessary in making such determination. 6.If any provision of this Agreement is held by an arbitrator or a court of competent jurisdiction to conflict with any federal, state or local law, or to be otherwise invalid or unenforceable, such provision shall be construed in a manner so as to maximize its enforceability while giving the greatest effect as possible to the parties' intent. To the extent any provision cannot be construed to be enforceable, such provision shall be deemed to be eliminated from this Agreement and of no force or effect and the remainder of this Agreement shall otherwise remain in full force and effect and be construed as if such portion had not been included in this Agreement. 7.This Amendment shall be deemed incorporated into the Agreement and, except as specifically modified by this Amendment, the Agreement shall remain unchanged and in full force and effect. The Agreement shall be binding upon successors and assigns.     In witness whereof, the parties have executed this Amendment to be effective as of the first date written above.               NETZERO, INC.               By:   /s/ MARK R. GOLDSTON    -------------------------------------------------------------------------------- Mark R. Goldston Chief Executive Officer               EMPLOYEE         /s/ BRIAN WOODS    -------------------------------------------------------------------------------- Brian Woods -------------------------------------------------------------------------------- QuickLinks AMENDMENT TO EMPLOYMENT AGREEMENT

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.3 STOCK PLEDGE AGREEMENT     THIS STOCK PLEDGE AGREEMENT is made and entered into as of the 12th day of July, 2001, by and among UNOVA, INC., a Delaware corporation, UNOVA INDUSTRIAL AUTOMATION SYSTEMS, INC., a Delaware corporation, INTERMEC TECHNOLOGIES CORPORATION, a Washington corporation (each individually a "Pledgor" and collectively the "Pledgors"), and BANK OF AMERICA, N.A., a national banking association (the "Agent") on behalf of certain "Lenders". W I T N E S S E T H:     WHEREAS, Pledgor owns all of the shares of the capital stock of those corporations described on Exhibit "A" attached hereto and made a part hereof (hereinafter the "Corporations");     WHEREAS, pursuant to that certain Credit Agreement dated as of the date hereof by and among Pledgor, UNOVA Industrial Automation Systems, Inc., a Delaware corporation, R & B Machine Tool Company, a Michigan corporation, J.S. McNamara Company, a Michigan corporation, M M & E, Inc., a Nevada corporation, Intermec IP Corp., a Delaware corporation, and UNOVA IP Corp., a Delaware corporation (each individually a "Grantor" and all collectively the "Grantors"), Agent, Heller Financial, Inc., as Syndication Agent, ("Syndication Agent") and Lenders (including all annexes, exhibits and schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the "Credit Agreement"), Lenders have agreed to make the Loans and issue Letters of Credit on behalf of the Grantors;     WHEREAS, for purposes of this Stock Pledge Agreement, the term "Loan Documents" means this Stock Pledge Agreement and all of the Loan Documents as defined in the Credit Agreement; and     WHEREAS, pursuant to the terms of the Credit Agreement and in order to induce Lenders to make loans under the Credit Agreement, Agent and Lenders require and each Pledgor is willing to pledge said stock to Agent and Lenders pursuant to this Agreement.     NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby covenant, agree, represent and warrant as follows:     1.  Capitalized Terms.  Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in that certain Security Agreement of even date hereof by and among the Grantors, Agent, Syndication Agent and Lenders (as amended, restated, supplemented or otherwise modified, the "Security Agreement"). This Agreement is in all respects subject to the terms of the Security Agreement and the rights of Agent are also subject to the terms of that certain Intercreditor Agreement of even date hereof by and among Agent, Lenders, Special Value Investment Management, LLC and the Term Lenders described therein.     2.  Deposit and Pledge of Shares.       (a) Contemporaneously with the execution of this Stock Pledge Agreement and subject to Section 2(c) below, each Pledgor has deposited with Agent for the benefit of Lenders, and hereby pledges and assigns to Agent, and grants to Agent for the benefit of Lenders a security interest in one hundred percent (100%) of the stock of the Corporations more fully described on Exhibit "A" attached hereto and incorporated herein by reference thereto (the "Stock") as security for the payment and performance of the Obligations to Agent and Lenders under the Credit Agreement until such time as all such payments and performance have been duly completed and satisfied.     (b) The term "Stock" also includes the following, which each Pledgor hereby pledges and assigns to Agent for the benefit of Lenders: (i) the certificates representing the Stock and any interest of any Pledgor in the entries on the books of any financial intermediary pertaining to the Stock, and all dividends, cash, warrants, rights, instruments and other property or proceeds from -------------------------------------------------------------------------------- time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Stock; (ii) all new shares of capital stock or securities created in respect of the Stock whether by stock split, stock dividend, merger, consolidation or otherwise, and all securities convertible into and warrants, options and other rights to purchase or otherwise acquire, stock of any issuer of the Stock from time to time acquired by any Pledgor in any manner (which shares shall be deemed to be part of the Stock), the certificates or other instruments representing such additional shares, securities, warrants, options or other rights and any interest of any Pledgor in the entries on the books of any financial intermediary pertaining to such additional shares, and all dividends, cash, warrants, rights, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such additional shares, securities, warrants, options or other rights; and proceeds of all or any of the property described in subparts (a) and (b) above.     (c) Notwithstanding Sections 2(a) and 2(b) above or any contrary provision in any Loan Document, the aggregate amount of the Obligations secured by Restricted Collateral shall not exceed the Restricted Amount as calculated from time to time. Notwithstanding anything to the contrary herein or in the Credit Agreement, the parties hereby agree that no party hereunder intends for any Pledgor hereunder to (and the Pledgors hereby do not) grant a security interest in any Restricted Collateral that, after taking into account the amount of the Liens associated with or arising under the Term Debt Loan, would require under the Indenture an equal and ratable security interest in the Restricted Collateral for the benefit of the securities outstanding under the Indenture.     3.  Voting and Ownership of Shares.  So long as no Event of Default has occurred and is continuing under the Credit Agreement, each Pledgor shall be entitled to (i) vote its respective Stock, and (ii) receive all income and proceeds thereof. Upon the occurrence and during the continuance of any Event of Default under the Credit Agreement, Agent shall, upon ten (10) days written notice to each of the Pledgors, be entitled to exercise all voting rights and privileges whatsoever with respect to the Stock until the Obligations are paid in full, including without limitation, voting the Stock to remove the directors and officers of the Corporation or any of them, and to elect new directors and officers of the Corporation who shall thereafter manage the affairs of the Corporation, operate its respective properties and carry on its respective businesses and otherwise take any action with respect thereto as they shall deem necessary and appropriate.     4.  Maintenance of Priority of Pledge.  Each Pledgor shall be liable for and shall from time to time pay and discharge all taxes, assessments and governmental charges imposed upon the Stock by any federal, state or local authority, the liens of which would or might be held prior to the right of Agent in and to the Stock. Each Pledgor shall execute and deliver such further documents and take such further actions as may be reasonably required or deemed advisable by Agent to confirm the rights of Agent in and to the Stock or otherwise to effectuate the intention of this Stock Pledge Agreement.     5.  Events of Default.  Any "Event of Default" as defined in the Credit Agreement shall be deemed an Event of Default hereunder.     6.  Remedies Upon Event of Default.       (a) Upon the occurrence and during the continuance of any Event of Default, Agent and Lenders shall have the following rights and remedies, in addition to all other rights and remedies provided under the Credit Agreement and the Loan Documents or by law or at equity, all of which shall be cumulative and may be exercised from time to time, either successively or concurrently:      (i) To declare this Stock Pledge Agreement immediately in default and to sell the Stock or any portion thereof, from time to time upon ten (10) days prior written notice to each 2 -------------------------------------------------------------------------------- Pledgor of the time and place of sale (which notice each Pledgors hereby agrees is commercially reasonable), for cash or upon credit or for future delivery (each Pledgor hereby waives all rights, if any, of marshaling the Stock and any other security for the payment of the sums owed by any of the Pledgors to Lender) and at the option and in the complete discretion of Agent, either:     (A) at a public sale or sales, including a sale at any broker's board or exchange; or     (B) at a private sale or sales.     Agent may bid for and acquire the Stock or any portion thereof at any public sale, free from any redemption rights of the Corporation, and in lieu of paying cash therefor, may make settlement for the selling price of the Stock or any part thereof by crediting upon the payment of the Obligations under the Credit Agreement and the Loan Documents, the net selling price of the Stock, after deducting all of Agent's reasonable costs and expenses of every kind and nature therefrom, including Agent's reasonable attorneys' fees incurred in connection with realizing upon the Stock. From time to time Agent may, but shall not be obligated to, postpone the time of any proposed sale of any of the Stock which has been the subject of a notice as provided above, and also, upon such notice to each Pledgor as may be required by applicable law, if any, may change the time and place of such sale.     (ii) To exercise all rights of a secured party under the Uniform Commercial Code and all other applicable laws.     (b) In the case of any sale by Agent of the Stock or any portion thereof on credit or for future delivery, which may be elected at the option and in the complete discretion of Agent, the Stock so sold may, at Agent's option, either be delivered to the purchaser with proper security retained therefor reasonably satisfactory to Agent or retained by Agent until the selling price is paid by the purchaser, but in either event, neither Agent nor any Lender shall incur liability in case of failure of the purchaser to take up and pay for the Stock so sold. In case of any such failure, such Stock may again be sold by Agent in the manner provided for in this Stock Pledge Agreement.     (c) After deducting all of its costs and expenses of every kind, including without limitation, legal fees and registration fees and expenses, if any, in connection with the sale of the Stock, Agent shall apply the residue of the proceeds of any sale or sales of the Stock to the Obligations under the Credit Agreement and the other Loan Documents in accordance with the Credit Agreement. Neither Agent nor any Lender shall incur any liability as a result of the sale of the Stock at any private sale or sales, and each Pledgor hereby waives any claim arising by reason of the fact that the price or prices for which the Stock or any portion thereof is sold at such private sale or sales is less than the price that would have been obtained at a public sale or sales or is less than the amounts due under the Credit Agreement and the Loan Documents, even if Agent accepts the first offer received and does not offer the Stock or any portion thereof to more than one offeree.     (d) Each Pledgor hereby acknowledges and confirms that Agent may be unable to effect a public sale of any or all of the Stock by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and applicable state securities laws and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers who will be obligated to agree, among other things, to acquire any shares of the Stock for their own respective accounts for investment and not with a view to distribution or resale thereof. Each Pledgor further acknowledges and confirms that any such private sale may result in prices or other terms less favorable to the seller than if such sale were a public sale and, notwithstanding such circumstances, 3 -------------------------------------------------------------------------------- agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner, and Agent shall be under no obligation to take any steps in order to permit the Stock to be sold at a public sale. Agent shall not be under any obligation to delay a sale of any of the Stock for any period of time necessary to permit any issuer thereof to register such Stock for public sale under the Securities Act of 1933, as amended, or under applicable state securities laws.     7.  No Waiver.  The undertakings of each Pledgor hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any exercise or nonexercise, or any waiver by Agent or any Lender of any right, remedy, power or privilege under the Credit Agreement or the Loan Documents, (b) any amendment to or modification of the Credit Agreement or the Loan Documents, or (c) the release or discharge or termination of any security or guarantee for any of the Obligations under the Credit Agreement or the Loan Documents, whether or not each Pledgor shall have notice or knowledge of any of the foregoing. Agent's prior recourse to any part or all of the Collateral under the Credit Agreement or the Loan Documents shall not constitute a condition of any demand, suit or proceeding for payment or collection of the Obligations under the Credit Agreement or the Loan Documents. No act, failure or delay by Agent shall constitute a waiver of Agent of its rights and remedies hereunder or otherwise. No single or partial waiver by Agent of any default or right or remedy that it may have shall operate as a waiver of any other default, right or remedy or of the same default, right or remedy on a future occasion. Each Pledgor waives to the maximum extent permitted by applicable law presentment, notice of dishonor and protest, notice of intent to accelerate and notice of acceleration of all instruments included in or evidencing any of the Obligations under the Credit Agreement or the Loan Documents, and any and all other notices and demands whatsoever.     8.  Notices.  Except as otherwise provided herein, all notices, demands and requests that any party is required or elects to give to any other shall be in writing, or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, but not limited to, delivery by overnight mail and courier service, (b) four (4) days after it shall have been mailed by United States mail, first class, certified or registered, with postage prepaid, or (c) in the case of notice by such a telecommunications device, when properly transmitted, in each case addressed to the party to be notified as follows:     If to the Agent or to the Bank: Bank of America, N.A. 55 South Lake Ave., Suite 900 Pasadena, California 91101 Attention: Business Credit- Account Executive Telecopy No.: (626) 578-6069     If to the Pledgors: c/o UNOVA, Inc. 21900 Burbank Boulevard Woodland Hills, California 91367 Attention: Treasurer Telecopy No.: (818) 992-2627 or to such other address as each party may designate for itself by like notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to the persons designated above to receive copies shall not adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication.     9.  Governing Law.  THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION OF THIS STOCK PLEDGE AGREEMENT AND THE RIGHTS AND REMEDIES AND DUTIES OF THE PARTIES HEREUNDER. 4 --------------------------------------------------------------------------------     10.  Successors and Assigns.  This Stock Pledge Agreement shall bind each Pledgor, and its successors and assigns, and shall inure to the benefit of Agent and Lenders, and their successors and assigns.     11.  Time of Essence.  Time shall be of the essence in the performance of the Obligations of each of the Pledgors hereunder. (SIGNATURE PAGE FOLLOWS) 5 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed this Stock Pledge Agreement as of the day, month and year first above written.     PLEDGORS:     UNOVA, INC.     By:   /s/ ELMER C. HULL, JR.    -------------------------------------------------------------------------------- Elmer C. Hull, Jr. Vice President and Treasurer          UNOVA INDUSTRIAL AUTOMATION SYSTEMS, INC.     By:   /s/ ELMER C. HULL, JR.    -------------------------------------------------------------------------------- Elmer C. Hull, Jr. Vice President and Treasurer          INTERMEC TECHNOLOGIES CORPORATION     By:   /s/ ELMER C. HULL, JR.    -------------------------------------------------------------------------------- Elmer C. Hull, Jr. Vice President and Treasurer          AGENT:     BANK OF AMERICA, N.A.     By:   /s/ RICHARD BURKE         --------------------------------------------------------------------------------     Name:   RICHARD BURKE         --------------------------------------------------------------------------------     Title:   SENIOR VICE PRESIDENT         -------------------------------------------------------------------------------- Stock Pledge Agreement 6 -------------------------------------------------------------------------------- QuickLinks STOCK PLEDGE AGREEMENT

EXHIBIT 10.16 EXECUTION COPY MANAGEMENT AGREEMENT             THIS MANAGEMENT AGREEMENT (this "Agreement") is made as of October 5, 2000, by and among Roma Restaurant Holdings Inc., a Delaware corporation (the "Company"), and Frank H. Steed ("Executive"). Certain definitions are set forth in Section 13 of this Agreement.             The Company and Executive desire to enter into an agreement (i) setting forth the terms pursuant to which the Company shall grant to Executive an option to acquire certain shares of Common; (ii) setting forth the terms and conditions of Executive's employment with the Company; and (iii) setting forth the obligation of Executive to refrain from competing with the Company and/or its Subsidiaries under certain circumstances as provided herein.         The parties hereto agree as follows: STOCK AND OPTION PROVISIONS 1.    Stock Option.         (a)   Grant of Option. Pursuant to the Plan, the Company hereby grants to Executive a nonqualified stock option (the "Option") to purchase 23.53 shares (the "Option Shares") of Common, at a price per share of $12,500.00 (the "Exercise Price"). If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) the Common into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of Option Shares shall be proportionately increased. If the Company at any time combines (by reverse stock split or otherwise) the Common into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Option Shares shall be proportionately decreased. The Option is not intended to be an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code.         (b)   Executive Bound by Plan. Attached hereto as Annex A is a copy of the Plan which is incorporated herein by reference and made a part hereof. Executive hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. The Plan should be carefully examined before any decision is made to exercise the Option.         (c)   Exercisability. Subject to Section 1(f), the Option shall be exercisable, in whole or in part, to the extent it has become vested, by written notice to the Company at any time, and from time to time, during the period of time after the Start Date and prior to the tenth anniversary of the Start Date or such earlier date upon which the Option expires as specified herein or in the Plan. The Option is subject to cancellation as provided in the Plan.         (d)   Vesting of Option. The Option shall vest and become exercisable with respect to the Option Shares as follows:                 (i) Time Option Shares. The Option shall vest with respect to up to 11.765 Option Shares (the "Time Option Shares") as follows. The Option shall vest on each vesting date set forth in the table below, with respect to the number of Time Option Shares corresponding to such vesting date as set forth in the table below, provided Executive remains continuously employed by the Company from the Start Date through such vesting date.   Vesting Date Number of Time Option Shares Which Vest The first anniversary of the Start Date 2.353 The last day of each month for the first 48 months after the first anniversary of the Start Date 0.19608333 provided , that if Executive remains continuously employed by the Company from the Start Date through the consummation of a Sale of the Company, upon such consummation the Option will immediately vest with respect to all of the unvested Time Option Shares.                 (ii) Time/Performance Option Shares. The Option shall vest with respect to up to 11.765 Option Shares (the "Performance Option Shares") as follows. The Option shall vest on the date, if any, on which Sentinel and Sentinel II, collectively, have actually received an aggregate of at least $60,000,000 in cash and/or other consideration (any such other consideration to be valued at its fair market value) in return for (or with respect to) all or any portion of their equity (common or preferred) interests in the Company, provided that (a) if Executive does not remain continuously employed by the Company from the Start Date through such date the Option shall vest only with respect to a number of Performance Option Shares equal to the number of Time Option Shares which vested pursuant to clause (i) above prior to the termination of Executive=s employment with the Company, or (b) if Executive remains continuously employed by the Company from the Start Date through such date the Option will vest with respect to all of the Performance Option Shares.         (e)   Early Expiration Upon Termination of Employment.                 (i) To the extent the Option has vested with respect to any Time Option Shares prior to or on the date Executive's employment with the Company terminates (the "Termination Date") for any reason other than termination by the Company for Cause, the Option may be exercised with respect to such vested Time Option Shares by Executive within 45 days of the Termination Date (90 days in the case of the Executive =s death). If Executive elects to exercise the Option with respect to such vested Time Option Shares within 45 days of the Termination Date (or 90 days as the case may be), such portion shall be immediately subject to the Repurchase Option pursuant to the terms and conditions set forth in Section 2. Any Time Option Shares not vested as of the Termination Date shall expire. If Executive does not elect to exercise any vested Time Option Shares within 45 days of the Termination Date (or 90 days as the case may be), such Time Option Shares shall expire and the Option shall no longer be exercisable with respect thereto.                 (ii) To the extent the Option has vested with respect to any Performance Option Shares prior to or on the Termination Date (and the termination of employment was for any reason other than termination by the Company for Cause), the Option may be exercised with respect to such vested Performance Option Shares within 45 days of the Termination Date (90 days in the case of the Executive=s death). If Executive does not elect to exercise any vested Performance Option Shares within 45 days of the Termination Date (90 days in the case of the Executive=s death), such Performance Option Shares shall expire and the Option shall no longer be exercisable with respect thereto. Any Performance Option Shares not vested as of the Termination Date, other than those Performance Option Shares, if any, which may potentially vest pursuant to Section 1(d)(ii), shall expire; provided that if the Option does not vest with respect to such Performance Option Shares, if any, on or before the date on which Sentinel and Sentinel II no longer have any equity interest in the Company, such portion of the Option shall expire on such date. If any portion of the Option vests pursuant to Section 1(d)(ii) following the Termination Date, Executive may exercise the Option with respect to such vested Performance Option Shares only in conjunction with and on the date of the consummation of the transaction which triggers such vesting; provided that the Company shall provide Executive with written notice 15 days prior to such date. If Executive does not elect to exercise the Option with respect to any Performance Option Shares which vest in conjunction with and on the date of a Sale of the Company, such Performance Option Shares shall expire and the Option shall no longer be exercisable with respect thereto. If Executive elects to exercise any portion of the Option with respect to the Performance Option Shares following the Termination Date, such portion shall be immediately subject to the Repurchase Option pursuant to the terms and conditions set forth in Section 2.                 (iii) Notwithstanding anything contained herein to the contrary, if Executive's employment is terminated by the Company for Cause, the entire Option (to the extent not yet exercised but whether vested or unvested) shall be forfeited and shall expire.         (f)   Procedure for Exercise. Executive may exercise all or a portion (to the extent it has vested) of the Option by delivering written notice of exercise to the Company, together with (i) written acknowledgment that Executive has read and has been afforded an opportunity to ask questions of management of the Company regarding all financial and other information provided to Executive regarding the Company and (ii) payment in full by delivery of a cashier's or certified check in the amount equal to the sum of (A) the Exercise Price multiplied by the number of shares of Common to be acquired and (B) the amount, if any, of any additional federal and state income taxes required to be withheld by reason of the exercise of the Option. As a condition to the exercise of any part of the Option, Executive will permit the Company to, and at the request of Executive the Company shall, deliver to him all financial and other information regarding the Company and its Subsidiaries which it believes necessary to enable Executive to make an informed investment decision.         (g)   Securities Laws Restrictions. Executive represents that when Executive exercises the Option he will be purchasing Option Shares for Executive's own account and not on behalf of others. Executive understands and acknowledges that federal and state securities laws govern and restrict Executive's right to offer, sell or otherwise dispose of any Option Shares unless Executive's offer, sale or other disposition thereof is registered under the Securities Act and state securities laws or, in the opinion of the Company' counsel, such offer, sale or other disposition is exempt from registration thereunder. Executive agrees that he will not offer, sell or otherwise dispose of any Option Shares in any manner which would: (i) require the Company to file any registration statement (or similar filing under state law) with the Securities and Exchange Commission or to amend or supplement any such filing or (ii) violate or cause the Company to violate the Securities Act, the rules and regulations promulgated thereunder or any other state or federal law. Executive further understands that the certificates for any Option Shares Executive purchases will bear the legend set forth in Section 4 hereof or such other legends as the Company deems necessary or desirable in connection with the Securities Act or other rules, regulations or laws.         (h)   Non-Transferability of the Option. The Option is personal to Executive and is not transferable by Executive. Only Executive or Permitted Transferees or their respective estates or heirs are entitled to exercise the Option.         (i)   Effect of Transfers in Violation of Agreement. The Company will not be required (i) to transfer on its books any Option Shares which have been sold or transferred in violation of any of the provisions set forth in this Agreement, or (ii) to treat as owner of such shares, to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares have been transferred in violation of this Agreement.         (j)   Delivery of Shares. The date on which Executive has delivered to the Company the items required under Section 1(f) is referred to herein as Executive's "Exercise Date". Certificates for Option Shares purchased upon exercise of the Option shall be delivered by the Company to Executive within five business days after Executive's Exercise Date.         (k)   Date of Issuance. The Option Shares issuable upon the exercise of the Option shall be deemed to have been issued to Executive on Executive's Exercise Date, and Executive shall be deemed for all purposes to have become the record holder of such Option Shares on Executive's Exercise Date.         (l)   Fully Paid. The issuance of certificates for Option Shares upon exercise of the Option shall be made without charge to Executive for any issuance tax in respect thereof or other cost incurred by the Company in connection with such exercise. Each Option Share issuable upon exercise of the Option shall, upon payment of the exercise price therefor, be fully paid and nonassessable and free from all liens and charges with respect to the issuance thereof.         (m)   Book Transfer. The Company shall not close its books against the transfer of any Option Shares issued or issuable upon the exercise of the Option in any manner which interferes with the timely exercise of the Option.         (n)   Filings. The Company shall assist and cooperate with Executive to make any required governmental filings or obtain any governmental approvals prior to or in connection with any exercise of the Option.         (o)   Reservation. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common solely for the purpose of issuance upon the exercise of the Option, such number of shares of Common as are issuable upon the exercise of the Option. All Option Shares which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Company shall take all such actions as may be necessary to assure that all such Option Shares may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange or market upon which shares of Common may be listed (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance). 2.     Repurchase Option.         (a)   Repurchase Option. In the event that Executive is no longer employed by the Company for any reason, the Executive Securities, whether held by Executive, or one or more Permitted Transferees, will be subject to repurchase by the Company and the Investors pursuant to the terms and conditions set forth in this Section 2 (the "Repurchase Option").         (b)   Termination for Reasons Other than for Cause. If Executive's employment with the Company is terminated for any reason other than for Cause, then within one year after the Termination Date, the Company may elect to purchase all or some of the Executive Securities, at a price per share equal to the Fair Market Value thereof (x) as determined on the Termination Date, if the Repurchase Notice (as defined in Section 2(d) below) has been delivered within three months after the Termination Date, or (y) as determined as of a date determined by the Board within 30 days prior to the delivery of the Repurchase Notice, if the Repurchase Notice is delivered after the third month following the Termination Date; provided that if Executive terminates his employment and violates Sections 9, 10 or 11, the repurchase price for each share of Executive Securities shall be equal to the lesser of its Fair Market Value (as of the date determined above) or the Original Value thereof.         (c)   Termination for Cause. If Executive is no longer employed by the Company as a result of Executive's termination for Cause, then within one year after the Termination Date, the Company may elect to purchase all or any portion of the Executive Securities at a price per share equal to the lower of (A) the Fair Market Value thereof (x) as determined on the Termination Date, if the Repurchase Notice (as defined in Section 2(d) below) has been delivered within three months after the Termination Date, or (y) as determined as of a date determined by the Board within 30 days prior to the delivery of the Repurchase Notice, if the Repurchase Notice is delivered after the third month following the Termination Date, and (B) the Original Value thereof.         (d)   Repurchase Procedures. The Company may elect to exercise the right to purchase all or any portion of the Executive Securities by delivering written notice (the "Repurchase Notice") to the holder or holders of such Executive Securities. The Repurchase Notice will set forth the number of shares of Executive Securities to be acquired from such holder(s), the aggregate consideration to be paid for such shares and the time and place for the closing of the transaction. If any shares of Executive Securities are held by Permitted Transferees of Executive, the Company shall purchase the shares elected to be purchased from such holder(s) of shares of Executive Securities pro rata according to the number of shares of Executive Securities held by such holder(s) at the time of delivery of such Repurchase Notice (determined as nearly as practicable to the nearest share).         (e)   Investors' Rights.                  (i) If for any reason the Company does not elect to purchase all of the Executive Securities, prior to the 90th day following the Termination Date, Sentinel and then in certain circumstances, each Investor will be entitled to exercise the Repurchase Option, in the manner set forth in Section 2(d), with respect to the Executive Securities that the Company has not elected to purchase (the "Available Shares"). As soon as practicable, but in any event within thirty (30) days after the Company determines that there will be Available Shares, the Company will deliver written notice (the "Option Notice") to all Investors setting forth the number of Available Shares and the price for each Available Share.                  (ii) Sentinel will be permitted to purchase all or some of the number (the "Sentinel Portion") of Available Shares equal to the product of (A) Sentinel's Pro Rata Share and (B) the number of Available Shares, by delivering written notice to the Company and the other Investors within 30 days after receipt of the Option Notice from the Company. The quotient determined by dividing (x) the number of shares of Available Shares elected to be purchased by Sentinel and (y) the Sentinel Portion, shall be referred to as the "Sentinel Percentage." If Sentinel elects to purchase any of the Available Shares, each of the other Investors shall be permitted to purchase all or some of the number of Available Shares equal to the product of (m) the Sentinel Percentage, (n) such Investor's Pro Rata Share and (o) the number of Available Shares, by delivering written notice to the Company within 30 days after receipt of the Option Notice from the Company.         (f)   Closing. The closing of the transactions contemplated by this Section 2 will take place on the date designated by the Company in the Repurchase Notice, which date will not be more than 90 days after the delivery of such notice. The Company and/or the Investors, as the case may be, will pay for the Executive Securities to be purchased pursuant to the Repurchase Option by delivery of a cashier=s check payable to the holder of Executive Securities. The Company and/or the Investors, as the case may be, will receive customary representations and warranties from Executive regarding the sale of the Executive Securities, including but not limited to the representation that Executive has good and marketable title to the Executive Securities to be transferred free and clear of all liens, claims and other encumbrances.         (g)   Restrictions on Repurchase. Notwithstanding anything to the contrary contained in this Agreement, all repurchases of Executive Securities by the Company shall be subject to applicable restrictions contained in the Delaware General Corporation Law and in the Company's and its Subsidiaries' debt and equity financing agreements. If any such restrictions prohibit the repurchase of Executive Securities hereunder which the Company is otherwise entitled or required to make, the Company may make such repurchases as soon as it is permitted to do so under such restrictions but in no event more than one year after such restrictions prevent such repurchase.         (h)   Termination of Repurchase Right. The right of the Company and the Investors to repurchase Executive Securities pursuant to this Section 2 shall terminate upon the first to occur of an Sale of the Company or a Qualified Public Offering. 3.     Stockholders Agreement. The parties hereto acknowledge that the shares of Executive Securities are subject to the terms and conditions of the Stockholders Agreement and such shares shall be deemed to be ACompany Shares@ and Executive shall be deemed to be a AStockholder@ for all purposes of the Stockholders Agreement including, without limitation, Section 6 of the Stockholders Agreement. Furthermore, the Option Shares (to the extent they have vested or may still potentially vest hereunder) will be deemed to be AStockholder Shares@ for purposes of all calculations under Section 6 of the Stockholders Agreement, notwithstanding the proviso to the definition of AStockholder Shares@ contained in the Stockholders Agreement and notwithstanding that the Option may not yet have been exercised with respect to such Option Shares. 4.       Restrictions on Transfer.                 (a)  The certificates representing the Executive Securities shall bear the following legend: > > "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON , > > ____, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED > > (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN > > EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM > > REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE > > ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE > > OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A MANAGEMENT AGREEMENT > > AMONG ROMA RESTAURANT HOLDINGS, INC. (THE "COMPANY") AND EXECUTIVE DATED AS > > OF ____________, 2000, AS AMENDED AND MODIFIED FROM TIME TO TIME. A COPY OF > > SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S > > PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."                 (b)     No holder of Executive Securities may sell, transfer or dispose of any Executive Securities (except pursuant to an effective registration statement under the Securities Act) without first delivering to the Company an opinion of counsel (reasonably acceptable in form and substance to the Company) that neither registration nor qualification under the Securities Act and applicable state securities laws is required in connection with such transfer. -------------------------------------------------------------------------------- EMPLOYMENT PROVISIONS 5.    Employment. The Company shall employ Executive, and Executive hereby accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Start Date and ending as provided in Section 8 hereof (the "Employment Period"). 6.     Position and Duties.         (a)   During the Employment Period, Executive shall serve as the Chief Executive Officer of the Company and shall have the normal duties, responsibilities and authority of the Chief Executive Officer, subject to the power of the Board to expand or limit such duties, responsibilities and authority and to override actions of the Chief Executive Officer. Executive shall also serve as a director on the Board during the Employment Period. Executive agrees to resign from the Board upon the termination of the Employment Period.         (b)   Executive shall report to the Board, and Executive shall devote his best efforts and substantially all of his business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company and its Subsidiaries. Executive shall perform his duties and responsibilities to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner. 7.       Base Salary; Benefits and Bonuses.         (a)   During the Employment Period, Executive's base salary shall be $300,000 per annum or such higher rate as the Board may designate in its sole discretion based on an annual review (the "Base Salary"), which salary shall be payable in regular installments in accordance with the Company's general payroll practices and shall be subject to customary withholding. In addition, during the Employment Period, Executive shall be entitled to participate in all of the Company's employee benefit programs for which senior executive employees of the Company and its Subsidiaries are generally eligible; provided that Executive shall be entitled to a car allowance of $10,160 per year and three weeks paid vacation.         (b)   The Company shall reimburse Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documentation of such expenses.         (c)   In addition to the Base Salary, the Board shall award a bonus to Executive following the end of each fiscal year equal to up to 50% of Executive's Base Salary based upon performance, determined at the discretion of the Board. In any given fiscal year if the Company were to just meet the performance goals contained in the Company=s management plan, the bonus awarded under this Section 7(c) will be no less than 25% of Executive=s Base Salary.         (d)   The Company shall pay Executive a bonus of $100,000 (in addition to any other bonus Executive may be entitled to hereunder) on the one year anniversary of the Start Date; provided that if Executive=s employment with the Company terminates prior to such one year anniversary the amount of such bonus shall be prorated based on the number of days in such one year period elapsed after the Start Date until the date of such termination. 8.     Term; Termination.         (a)   The Employment Period shall end on the fifth annual anniversary of the Start Date; provided that (i) the Employment Period shall terminate prior to such date upon Executive's death or Disability; (ii) the Employment Period may be terminated by the Company at any time prior to such date for Cause or without Cause; and (iii) the Employment Period may be terminated by Executive at any time for any reason (a "Voluntary Termination").         (b)   Upon (1) a Voluntary Termination of the employment relationship by Executive other than within 10 days of a Good Reason Event, or (2) termination of Executive's employment relationship by the Company for Cause, all future compensation or bonuses to which Executive would otherwise be entitled and all future benefits for which Executive would otherwise be eligible shall cease and terminate as of the date of such termination; provided, however, that any salary, bonus, incentive payment, deferred compensation or other compensation or benefit which has been earned by or accrued for the benefit of Executive prior to the date of termination shall not be forfeited and shall be paid to Executive promptly.         (c)   Upon a termination of Executive's employment other than (i)  a termination by the Company for Cause, (ii)  a Voluntary Termination of the employment relationship by Executive other than within 10 days of a Good Reason Event, or (iii) on the fifth anniversary of the Start Date, Executive shall be entitled (so long as he executes a form of the release attached hereto as Exhibit A), in consideration of Executive's continuing obligations hereunder after such termination (including, without limitation, Executive's non-competition obligations), to receive his Base Salary, payable bi-weekly, and fringe benefits, as if Executive's employment (which shall cease on the date of such termination) had continued for the twelve (12) months following termination; provided, that Executive shall be required to use his reasonable best efforts to obtain, as expeditiously as possible, employment with a salary comparable to the Base Salary. In such event, Executive's right to receive the amounts and benefits set forth in this Section 8(c) shall terminate. Notwithstanding the foregoing, if Executive obtains employment in accordance with this Section 8(c) and the salary to be paid to Executive is less than the Base Salary, the Company shall pay to Executive an amount equal to such deficiency, payable bi-weekly, for the remainder of the severance period. MISCELLANEOUS PROVISIONS 9.        Confidential Information. Executive acknowledges that the information, observations and data obtained by him while employed by the Company and its Subsidiaries (including those obtained while employed by the Company prior to the date of this Agreement) concerning the business or affairs of the Company or any of its Subsidiaries ("Confidential Information") are the property of the Company or such Subsidiary. Therefore, Executive agrees that he shall not disclose to any unauthorized person or use for his own purposes any Confidential Information without the prior written consent of the Board, unless and to the extent that (i) such information was otherwise available to Executive from a source other than the Company or (ii) the aforementioned matters become generally known to and available for use by the public other than as a result of Executive's acts or omissions. Executive shall deliver to the Company at the termination of the Employment Period, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) or the business of the Company or any Subsidiary which he may then possess or have under his control. 10.         Inventions and Patents. Executive acknowledges that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information (whether or not patentable) which relate to the Company's or any of its Subsidiaries' actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by Executive while employed by the Company and its Subsidiaries ("Work Product") belong to the Company or such Subsidiary. Executive shall promptly disclose such Work Product to the Board and perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments). 11.         Non-Compete, Non-Solicitation.         (a)   In further consideration of the compensation to be paid to Executive hereunder, Executive acknowledges that in the course of his employment with the Company prior to the date of this Agreement he has become familiar, and during his continued employment with the Company he shall become familiar, with the Company's trade secrets and with other Confidential Information concerning the Company and its Subsidiaries and that his services have been and shall be of special, unique and extraordinary value to the Company and its Subsidiaries. Therefore, Executive agrees that, during the period commencing on the Start Date and ending on the eighteenth month anniversary of the termination of the Employment Period (the "Noncompete Period"), he shall not directly or indirectly own any interest in, manage, control, participate in, consult with, or render services for, any Person that is in the casual dining restaurant business in the United States for which ribs account for at least 20% of such Person=s sales. Nothing herein shall prohibit Executive from being a passive owner of not more than 5% of the outstanding stock of any class of a corporation which is publicly traded, so long as Executive has no active participation in the business of such corporation.         (b)   During the Noncompete Period, Executive shall not directly, or indirectly through another entity, (i) induce or attempt to induce any executive employee, district manager, store manager or assistant store manager of the Company or any Subsidiary (collectively, the "Restricted Employees") to leave the employ of the Company or such Subsidiary, or in any way interfere with the relationship between the Company or any Subsidiary and any Restricted Employee, (ii) hire any person who was a Restricted Employee at any time during the 6 months prior to the termination of the Employment Period, or (iii) induce or attempt to induce any supplier, licensee, licensor, franchisee or other material business relation of the Company or any Subsidiary to cease doing business with the Company or such Subsidiary, or in any way interfere with the relationship between any such supplier, licensee, licensor or material business relation and the Company or any Subsidiary (including, without limitation, making any negative statements or communications about the Company or its Subsidiaries). 12.       Enforcement. If, at the time of enforcement of Sections 9, 10 or 11 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area. Because Executive's services are unique and because Executive has access to Confidential Information and Work Product, the parties hereto agree that money damages would not be an adequate remedy for any breach of this Agreement. Therefore, in the event a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). In addition, in the event of an alleged breach or violation by Executive of Section 11, the Noncompete Period shall be tolled until such breach or violation has been duly cured. Executive agrees that the restrictions contained in Section 11 are reasonable. 13.       Definitions. All references to a fiscal year refer to the Company=s fiscal year.         "Affiliate" means, with respect to any Person, any other Person controlling, controlled by, or under common control with such Person. For purposes of this Agreement, the term "control" (including, with correlative meanings, the terms "controlled by" and "under common control with" as used with respect to any Person) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person whether through ownership of voting securities, by contract or otherwise.       "Board" means the board of directors of the Company.       "Cause" means (i) a material breach of this Agreement by Executive that is not cured or remedied and continues for five (5) business days after the Board has given written notice to Executive specifying the manner in which Executive has materially breached this Agreement, (ii) gross negligence (which is not cured within 5 days after written notice from the Board) or willful misconduct by Executive in the performance of his duties as an executive of the Company, (iii) Executive's commission of a felony involving dishonesty, disloyalty or fraud with respect to the Company or moral turpitude, or (iv) Executive=s continued failure to obey lawful written directions of the Board which written directions are not materially inconsistent with Executive=s duties and responsibilities hereunder.       "Change of Ownership" is any event pursuant to which Sentinel and Sentinel II together with their Affiliates collectively cease to own at least 50% of the aggregate number of shares of Common which Sentinel and Sentinel II owns as of the date hereof (subject to adjustments for stock splits, combinations, dividends and other similar transactions).       "Common" means the Company's Common Stock, par value $.01 per share.       "Disability" means Executive's inability, due to illness, accident, injury, physical or mental incapacity or other disability, to carry out effectively his duties and obligations to the Company or to participate effectively and actively in the management of the Company for a period of at least 60 consecutive days as determined by an independent physician.       "Executive Securities" means (i) the Option Shares which are issued and outstanding from time to time, (ii) any other shares of Common otherwise issued to, acquired by or held by Executive, and (iii) shares of the Company's capital stock issued with respect to the securities specified in clauses (i) or (ii) above by way of a stock split, stock dividend or other recapitalization; provided that Executive Securities shall continue to be Executive Securities in the hands of any holder other than Executive (except for the Company and the Investors and except for transferees in a Public Sale), and except as otherwise provided herein, each such other holder of Executive Securities shall succeed to all rights and obligations attributable to Executive as a holder of Executive Securities hereunder.       "Fair Market Value" of each share of Executive Securities, as the case may be, means the market value as determined in good faith mutually by the Board and Executive; provided that if the parties cannot agree within 30 days, the Fair Market Value will be decided by a mutually acceptable independent investment bank, whose determination will be final and binding.       "Good Reason Event" means: > (a)   Notwithstanding the exercise of the power granted to the Company and the > Board by Section 6(a) hereof, the assignment to Executive of any duties > inconsistent in any material respect with Executive's position (including > status, offices, titles and reporting requirements), authority, duties or > responsibilities initially assigned to Executive and as contemplated by > Section 6 of this Agreement, or any other action that results in a diminution > in such position, authority, duties or responsibilities, excluding for this > purpose an isolated, insubstantial and inadvertent action not taken in bad > faith that is remedied within 10 days after receipt of written notice thereof > from Executive to the Company; or > > (b)   Any failure by the Company to comply with any of the provisions of this > Agreement, other than an isolated, insubstantial and inadvertent failure not > occurring in bad faith that is remedied within 10 days after receipt of > written notice thereof from Executive to the Company.       "Investor Shares" means (i) any Common acquired by the Investors, and (ii) any equity securities of the Company issued or issuable directly or indirectly with respect to the securities referred to in clause (i) above by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization; provided that Investor Shares shall not include (a) shares of Common issued pursuant to the conversion or exercise of any options, warrants or other convertible securities or (b) any equity securities of the Company issued or issuable with respect to the securities referred to in clause (a) above in connection with a combination or split of shares, recapitalization, merger, consolidation or other reorganization. >       "Investors" means the parties listed on Schedule 1 attached hereto, > provided that if a party who is an employee of the Company as of the date > hereof or becomes an employee of the Company at any time after the date hereof > ceases to be an employee of the Company hereafter or thereafter, such party > shall be deemed to have been removed from the Schedule and shall no longer be > deemed an Investor for purposes of this Agreement.         "Original Value" means with respect to each share of Executive Securities, the purchase price paid for such share (as proportionally adjusted for all stock splits, stock dividends and other recapitalizations subsequent to the date hereof).         "Permitted Transferee" has the meaning set forth in the Stockholders Agreement.         "Person" means any natural person, corporation, partnership, limited liability company, trust, unincorporated organization or other entity.         "Plan" means the Company=s 1998 Stock Option Plan.         "Pro Rata Share" means, with respect to each Investor, the quotient determined by dividing (i) the total number of Investor Shares held by such Investor, by (ii) the total number of Investor Shares held by all Investors.         "Public Sale" means any sale pursuant to a registered public offering under the Securities Act or any sale to the public pursuant to Rule 144 promulgated under the Securities Act effected through a broker, dealer or market maker.         "Qualified Public Offering" has the meaning set forth in the Stockholders Agreement.         "Sale of the Company" means the first to occur of any transaction (i) following which there has been a Change of Ownership, or (ii) involving the sale of substantially all of the Company's operating assets determined on a consolidated basis.         "Securities Act" means the Securities Act of 1933, as amended from time to time.         "Sentinel" means Sentinel Capital Partners, L.P., a Delaware limited partnership.         "Sentinel II" means Sentinel Capital Partners II, L.P., a Delaware limited partnership.         "Start Date" means the date as mutually agreed to by the Company and Executive, which shall not be more than 15 days from the date hereof, on which Executive commences his employment with the Company.         "Stockholders Agreement" means that certain Stockholders Agreement dated as of July 1, 1998, by and among the Company and the Company's stockholders.         "Subsidiary" means any corporation, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by the Company or (ii) if a partnership, association or other business entity, a majority of the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by the Company. For purposes hereof, the Company shall be deemed to have a majority ownership interest in a partnership, association or other business entity if the Company, directly or indirectly, is allocated a majority of partnership, association, or other business entity gains or losses, or is or controls the managing director or general partner (or Person having like authority) of such partnership, association or other business entity.         "Termination Date" has the meaning set forth in Section 1(e). 14.     Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the Investors at the addresses indicated in the Company's records and to the other recipients at the address indicated below: If to Executive:                      Frank H. Steed                                                41 Masland Circle                                                Dallas, TX 75230 with a copy to (which            Akin, Gump, Strauss, Hauer & Feld, LLP shall not constitute                 300 Covent Street, #1500 notice to Executive):              San Antonio, TX 78205 If to the Company:                                                 c/o Sentinel Capital Partners, L.P.                                                 777 Third Avenue, 32nd Floor                                                 New York, New York 10022                                                 Attention:      David S. Lobel                                                                      John F. McCormack                                                                      Eric D. Bommer with a copy to (which              Kirkland & Ellis shall not constitute                   Citicorp Center notice to the Company:            153 East 53rd Street                                                   New York, New York 10022                                                   Attention: Frederick  Tanne, Esquire                                                      - and-                                                   David Short                                                   Romacorp, Inc.                                                   9304 Forest Lane, Suite 200                                                   Dallas, TX 75243 or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the U.S. mail. 15.   General Provisions.         (a)   Transfers in Violation of Agreement. Any transfer or attempted transfer of any Executive Securities in violation of any provision of this Agreement shall be void, and the Company shall not record such transfer on its books or treat any purported transferee of such Executive Securities as the owner of such stock for any purpose.         (b)   Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.         (c)   Complete Agreement. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.         (d)   Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.         (e)   Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company, the Investors and their respective successors and assigns (including subsequent holders of Executive Securities); provided that the rights and obligations of Executive under this Agreement shall not be assignable except in connection with a permitted transfer of Executive Securities hereunder.         (f)   Choice of Law. The corporate law of the State of Delaware shall govern all questions concerning the relative rights of the Company, Executive and the Investors. All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas.         (g)   Remedies. Each of the parties to this Agreement (including the Investors) shall be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorney's fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages would not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement .         (h)   Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive. The provisions of Section 2 may be amended and waived only with the prior written consent of the Investors.         (i)   Third-Party Beneficiaries. The parties hereto acknowledge and agree that the Investors are third party beneficiaries of this Agreement. This Agreement will inure to the benefit of and be enforceable by the Investors and their successors and assigns . * * * * *       IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. ROMA RESTAURANT HOLDINGS INC.   By: /s/Richard A. Peabody                  Its:  President                                                     /s/Frank H. Steed                                  Frank H. Steed                                                 --------------------------------------------------------------------------------     Schedule 1   Sentinel Capital Partners, L.P. Sentinel Capital Partners II, L.P. Omega Partners, L.P. The Provident Bank Travelers Casualty and Surety Company The Travelers Insurance Company The Travelers Life and Annuity Company The Phoenix Insurance Company NPC Restaurant Holdings, Inc.

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.3 As Adopted by the Board of Directors on April 26, 1999, and amended on April 1, 2001 and October 17, 2001 ACTIVISION, INC. 1999 INCENTIVE PLAN     ACTIVISION, INC., a corporation formed under the laws of the State of Delaware (the "Company"), hereby establishes and adopts the following 1999 Incentive Plan (the "Plan"). RECITALS     WHEREAS, the Company desires to encourage high levels of performance by those individuals who are key to the success of the Company, to attract new individuals who are highly motivated and who will contribute to the success of the Company and to encourage such individuals to remain as directors and/or employees of the Company and its subsidiaries by increasing their proprietary interest in the Company's growth and success.     WHEREAS, to attain these ends, the Company has formulated the Plan embodied herein to authorize the granting of incentive awards through grants of share options ("Options"), grants of share appreciation rights, grants of Share Purchase Awards (hereafter defined) and grants of Restricted Share Awards (hereafter defined) to those individuals whose judgment, initiative and efforts are or have been responsible for the success of the Company.     NOW, THEREFORE, the Company hereby constitutes, establishes and adopts the following Plan and agrees to the following provisions: ARTICLE 1. PURPOSE OF THE PLAN     1.1.  Purpose.  The purpose of the Plan is to assist the Company and its subsidiaries in attracting and retaining selected individuals to serve as directors, officers, consultants, advisors and other key employees of the Company and its subsidiaries who will contribute to the Company's success and to achieve long-term objectives which will inure to the benefit of all shareholders of the Company through the additional incentive inherent in the ownership or increased ownership of the Company's shares of common stock ("Shares"). Options granted under the Plan will be either "incentive share options," intended to qualify as such under the provisions of Section 422 of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), or "nonqualified share options." For purposes of the Plan, the term "subsidiary" shall mean "subsidiary corporation," as such term is defined in Section 424(f) of the Code, and "affiliate" shall have the meaning set forth in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For purposes of the Plan, the term "Award" shall mean a grant of an Option, a grant of a share appreciation right, a grant of a Share Purchase Award, a grant of a Restricted Share Award, or any other award made under the terms of the Plan. ARTICLE 2. SHARES SUBJECT TO AWARDS     2.1.  Number of Shares.  Subject to the adjustment provisions of Section 9.10 hereof, the aggregate number of Shares which may be issued under Awards under the Plan, whether pursuant to Options, share appreciation rights, Share Purchase Awards or Restricted Share Awards shall not exceed 5,000,000. No Options to purchase fractional Shares shall be granted or issued under the Plan. For -------------------------------------------------------------------------------- purposes of this Section 2.1, the Shares that shall be counted toward such limitation shall include all Shares: (1)issued or issuable pursuant to Options that have been or may be exercised; (2)issued or issuable pursuant to Share Purchase Awards; and (3)issued as, or subject to issuance as a Restricted Share Award.     2.2.  Shares Subject to Terminated Awards.  The Shares covered by any unexercised portions of terminated Options granted under Articles 4 and 6, Shares forfeited as provided in Section 8.2(a) and Shares subject to any Awards which are otherwise surrendered by the Participant without receiving any payment or other benefit with respect thereto may again be subject to new Awards under the Plan. In the event the purchase price of an Option is paid in whole or in part through the delivery of Shares, the number of Shares issuable in connection with the exercise of the Option shall not again be available for the grant of Awards under the Plan. Shares subject to Options, or portions thereof, which have been surrendered in connection with the exercise of share appreciation rights shall not again be available for the grant of Awards under the Plan.     2.3.  Character of Shares.  Shares delivered under the Plan may be authorized and unissued Shares or Shares acquired by the Company, or both.     2.4.  Limitations on Grants to Individual Participant.  Subject to adjustments pursuant to the provisions of Section 10.10 hereof, the maximum number of Shares with respect to which Options or stock appreciation rights may be granted hereunder to any employee during any fiscal year shall be 500,000 Shares (the "Limitation"). If an Option is cancelled, the cancelled Option shall continue to be counted toward the Limitation for the year granted. An Option (or a stock appreciation right) that is repriced during any fiscal year is treated as the cancellation of the Option (or stock appreciation right) and a grant of a new Option (or stock appreciation right) for purposes of the Limitation for that fiscal year. ARTICLE 3. ELIGIBILITY AND ADMINISTRATION     3.1.  Awards to Employees and Directors.  (a) Participants who receive (i) Options under Articles 4 and 6 hereof or share appreciation rights under Article 5 ("Optionees"), and (ii) Share Purchase Awards under Article 7 or Restricted Share Awards under Article 8 (in either case, a "Participant"), shall consist of such officers, key employees, consultants, representatives and other contractors and agents and Directors (hereinafter defined) of the Company or any of its subsidiaries or affiliates as the Committee shall select from time to time, provided, however, that an Option that is intended to qualify as an "incentive share option" may be granted only to an individual that is an employee of the Company or any of its subsidiaries. The Committee's designation of an Optionee or Participant in any year shall not require the Committee to designate such person to receive Awards or grants in any other year. The designation of an Optionee or Participant to receive Awards or grants under one portion of the Plan shall not require the Committee to include such Optionee or Participant under other portions of the Plan. (b)No Option which is intended to qualify as an "incentive share option" may be granted to any employee or Director who, at the time of such grant, owns, directly or indirectly (within the meaning of Sections 422(b)(6) and 424(d) of the Code), shares possessing more than 10% of the total combined voting power of all classes of shares of the Company or any of its subsidiaries or affiliates, unless at the time of such grant, (i) the option price is fixed at not less than 110% of the Fair Market Value (as defined below) of the Shares subject to such 2 -------------------------------------------------------------------------------- Option, determined on the date of the grant, and (ii) the exercise of such Option is prohibited by its terms after the expiration of five years from the date such Option is granted.     3.2.  Administration.  (a) The Plan shall be administered by a committee (the "Committee") consisting of not fewer than two Directors of the Company (the directors of the Company being hereinafter referred to as the "Directors"), as designated by the Directors. The Directors may remove from, add members to, or fill vacancies in the Committee. Unless otherwise determined by the Directors, each member of the Committee will be a "non-employee director" within the meaning of Rule 16b-3 (or any successor rule) of the Exchange Act and an "outside director" within the meaning of Section 162(m)(4)(C)(i) of the Code and the regulations thereunder.     Notwithstanding any other provision of this Plan, any Award to a member of the Committee must be approved by the Board of Directors of the Company (excluding Directors who are also members of the Committee) to be effective. (b)The Committee is authorized, subject to the provisions of the Plan, to establish such rules and regulations as it may deem appropriate for the conduct of meetings and proper administration of the Plan. All actions of the Committee shall be taken by majority vote of its members. (c)Subject to the provisions of the Plan, the Committee shall have authority, in its sole discretion, to grant Awards under the Plan, to interpret the provisions of the Plan and, subject to the requirements of applicable law, including Rule 16b-3 of the Exchange Act, to prescribe, amend, and rescind rules and regulations relating to the Plan or any Award thereunder as it may deem necessary or advisable. All decisions made by the Committee pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including the Company, its shareholders, Directors and employees, and other Plan participants. ARTICLE 4. OPTIONS     4.1.  Grant of Options. Directors, Officers and Other Key Employees. The Committee shall determine, within the limitations of the Plan, those Directors, officers and other key employees of the Company and its subsidiaries and affiliates to whom Options are to be granted under the Plan, the number of Shares that may be purchased under each such Option and the option price, and shall designate such Options at the time of the grant as either "incentive share options" or "nonqualified share options"; provided, however, that Options granted to employees of an affiliate (that is not also a subsidiary) or to non-employees of the Company may only be "nonqualified share options."     4.2.  Share Option Agreements; etc.  All Options granted pursuant to Article 4 and Article 6 herein (a) shall be authorized by the Committee and (b) shall be evidenced in writing by share option agreements ("Share Option Agreements") in such form and containing such terms and conditions as the Committee shall determine which are not inconsistent with the provisions of the Plan, and, with respect to any Share Option Agreement granting Options which are intended to qualify as "incentive share options," are not inconsistent with Section 422 of the Code. Granting of an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such option. Any individual who is granted an Option pursuant to this Article 4 and Article 6 herein may hold more than one Option granted pursuant to such Articles at the same time and may hold both "incentive share options" and "nonqualified share options" at the same time. To the extent that any Option does not qualify as an "incentive share option" (whether because of its provisions, the time or manner of its exercise or otherwise) such Option or the portion thereof which does not so qualify shall constitute a separate "nonqualified share option."     4.3.  Option Price.  Subject to Section 3.1(b), the option price per each Share purchasable under any "incentive share option" granted pursuant to this Article 4 and any "nonqualified share option" 3 -------------------------------------------------------------------------------- granted pursuant to Article 6 herein shall be determined by the Committee, but in the case of an "incentive share option" shall not be less than 100% of the Fair Market Value (as hereinafter defined) of such Share on the date of the grant of such Option. The option price per share of each Share purchasable under any "nonqualified share option" granted pursuant to this Article 4 shall be determined by the Committee at the time of the grant of such Option, but shall not be less than 85% of the Fair Market Value of such Share on the date of the grant of such Option.     4.4.  Other Provisions.  Options granted pursuant to this Article 4 shall be made in accordance with the terms and provisions of Article 10 hereof and any other applicable terms and provisions of the Plan. ARTICLE 5. SHARE APPRECIATION RIGHTS     5.1.  Grant and Exercise.  Share appreciation rights may be granted in conjunction with all or part of any Option granted under the Plan, as follows: (i) in the case of a nonqualified share option, such rights may be granted either at the time of the grant of such option or at any subsequent time during the term of the option; and (ii) in the case of an incentive share option, such rights may be granted only at the time of the grant of such option. A "share appreciation right" is a right to receive cash or Shares, as provided in this Article 5, in lieu of the purchase of a Share under a related Option. A share appreciation right or applicable portion thereof shall terminate and no longer be exercisable upon the termination or exercise of the related Option, and a share appreciation right granted with respect to less than the full number of Shares covered by a related Option shall not be reduced until, and then only to the extent that, the exercise or termination of the related Option exceeds the number of Shares not covered by the share appreciation right. A share appreciation right may be exercised by the holder thereof (the "Holder"), in accordance with Section 5.2 of this Article 5, by giving written notice thereof to the Company and surrendering the applicable portion of the related Option. Upon giving such notice and surrender, the Holder shall be entitled to receive an amount determined in the manner prescribed in Section 5.2 of this Article 5. Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the related share appreciation rights have been exercised.     5.2.  Terms and Conditions.  Share appreciation rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following: (a)Share appreciation rights shall be exercisable only at such time or times and to the extent that the Options to which they relate shall be exercisable in accordance with the provisions of the Plan. (b)Upon the exercise of a share appreciation right, a Holder shall be entitled to receive up to, but no more than, an amount in cash or whole Shares as determined by the Committee in its sole discretion equal to the excess of the then Fair Market Value of one Share over the option price per Share specified in the related Option multiplied by the number of Shares in respect of which the share appreciation right shall have been exercised. The Holder shall specify in his written notice of exercise, whether payment shall be made in cash or in whole Shares. Each share appreciation right may be exercised only at the time and so long as a related Option, if any, would be exercisable or as otherwise permitted by applicable law. (c)Upon the exercise of a share appreciation right, the Option or part thereof to which such share appreciation right is related shall be deemed to have been exercised for the purpose of the limitation of the number of Shares to be issued under the Plan, as set forth in Section 2.1 of the Plan. 4 -------------------------------------------------------------------------------- (d)With respect to share appreciation rights granted in connection with an Option that is intended to be an "incentive share option," the following shall apply: (i)No share appreciation right shall be transferable by a Holder otherwise than by will or by the laws of descent and distribution, and share appreciation rights shall be exercisable, during the Holder's lifetime, only by the Holder. (ii)Share appreciation rights granted in connection with an Option may be exercised only when the Fair Market Value of the Shares subject to the Option exceeds the option price at which Shares can be acquired pursuant to the Option. ARTICLE 6. RELOAD OPTIONS     6.1.  Authorization of Reload Options.  Concurrently with the award of any Option (such Option hereinafter referred to as the "Underlying Option") to any participant in the Plan, the Committee may grant one or more reload options (each, a "Reload Option") to such participant to purchase for cash or Shares a number of Shares as specified below. A Reload Option shall be exercisable for an amount of Shares equal to (i) the number of Shares delivered by the Optionee to the Company to exercise the Underlying Option, and (ii) to the extent authorized by the Committee, the number of Shares used to satisfy any tax withholding requirement incident to the exercise of the Underlying Option, subject to the availability of Shares under the Plan at the time of such exercise. Any Reload Option may provide for the grant, when exercised, of subsequent Reload Options to the extent and upon such terms and conditions consistent with this Article 6, as the Committee in its sole discretion shall specify at or after the time of grant of such Reload Option. The grant of a Reload Option will become effective upon the exercise of an Underlying Option or Reload Option by the Optionee delivering to the Company Shares owned by the Optionee in payment of the exercise price and/or tax withholding obligations. Notwithstanding the fact that the Underlying Option may be an "incentive share option," a Reload Option is not intended to qualify as an "incentive share option" under Section 422 of the Code.     6.2.  Reload Option Amendment.  Each Share Option Agreement shall state whether the Committee has authorized Reload Options with respect to the Underlying Option. Upon the exercise of an Underlying Option or other Reload Option, the Reload Option will be evidenced by an amendment to the underlying Share Option Agreement.     6.3.  Reload Option Price.  The option price per Share payable upon the exercise of a Reload Option shall be the Fair Market Value of a Share on the date the grant of the Reload Option becomes effective.     6.4.  Term and Exercise.  Each Reload Option is fully exercisable immediately from the effective date of grant. The term of each Reload Option shall be equal to the remaining option term of the Underlying Option.     6.5.  Termination of Employment.  No additional Reload Options shall be granted to Optionees when Options and/or Reload Options are exercised pursuant to the terms of this Plan following termination of the Optionee's employment unless the Committee, in its sole discretion, shall determine otherwise.     6.6.  Applicability of Other Sections.  Except as otherwise provided in this Article 6, the provisions of Article 9 applicable to Options shall apply equally to Reload Options. 5 -------------------------------------------------------------------------------- ARTICLE 7. SHARE PURCHASE AWARDS     7.1.  Grant of Share Purchase Award.  The term "Share Purchase Award" means the right to purchase Shares of the Company and to pay for such Shares through a loan made by the Company to an employee (a "Purchase Loan") as set forth in this Article 7.     7.2.  Terms of Purchase Loans.  (a) Purchase Loan. Each Purchase Loan shall be evidenced by a promissory note. The term of the Purchase Loan shall be a period of years, as determined by the Committee, and the proceeds of the Purchase Loan shall be used exclusively by the Participant for purchase of Shares from the Company at a purchase price equal to the Fair Market Value on the date of the Share Purchase Award. (b)Interest on Purchase Loan.  A Purchase Loan shall be non-interest bearing or shall bear interest at whatever rate the Committee shall determine (but not in excess of the maximum rate permissible under applicable law), payable in a manner and at such times as the Committee shall determine. Those terms and provisions as the Committee shall determine shall be incorporated into the promissory note evidencing the Purchase Loan. (c)Forgiveness of Purchase Loan.  Subject to Section 7.4 hereof, the Company may forgive the repayment of up to 100% of the principal amount of the Purchase Loan, subject to such terms and conditions as the Committee shall determine and set forth in the promissory note evidencing the Purchase Loan. A Participant's Purchase Loan can be prepaid at any time, and from time to time, without penalty.     7.3.  Security for Loans.  (a) Stock Power and Pledge. Purchase Loans granted to Participants shall be secured by a pledge of the Shares acquired pursuant to the Share Purchase Award. Such pledge shall be evidenced by a pledge agreement (the "Pledge Agreement") containing such terms and conditions as the Committee shall determine. Purchase Loans shall be recourse or non-recourse with respect to a Participant, as determined from time to time by the Committee. The share certificates for the Shares purchased by a Participant pursuant to a Share Purchase Award shall be issued in the Participant's name, but shall be held by the Company as security for repayment of the Participant's Purchase Loan together with a stock power executed in blank by the Participant (the execution and delivery of which by the Participant shall be a condition to the issuance of the Share Purchase Award). The Participant shall be entitled to exercise all rights applicable to such Shares, including, but not limited to, the right to vote such Shares and the right to receive dividends and other distributions made with respect to such Shares. When the Purchase Loan and any accrued but unpaid interest thereon has been repaid or otherwise satisfied in full, the Company shall deliver to the Participant the share certificates for the Shares purchased by a Participant under the Share Purchase Award. (b)Release and Delivery of Share Certificates During the Term of the Purchase Loan.  The Company shall release and deliver to each Participant certificates for Shares purchased by a Participant pursuant to a Share Purchase Award, in such amounts and on such terms and conditions as the Committee shall determine, which shall be set forth in the Pledge Agreement. (c)Release and Delivery of Share Certificates Upon Repayment of the Purchase Loan.  The Company shall release and deliver to each Participant certificates for the Shares purchased by the Participant under the Share Purchase Award and then held by the Company, provided the Participant has paid or otherwise satisfied in full the balance of the Purchase Loan and any accrued but unpaid interest thereon. In the event the balance of the Purchase Loan is not repaid, forgiven or otherwise satisfied within 90 days after (i) the date repayment of the Purchase Loan is due (whether in accordance with its term, by reason of acceleration or otherwise), or (ii) such longer time as the Committee, in its discretion, shall provide for 6 -------------------------------------------------------------------------------- repayment or satisfaction, the Company shall retain those Shares then held by the Company in accordance with the Pledge Agreement. (d)Recourse Purchase Loans.  Notwithstanding Sections 7.3(a), (b) and (c) above, in the case of a recourse Purchase Loan, the Committee may make such Purchase Loan on such terms as it determines, including without limitation, not requiring a pledge of the acquired Shares.     7.4.  Termination of Employment.  (a) Termination of Employment by Death, Disability or by the Company Without Cause; Change of Control. In the event of a Participant's termination of employment by reason of death, "disability" or by the Company without "cause," or in the event of a "change of control," the Committee shall have the right (but shall not be required) to forgive the remaining unpaid amount (principal and interest) of the Purchase Loan in whole or in part as of the date of such occurrence. "Change of Control," "disability" and "cause" shall have the respective meanings as set forth in the promissory note evidencing the Purchase Loan. (b)Other Termination of Employment.  Subject to Section 7.4(a) above, in the event of a Participant's termination of employment for any reason, the Participant shall repay to the Company the entire balance of the Purchase Loan and any accrued but unpaid interest thereon, which amounts shall become immediately due and payable, unless otherwise determined by the Committee.     7.5.  Restrictions on Transfer.  No Share Purchase Award or Shares purchased through such an Award and pledged to the Company as collateral security for the Participant's Purchase Loan (and accrued and unpaid interest thereon) may be otherwise pledged, sold, assigned or transferred (other than by will or by the laws of descent and distribution). ARTICLE 8. RESTRICTED AWARDS     8.1.  Restricted Share Awards.  (a) Grant. A grant of Shares made pursuant to this Article 8 is referred to as a "Restricted Share Award." The Committee may grant to any employee an amount of Shares in such manner, and subject to such terms and conditions relating to vesting, forfeitability and restrictions on delivery and transfer (whether based on performance standards, periods of service or otherwise) as the Committee shall establish (such Shares, "Restricted Shares"). The terms of any Restricted Share Award granted under this Plan shall be set forth in a written agreement (a "Restricted Share Agreement") which shall contain provisions determined by the Committee and not inconsistent with this Plan. The provisions of Restricted Share Awards need not be the same for each Participant receiving such Awards. (b)Issuance of Restricted Shares.  As soon as practicable after the date of grant of a Restricted Share Award by the Committee, the Company shall cause to be transferred on the books of the Company, Shares registered in the name of the Company, as nominee for the Participant, evidencing the Restricted Shares covered by the Award; provided, however, such Shares shall be subject to forfeiture to the Company retroactive to the date of grant, if a Restricted Share Agreement delivered to the Participant by the Company with respect to the Restricted Shares covered by the Award is not duly executed by the Participant and timely returned to the Company. All Restricted Shares covered by Awards under this Article 8 shall be subject to the restrictions, terms and conditions contained in the Plan and the Restricted Share Agreement entered into by and between the Company and the Participant. Until the lapse or release of all restrictions applicable to an Award of Restricted Shares, the share certificates representing such Restricted Shares shall be held in custody by the Company or its designee. (c)Shareholder Rights.  Beginning on the date of grant of the Restricted Share Award and subject to execution of the Restricted Share Agreement as provided in Sections 8.1(a) and (b), 7 -------------------------------------------------------------------------------- the Participant shall become a shareholder of the Company with respect to all Shares subject to the Restricted Share Agreement and shall have all of the rights of a shareholder, including, but not limited to, the right to vote such Shares and the right to receive distributions made with respect to such Shares; provided, however, that any Shares distributed as a dividend or otherwise with respect to any Restricted Shares as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Shares and shall be represented by book entry and held as prescribed in Section 8.1(b). (d)Restriction on Transferability.  None of the Restricted Shares may be assigned or transferred (other than by will or the laws of descent and distribution), pledged or sold prior to lapse or release of the restrictions applicable thereto. (e)Delivery of Shares Upon Release of Restrictions.  Upon expiration or earlier termination of the forfeiture period without a forfeiture and the satisfaction of or release from any other conditions prescribed by the Committee, the restrictions applicable to the Restricted Shares shall lapse. As promptly as administratively feasible thereafter, subject to the requirements of Section 12.1, the Company shall deliver to the Participant or, in case of the Participant's death, to the Participant's beneficiary, one or more stock certificates for the appropriate number of Shares, free of all such restrictions, except for any restrictions that may be imposed by law.     8.2.  Terms of Restricted Shares.  (a) Forfeiture of Restricted Shares. Subject to Section 8.2(b), all Restricted Shares shall be forfeited and returned to the Company and all rights of the Participant with respect to such Restricted Shares shall terminate unless the Participant continues in the service of the Company as an employee until the expiration of the forfeiture period for such Restricted Shares and satisfies any and all other conditions set forth in the Restricted Share Agreement. The Committee in its sole discretion, shall determine the forfeiture period (which may, but need not, lapse in installments) and any other terms and conditions applicable with respect to any Restricted Share Award. (b)Waiver of Forfeiture Period.  Notwithstanding anything contained in this Article 8 to the contrary, the Committee may, in its sole discretion, waive the forfeiture period and any other conditions set forth in any Restricted Share Agreement under appropriate circumstances (including the death, disability or retirement of the Participant or a material change in circumstances arising after the date of an Award) and subject to such terms and conditions (including forfeiture of a proportionate number of the Restricted Shares) as the Committee shall deem appropriate. 8 -------------------------------------------------------------------------------- ARTICLE 9. DEFERRED SHARE AWARDS     9.1.  Shares and Administration.  Awards of the right to receive Shares that are not to be distributed to the Participant until after a specified deferral period (such Award and the deferred Shares delivered thereunder hereinafter as the context shall require, the "Deferred Shares") may be made either alone or in addition to share options, share appreciation rights, or Restricted Share Awards, or Other Share-based Awards (hereafter defined) granted under the Plan. The Committee shall determine the Directors, officers and other key employees of the Company and its subsidiaries to whom and the time or times at which Deferred Shares shall be awarded, the number of Deferred Shares to be awarded to any Participant, the duration of the period (the "Deferral Period") during which, and the conditions under which, receipt of the Shares will be deferred, and the terms and conditions of the award in addition to those contained in Section 9.2. In its sole discretion, the Committee may provide for a minimum payment at the end of the applicable Deferral Period based on a stated percentage of the Fair Market Value on the date of grant of the number of Shares covered by a Deferred Share award. The Committee may also provide for the grant of Deferred Shares upon the completion of a specified performance period. The provisions of Deferred Share awards need not be the same with respect to each recipient.     9.2.  Terms and Conditions.  Deferred Share awards made pursuant to this Article 9 shall be subject to the following terms and conditions: (a)Subject to the provisions of the Plan, the Shares to be issued pursuant to a Deferred Share award may not be sold, assigned, transferred, pledged or otherwise encumbered during the Deferral Period or Elective Deferral Period (defined below), where applicable, and may be subject to a risk of forfeiture during all or such portion of the Deferral Period as shall be specified by the Committee. At the expiration of the Deferral Period and Elective Deferral Period, share certificates shall be delivered to the Participant, or the Participant's legal representative, in a number equal to the number of shares covered by the Deferred Share award. (b)Amounts equal to any dividends declared during the Deferral Period with respect to the number of Shares covered by a Deferred Share award will be paid to the Participant currently, or deferred and deemed to be reinvested in additional deferred Shares or otherwise reinvested, as determined at the time of the award by the Committee, in its sole discretion. (c)Subject to the provisions of paragraph 9.2(d) of this Article 9, upon termination of employment for any reason during the Deferral Period for a given award, the Deferred Shares in question shall be forfeited by the Participant. (d)In the event of the Participant's death or permanent disability during the Deferral Period (or Elective Deferral Period, where applicable), or in cases of special circumstances, the Committee may, in its sole discretion, when it finds that a waiver would be in the best interests of the Company, waive in whole or in part any or all of the remaining deferral limitations imposed hereunder with respect to any or all of the Participant's Deferred Shares. (e)Prior to completion of the Deferral Period, a Participant may elect to further defer receipt of the award for a specified period or until a specified event (the "Elective Deferral Period"), subject in each case to the approval of the Committee and under such terms as are determined by the Committee, all in its sole discretion. (f)Each award shall be confirmed by a Deferred Share agreement or other instrument executed by the Company and the Participant. 9 -------------------------------------------------------------------------------- ARTICLE 10. GENERALLY APPLICABLE PROVISIONS     10.1.  Option Period.  Subject to Section 3.1(b), the period for which an Option is exercisable shall not exceed ten years from the date such Option is granted, provided, however, in the case of an Option that is not intended to be an "incentive share option," the Committee may prescribe a period in excess of ten years. After the Option is granted, the option period may not be reduced.     10.2.  Fair Market Value.  If the Shares are listed or admitted to trading on a securities exchange registered under the Exchange Act or listed as a national market security on the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ"), the "Fair Market Value" of a Share as of a specified date shall mean the closing price of a share on the day immediately preceding the date as of which Fair Market Value is being determined (or if there was no reported sale on such date, on the last preceding date on which any reported sale occurred) on the principal securities exchange or NASDAQ on which the Shares are listed or admitted to trading. If the Shares are not listed or admitted to trading on any such exchange but are traded in the over-the-counter market or listed or traded on any similar system then in use, the Fair Market Value of a Share shall be the average of the high bid and low asked prices of the Shares for the day immediately preceding the date as of which the Fair Market Value is being determined (or if there was no reported sale on such date, on the last preceding date on which any reported sale occurred) reported on such system. If the Shares are not publicly traded, Fair Market Value shall be determined by the Committee in its sole discretion using appropriate criteria. In no case shall Fair Market Value be less than the par value of a Share. An Option shall be considered granted on the date the Committee acts to grant the Option or such later date as the Committee shall specify.     10.3.  Exercise of Options.  Options granted under the Plan shall be exercised by the Optionee or by a Permitted Assignee thereof (or by his executors, administrators, guardian or legal representative, as provided in Sections 10.6 and 10.7 hereof) as to all or part of the Shares covered thereby, by the giving of written notice of exercise to the Company, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased. Full payment of such purchase price shall be made within five business days following the date of exercise and shall be made (i) in cash or by certified check or bank check, (ii) with the consent of the Committee, by delivery of a promissory note in favor of the Company upon such terms and conditions as determined by the Committee, (iii) with the consent of Committee, by tendering previously acquired Shares (valued at its Fair Market Value, as determined by the Committee as of the date of tender), or (iv) with the consent of the Committee, any combination of (i), (ii) and (iii). In connection with a tender of previously acquired Shares pursuant to clause (iii) above, the Committee, in its sole discretion, may permit the Optionee to constructively exchange Shares already owned by the Optionee in lieu of actually tendering such Shares to the Company, provided that adequate documentation concerning the ownership of the Shares to be constructively tendered is furnished in form satisfactory to the Committee. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share. The Company shall effect the transfer of Shares purchased pursuant to an Option as soon as practicable, and, within a reasonable time thereafter, such transfer shall be evidenced on the books of the Company. No person exercising an Option shall have any of the rights of a holder of Shares subject to an Option until certificates for such Shares shall have been issued following the exercise of such Option. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such issuance.     10.4.  Transferability.  No Option that is intended to qualify as an "incentive stock option" under Section 422 of the Code shall be assignable or transferable by the Optionee, other than by will or the 10 -------------------------------------------------------------------------------- laws of descent and distribution, and such Option may be exercised during the life of the Optionee only by the Optionee or his guardian or legal representative. "Non-qualified share options" and any share appreciation rights granted in tandem therewith are transferable (together and not separately) with the consent of the Committee by the Optionee or Holder, as the case may be, to any one or more of the following persons (each, a "Permitted Assignee"): (i) the spouse, parent, issue, spouse of issue, or issue of spouse ("issue" shall include all descendants whether natural or adopted) of such Optionee or Holder, as the case may be; (ii) a trust for the benefit of one or more of those persons described in clause (i) above or for the benefit of such Optionee or Holder, as the case may be; (iii) an entity in which the Optionee or Holder or any Permitted Assignee thereof is a beneficial owner; or (iv) in the case of a transfer by an Optionee who is a non-employee director, another non-employee director of the Company; provided that such Permitted Assignee shall be bound by and subject to all of the terms and conditions of this Plan and the Share Option Agreement relating to the transferred Option and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Optionee or Holder shall remain bound by the terms and conditions of this Plan. In the case of a transfer by a non-employee director to another non-employee director, the vesting and exercisability shall after such transfer be determined by reference to the service of the assignee, rather than the assignor. The Company shall cooperate with any Permitted Assignee and the Company's transfer agent in effectuating any transfer permitted under this Section 10.4.     10.5.  Termination of Employment.  In the event of the termination of employment of an Optionee or the termination or separation from service of an advisor or consultant or a Director (who is an Optionee) for any reason (other than death or disability as provided below), any Option(s) granted to such Optionee under this Plan and not previously exercised or expired shall be deemed cancelled and terminated on the day of such termination or separation, unless the Committee decides, in its sole discretion, to extend the term of the Option for a period not to exceed three months after the date of such termination or separation, provided, however, that in no instance may the term of the Option, as so extended, exceed the maximum term established pursuant to Section 3.1(b)(ii) or 10.1 above. Notwithstanding the foregoing, in the event of the termination or separation from service of an Optionee for any reason other than death or disability, under conditions satisfactory to the Company, the Committee may, in its sole discretion, allow any "nonqualified share options" granted to such Optionee under the Plan and not previously exercised or expired to be exercisable for a period of time to be specified by the Committee, provided, however, that in no instance may the term of the Option, as so extended, exceed the maximum term established pursuant to Section 10.1 above.     10.6.  Death.  In the event an Optionee dies while employed by the Company or any of its subsidiaries or affiliates or during his term as a Director of the Company or any of its subsidiaries or affiliates, as the case may be, any Option(s) granted to him (or his Permitted Assignee) and not previously expired or exercised shall, to the extent exercisable on the date of death, be exercisable by the estate of such Optionee or by any person who acquired such Option by bequest or inheritance, or by the Permitted Assignee at any time within one year after the death of the Optionee, unless earlier terminated pursuant to its terms, provided, however, that if the term of such Option would expire by its terms within six months after the Optionee's death, the term of such Option shall be extended until six months after the Optionee's death, provided further, however, that in no instance may the term of the Option, as so extended, exceed the maximum term established pursuant to Section 3.1(b)(ii) or 10.1 above.     10.7.  Disability.  In the event of the termination of employment of an Optionee or the separation from service of a Director (who is an Optionee) due to total disability, the Optionee, or his guardian or legal representative, or a Permitted Assignee shall have the unqualified right to exercise any Option(s) which have not been previously exercised or expired and which the Optionee was eligible to exercise as of the first date of total disability (as determined by the Committee), at any time within one year after such termination or separation, unless earlier terminated pursuant to its terms, provided, however, that if the term of such Option would expire by its terms within six months after such termination or 11 -------------------------------------------------------------------------------- separation, the term of such Option shall be extended until six months after such termination or separation, provided further, however, that in no instance may the term of the Option, as so extended, exceed the maximum term established pursuant to Section 3.1(b)(ii) or 10.1 above. The term "total disability" shall, for purposes of this Plan, be defined in the same manner as such term is defined in Section 22(e)(3) of the Code.     10.8.  Amendment and Modification of the Plan.  The Compensation Committee of the Board of Directors of the Company may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable, subject to any requirement for shareholder approval imposed by applicable law or any rule of any stock exchange or quotation system on which Shares are listed or quoted; provided that such Compensation Committee may not amend the Plan, without the approval of the Company's shareholders, to increase the number of Shares that may be the subject of Options under the Plan (except for adjustments pursuant to Section 10.9 hereof). In addition, no amendments to, or termination of, the Plan shall in any way impair the rights of an Optionee or a Participant (or a Permitted Assignee thereof) under any Award previously granted without such Optionee's or Participant's consent.     10.9.  Adjustments.  In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities, the issuance of warrants or other rights to purchase Shares or other securities, or other similar corporate transaction or event affects the Shares with respect to which Options have been or may be issued under the Plan, such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as the Committee may deem equitable, adjust any or all of (i) the number and type of Shares that thereafter may be made the subject of Options, (ii) the number and type of Shares subject to outstanding Options and share appreciation rights, and (iii) the grant or exercise price with respect to any Option, or, if deemed appropriate, make provision for a cash payment to the holder of any outstanding Option; provided, in each case, that with respect to "incentive stock options," no such adjustment shall be authorized to the extent that such adjustment would cause such options to violate Section 422(b) of the Code or any successor provision; and provided further, that the number of Shares subject to any Option denominated in Shares shall always be a whole number. In the event of any reorganization, merger, consolidation, split-up, spin-off, or other business combination involving the Company (collectively, a "Reorganization"), the Compensation Committee of the Board of Directors or the Board of Directors may cause any Award outstanding as of the effective date of the Reorganization to be cancelled in consideration of a cash payment or alternate Award made to the holder of such cancelled Award equal in value to the fair market value of such cancelled Award. The determination of fair market value shall be made by the Compensation Committee of the Board of Directors or the Board of Directors, as the case may be, in their sole discretion.     10.10.  Change in Control.  The terms of any Award may provide in the Share Option Agreement, Restricted Share Agreement, Purchase Loan or other document evidencing the Award, that upon a "Change in Control" of the Company (as that term may be defined therein), (i) Options (and share appreciation rights) accelerate and become fully exercisable, (ii) restrictions on Restricted Shares lapse and the shares become fully vested, (iii) Purchase Loans are forgiven in whole or in part, and (iv) such other additional benefits as the Committee deems appropriate shall apply. For purposes of this Plan, a "Change in Control" shall mean an event described in the applicable document evidencing the Award or such other event as determined in the sole discretion of the Board of Directors of the Company. The Committee, in its discretion, may determine that, upon the occurrence of a Change in Control of the Company, each Option and share appreciation right outstanding hereunder shall terminate within a specified number of days after notice to the Participant or Holder, and such Participant or Holder shall receive, with respect to each Share subject to such Option or share appreciation right, an amount equal 12 -------------------------------------------------------------------------------- to the excess of the Fair Market Value of such Shares immediately prior to the occurrence of such Change in Control over the exercise price per share of such Option or share appreciation right; such amount to be payable in cash, in one or more kinds of property (including the property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its discretion, shall determine.     10.11.  Employment Violation.  Each Share Option Agreement evidencing an Option granted on or after April 1, 2001, shall include and be subject to the following terms: (a)The terms of this Section 10.11 shall apply to the Option if the Optionee is or shall become subject to an employment agreement with the Company. (b)If the Optionee materially breaches his or her employment agreement (it being understood that any breach of the post-termination obligations contained therein shall be deemed to be material) for so long as the terms of such employment agreement shall apply to the Optionee (each, an "Employment Violation"), the Company shall have the right to require (i) the termination and cancellation of the unexercised portion of the Option, if any, whether vested or unvested, and (ii) payment by the Optionee to the Company of the Recapture Amount (as defined below). Such termination of unexercised Options and payment of the Recapture Amount, as the case may be, shall be in addition to, and not in lieu of, any other right or remedy available to the Company arising out of or in connection with any such Employment Violation including, without limitation, the right to terminate Optionee,s employment if not already terminated, seek injunctive relief and additional monetary damages. (c)"Recapture Amount" shall mean the gross gain realized or unrealized by the Optionee upon each exercise of his Option during the period beginning on the date which is twelve (12) months prior to the date of the Optionee's Employment Violation and ending on the date of computation (the "Look-back Period"), which gain shall be calculated as the sum of: (i)if the Optionee has exercised any portion of his Option during the Look-back Period and sold any of the Shares acquired on exercise thereafter, an amount equal to the product of (x) the sales price per Share sold minus the exercise price per Share times (y) the number of Shares as to which the Option was exercised and which were sold at such sales price; plus (ii)if the Optionee has exercised any portion of his Option during the Look-back Period and not sold any of the Shares acquired on exercise thereafter, with respect to each of such Shares an amount equal to the product of (x) the greatest of the following: (1) the Fair Market Value per Share on the date of exercise, (2) the arithmetic average of the per Share closing sales prices as reported on NASDAQ for the thirty (30) trading day period ending on the trading day immediately preceding the date of the Company's written notice of its exercise of its rights under this clause (h), or (3) the arithmetic average of the per Share closing sales prices as reported on NASDAQ for the thirty (30) trading day period ending on the trading day immediately preceding the date of computation, minus the exercise price per Share times (y) the number of Shares as to which this Option was exercised and which were not sold; provided, however, in lieu of payment by the Optionee to the Company of the Recapture Amount determined pursuant to subclause (ii) above, the Optionee, in his or her discretion, may tender to the Company the Shares acquired upon exercise of this Option during the Look-back Period and not sold and the Optionee shall not be entitled to receive any consideration from the Company in exchange therefor.     With respect to any other Awards granted hereunder, the terms of any Restricted Share Agreement, share appreciation right, Share Purchase Award or any other document evidencing an Award under the Plan, may include comparable provisions to those set forth in this Section 10.11. 13 --------------------------------------------------------------------------------     10.12.  Other Provisions.  (a) The Committee may require each Participant purchasing Shares pursuant to an Award under the Plan to represent to and agree with the Company in writing that such Participant is acquiring the Shares without a view to distribution thereof. The certificates for such Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer. (b)All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such share-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other restrictions of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable Federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (c)Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for, any other Awards granted under the Plan. If Awards are granted in substitution for other Awards, the Committee shall require the surrender of such other Awards in consideration for the grant of the new Awards. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards. (d)Nothing contained in this Plan shall prevent the Board of Directors from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. (e)A Participant shall have no right as a shareholder until he or she becomes the holder of record. (f)The Company will provide to its shareholders, at least annually, reports containing financial statements and management's discussion and analysis of financial conditions and results of operations. ARTICLE 11. MISCELLANEOUS     11.1.  Tax Withholding.  The Company shall notify an Optionee or Participant (or a Permitted Assignee thereof) of any income tax withholding requirements arising as a result of the grant of any Award, exercise of an Option or share appreciation rights or any other event occurring pursuant to this Plan. The Company shall have the right to withhold from such Optionee or Participant (or a Permitted Assignee thereof) such withholding taxes as may be required by law, or to otherwise require the Optionee or Participant (or a Permitted Assignee thereof) to pay such withholding taxes. If the Optionee or Participant (or a Permitted Assignee thereof) shall fail to make such tax payments as are required, the Company or its subsidiaries or affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Optionee or Participant or to take such other action as may be necessary to satisfy such withholding obligations. In satisfaction of the requirement to pay withholding taxes, the Optionee (or Permitted Assignee) make a written election, which may be accepted or rejected in the discretion of the Committee, to have withheld a portion of the Shares then issuable to the Optionee (or Permitted Assignee) pursuant to the Option having an aggregate Fair Market Value equal to the withholding taxes.     11.2.  Right of Discharge Reserved.  Nothing in the Plan nor the grant of an Award hereunder shall confer upon any employee, Director or other individual the right to continue in the employment or service of the Company or any subsidiary or affiliate of the Company or affect any right that the Company or any subsidiary or affiliate of the Company may have to terminate the employment or service of (or to demote or to exclude from future Options under the Plan) any such employee, 14 -------------------------------------------------------------------------------- Director or other individual at any time for any reason. Except as specifically provided by the Committee, the Company shall not be liable for the loss of existing or potential profit from an Award granted in the event of termination of an employment or other relationship even if the termination is in violation of an obligation of the Company or any subsidiary or affiliate of the Company to the employee or Director.     11.3.  Nature of Payments.  All Awards made pursuant to the Plan are in consideration of services performed or to be performed for the Company or any subsidiary or affiliate of the Company. Any income or gain realized pursuant to Awards under the Plan and any share appreciation rights constitutes a special incentive payment to the Optionee, Participant or Holder and shall not be taken into account, to the extent permissible under applicable law, as compensation for purposes of any of the employee benefit plans of the Company or any subsidiary or affiliate of the Company except as may be determined by the Committee or by the Directors or directors of the applicable subsidiary or affiliate of the Company.     11.4.  Unfunded Status of the Plan.  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 or Optionee by the Company, nothing contained herein shall give any such Participant or Optionee any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder; provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.     11.5.  Severability.  If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part, such unlawfulness, invalidity or unenforceability shall not affect any other provision of the Plan or part thereof, each of which remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan.     11.6.  Gender and Number.  In order to shorten and to improve the understandability of the Plan document by eliminating the repeated usage of such phrases as "his or her" and any masculine terminology herein shall also include the feminine, and the definition of any term herein in the singular shall also include the plural except when otherwise indicated by the context.     11.7.  Governing Law.  The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware and construed accordingly.     11.8.  Effective Date of Plan; Termination of Plan.  The Plan shall be effective on the date of the approval of the Plan by the Board of Directors. Notwithstanding the foregoing, no Option intended to qualify as an incentive share option shall be granted hereunder until the Plan shall be approved by the holders of a majority of the shares entitled to vote thereon, provided such approval is obtained within 12 months after the date of adoption of the Plan by the Board of Directors. Awards may be granted under the Plan at any time and from time to time prior to May 31, 2009, on which date the Plan will expire except as to Awards and related share appreciation rights then outstanding under the Plan. Such outstanding Awards and share appreciation rights shall remain in effect until they have been exercised or terminated, or have expired.     11.9.  Captions.  The captions in this Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein. 15 -------------------------------------------------------------------------------- STOCK OPTION CERTIFICATE For      Shares Issued Pursuant to the 1999 Incentive Plan of ACTIVISION, INC.     THIS CERTIFIES that on            (the "Issuance Date")            (the "Holder") was granted an option (the "Option") to purchase at the option price of $      per share, all or any part of      fully paid and non-assessable shares ("Shares") of the Common Stock (no par value) of ACTIVISION, INC., a Delaware corporation (the "Company"), upon and subject to the following terms and conditions: (a)Terms of the Plan.  The Option is granted pursuant to, and is subject to the terms and conditions of, the 1999 Incentive Plan of the Company (the "Plan"), the terms, conditions and definitions of which are hereby incorporated herein as though set forth at length, and the receipt of a copy of which the Holder hereby acknowledges by his signature below. Capitalized terms used herein shall have the meanings set forth in the Plan, unless otherwise defined herein.     [The Company intends that this Option qualify as an "incentive" share option within the meaning of Section 422 of the Internal Revenue Code to the maximum extent permissible under the Internal Revenue Code. To the extent that the Option does not qualify as an incentive share option, the Option or the portion thereof which does not so qualify shall constitute a separate "nonqualified" share option.] (b)Expiration.  This Option shall expire      ,      , unless extended or earlier terminated in accordance herewith. (c)Exercise.  This Option may be exercised or surrendered during the Holder's lifetime only by the Holder or his/her guardian or legal representative. THIS OPTION SHALL NOT BE TRANSFERABLE BY THE HOLDER OTHERWISE THAN BY WILL OR BY THE LAWS OF DESCENT AND DISTRIBUTION, SUBJECT TO THE TERMS AND CONDITIONS OF THE PLAN.     This Option shall vest and be exercisable [commencing on the Issuance Date] [as follows:            ].     This Option shall be exercised by the Holder (or by her executors, administrators, guardian or legal representative) as to all or part of the Shares, by the giving of written notice of exercise to the Company, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased. Full payment of such purchase price shall be made [within five business days following the date of] [at the time of] exercise and shall be made (i) in cash or by certified check or bank check, (ii) with the consent of the Company, by delivery of a promissory note in favor of the Company upon such terms and conditions as determined by the Company, (iii) with the consent of the Company, by tendering previously acquired Shares (valued at its Fair Market Value (as defined in the Plan), as determined by the Company as of the date of tender), or (iv) with the consent of the Company, any combination of (i), (ii) and (iii). Such notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Company may from time to time direct, and shall be in such form, containing such further provisions as the Company may from time to time prescribe. In no event may this Option be exercised for a fraction of a Share. The Company shall effect the transfer of Shares purchased pursuant to an Option as soon as practicable, and, within a reasonable time thereafter, such transfer 16 -------------------------------------------------------------------------------- shall be evidenced on the books of the Company. No person exercising this Option shall have any of the rights of a holder of Shares subject to this Option until certificates for such Shares shall have been issued following the exercise of such Option. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such issuance. (d)Termination of Employment.  In the event of the termination of employment or separation from service of the Holder for any reason (other than death or disability as provided below), this Option, to the extent not previously exercised or expired, shall be deemed cancelled and terminated on the day of such termination or separation, unless the Company decides, in its sole discretion, to extend the term of this Option for a period not to exceed three months after the date of such termination or separation. (e)Death.  In the event the Holder dies while employed by the Company or any of its subsidiaries or affiliates, or during his term as a Director of the Company or any of its subsidiaries or affiliates, as the case may be, this Option, to the extent not previously expired or exercised, shall, to the extent exercisable on the date of death, be exercisable by the estate of the Holder or by any person who acquired this Option by bequest or inheritance, at any time within one year after the death of the Holder, unless earlier terminated pursuant to its terms, provided, however, that if the term of this Option would expire by its terms within six months after the Holder's death, the term of this Option shall be extended until six months after the Holder's death. (f)Disability.  In the event of the termination of employment of the Holder or the separation from service of a Director who is a Holder due to total disability, the Holder, or her guardian or legal representative, shall have the unqualified right to exercise any portion of this Option which has not been previously exercised or expired and which the Holder was eligible to exercise as of the first date of total disability (as determined by the Company), at any time within one year after such termination or separation, unless earlier terminated pursuant to its terms, provided, however, that if the term of such Option would expire by its terms within six months after such termination or separation, the term of such Option shall be extended until six months after such termination or separation. The term "total disability" shall, for purposes of this Option Certificate, be defined in the same manner as such term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended. [(g)Change in Control.  In the event of the occurrence of a change in control (as defined below) of the Company, this Option and all rights granted hereunder shall immediately vest and be exercisable in accordance with its terms with respect to those Shares not already vested and exercisable pursuant to the terms of this Option. For purposes of this Option, a "change in control of the Company" shall be deemed to occur if: (i)there shall have occurred a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date hereof, whether or not the Company is then subject to such reporting requirement, provided, however, that there shall not be deemed to be a "change in control" of the Company if immediately prior to the occurrence of what would otherwise be a "change in control" of the Company (a) the Executive is the other party to the transaction (a "Control Event") that would otherwise result in a "change in control" of the Company or (b) the Executive is an executive officer, trustee, director or more than 5% equity holder of the other party to the Control Event or of any entity, directly or indirectly, controlling such other party, (ii)the Company merges or consolidates with, or sells all or substantially all of its assets to, another company (each, a "Transaction"), provided, however, that a Transaction shall not 17 -------------------------------------------------------------------------------- be deemed to result in a "change in control" of the Company if (a) immediately prior thereto the circumstances in (i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company, immediately before such Transaction own, directly or indirectly, immediately following such Transaction in excess of fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such Transaction (the "Surviving Corporation") in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Transaction and (2) the individuals who were members of the Company's Board of Directors immediately prior to the execution of the agreement providing for such Transaction constitute at least a majority of the members of the board of directors or the board of trustees, as the case may be, of the Surviving Corporation, or of a corporation or other entity beneficially directly or indirectly owning a majority of the outstanding voting securities of the Surviving Corporation, or (iii)the Company acquires assets of another company or a subsidiary of the Company merges or consolidates with another company (each, an "Other Transaction") and (a) the shareholders of the Company, immediately before such Other Transaction own, directly or indirectly, immediately following such Other Transaction 50% or less of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such Other Transaction (the "Other Surviving Corporation") in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Other Transaction or (b) the individuals who were members of the Company's Board of Directors immediately prior to the execution of the agreement providing for such Other Transaction constitute less than a majority of the members of the board of directors or the board of trustees, as the case may be, of the Other Surviving Corporation, or of a corporation or other entity beneficially directly or indirectly owning a majority of the outstanding voting securities of the Other Surviving Corporation, provided, however, that an Other Transaction shall not be deemed to result in a "change in control" of the Company if immediately prior thereto the circumstances in (i)(a) or (i)(b) above exist.] (h)Adjustments.  In the event that the Company shall determine that any dividend or other distribution (whether in the form of cash, shares of common stock of the Company, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of shares of common stock of the Company or other securities, the issuance of warrants or other rights to purchase shares of common stock of the Company, or other securities, or other similar corporate transaction or event affects the Shares, such that an adjustment is determined by the Company to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available to the Holder, then the Company shall, in such manner as the Company may deem equitable, adjust any or all of (i) the number and type of shares of common stock of the Company subject to this Option, and (ii) the grant or exercise price with respect to this Option, or, if deemed appropriate, make provision for a cash payment to the Holder. (i)Delivery of Share Certificates.  Within a reasonable time after the exercise of this Option, the Company shall cause to be delivered to the person entitled thereto a certificate for the Shares purchased pursuant to the exercise of this Option. If this Option shall have been exercised with respect to less than all of the Shares subject to this Option, the Company shall also cause to be delivered to the person entitled thereto a new Option Certificate in replacement of this Option Certificate if surrendered at the time of the exercise of this Option, indicating the 18 -------------------------------------------------------------------------------- number of Shares with respect to which this Option remains available for exercise, or this Option Certificate shall be endorsed to give effect to the partial exercise of this Option. (j)Withholding.  In the event that the Holder elects to exercise this Option or any part thereof, and if the Company or any subsidiary or affiliate of the Company shall be required to withhold any amounts by reasons of any federal, state or local tax laws, rules or regulations in respect of the issuance of Shares to the Holder pursuant to this Option, the Company or such subsidiary or affiliate shall be entitled to deduct and withhold such amounts from any payments to be made to the Holder. In any event, the Holder shall make available to the Company or such subsidiary or affiliate, promptly when requested by the Company or such subsidiary or affiliate, sufficient funds to meet the requirements of such withholding; and the Company or such subsidiary or affiliate shall be entitled to take and authorize such steps as it may deem advisable in order to have such funds available to the Company or such subsidiary or affiliate out of any funds or property due or to become due to the Holder. (k)Reservation of Shares.  The Company hereby agrees that at all times there shall be reserved for issuance and/or delivery upon exercise of this Option such number of Shares as shall be required for issuance or delivery upon exercise hereof. (l)Rights of Holder.  Nothing contained herein shall be construed to confer upon the Holder any right to be continued in the employ of the Company and/or any subsidiary or affiliate of the Company or derogate from any right of the Company and/or any subsidiary or affiliate of the Company to retire, request the resignation of, or discharge the Holder at any time, with or without cause. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or in equity, and the rights of the Holder are limited to those expressed herein and are not enforceable against the Company except to the extent set forth herein. (m)Exclusion from Pension Computations.  By acceptance of the grant of this Option, the Holder hereby agrees that any income realized upon the receipt or exercise hereof, or upon the disposition of the Shares received upon its exercise, is special incentive compensations and, to the extent permissible under applicable law, shall not be taken into account as "wages", "salary" or "compensation" in determining the amount of any payment under any pension, retirement, incentive, profit sharing, bonus or deferred compensation plan of the Company or any of its subsidiaries or affiliates. (n)Registration; Legend.  The Company may postpone the issuance and delivery of Shares upon any exercise of this Option until (a) the admission of such Shares to listing on any stock exchange or exchanges on which Shares of the Company of the same class are then listed and (b) the completion of such registration or other qualification of such Shares under any state or federal law, rule or regulation as the Company shall determine to be necessary or advisable. The Holder shall make such representations and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company, in light of the then existence or non-existence with respect to such Shares of an effective Registration Statement under the Securities Act of 1933, as amended, to issue the Shares in compliance with the provisions of that or any comparable act.     The Company may cause the following or a similar legend to be set forth on each certificate representing Shares or any other security issued or issuable upon exercise of this Option unless counsel for the Company is of the opinion as to any such certificate that such legend is unnecessary:     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, AS AMENDED (THE 19 -------------------------------------------------------------------------------- "ACT"), OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS ESTABLISHED BY AN OPINION FROM COUNSEL TO THE COMPANY. (o)Amendment.  The Company may, with the consent of the Holder, at any time or from time to time amend the terms and conditions of this Option, and may at any time or from time to time amend the terms of this Option. (p)Notices.  Any notice which either party hereto may be required or permitted to give to the other shall be in writing, and may be delivered personally or by mail, postage prepaid, or overnight courier, addressed as follows: if to the Company, at its office at 3100 Ocean Park Blvd., Santa Monica, California 90405, Attn: General Counsel, or at such other address as the Company by notice to the Holder may designate in writing from time to time; and if to the Holder, at the address shown below her signature on this Option Certificate, or at such other address as the Holder by notice to the Company may designate in writing from time to time. Notices shall be effective upon receipt. (q)Interpretation.  A determination of the Company as to any questions which may arise with respect to the interpretation of the provisions of this Option and of the Plan shall be final and binding. The Company may authorize and establish such rules, regulations and revisions thereof as it may deem advisable.     IN WITNESS WHEREOF, the parties have executed this Option Certificate as of the date set forth above.     ACTIVISION, INC. Dated:  --------------------------------------------------------------------------------       Attest:  --------------------------------------------------------------------------------   By: -------------------------------------------------------------------------------- Name: Title: ACCEPTED: -------------------------------------------------------------------------------- Option Holder       -------------------------------------------------------------------------------- Address       -------------------------------------------------------------------------------- City        State        Zip Code       -------------------------------------------------------------------------------- Social Security Number       20 -------------------------------------------------------------------------------- QuickLinks ACTIVISION, INC. 1999 INCENTIVE PLAN RECITALS ARTICLE 1. PURPOSE OF THE PLAN ARTICLE 2. SHARES SUBJECT TO AWARDS ARTICLE 3. ELIGIBILITY AND ADMINISTRATION ARTICLE 4. OPTIONS ARTICLE 5. SHARE APPRECIATION RIGHTS ARTICLE 6. RELOAD OPTIONS ARTICLE 7. SHARE PURCHASE AWARDS ARTICLE 8. RESTRICTED AWARDS ARTICLE 9. DEFERRED SHARE AWARDS ARTICLE 10. GENERALLY APPLICABLE PROVISIONS ARTICLE 11. MISCELLANEOUS STOCK OPTION CERTIFICATE

Amendment No. 1 To the Master Agreement DATED DECEMBER 7, 2000 BETWEEN Ecolab Inc. and HENKEL KGAA     1.             Section 6.1 is amended as follows:   The date "January 2, 2002" is replaced by the date "November 30, 2001".  The hour of the Closing "at 11:00 a.m., local time" is replaced by "effective as of 23:59 hours".   2.             Section 8.11 is amended to read in its entirety as follows:   "The parties shall cause the JV Entities prior to the Closing Date to declare a dividend consistent with past practice with respect to the earnings of the JV Entities (taken as a whole) for the fiscal year ending November 30, 2001 less the amount of USD 4 million."   3.             All other terms, conditions and provisions of the Master Agreement shall remain in full force and effect and are not amended hereby.     Düsseldorf / St. Paul, September 12, 2001       Henkel KGaA     Ecolab Inc.               By:         /s/ Steinebach /s/ Kühn   /s/ Lawrence T. Bell Dr. Steinebach Kühn   Lawrence T. Bell  

-------------------------------------------------------------------------------- [*] — Confidential treatment has been requested for certain portions of the exhibit EXHIBIT 10.67 PURCHASE CONTRACT DATE: October 9, 2001 CONTRACT NO.: Ref-01-009 We as a Buyer, hereby confirm having purchased from you, as Seller, the following goods in accordance with all the terms and conditions hereof. If any concern arises during the actual delivery, the Parties shall consult with each other to attempt to resolve such issue in good faith. Meanwhile the Parties are to proceed their negotiation for the terms and conditions of [*]. COMMODITY: AN-2000 IB, DSLAM QUALITY: Any New, Upgraded, improved or modified product Seller can offer QUANTITY: [*] AMOUNT US $100,053,600 FOB Shanghai, China PAYMENT: T/T Remittance, net 30 days after the Delivery SHIPMENT: 3 weeks after Seller’s receipt of this PURCHASE CONTRACT SHIPPING PORT Shanghai, China PORT OF DESTINATION Japan, Tokyo Airport PRODUCT INSPECTION: Seller’s inspection to be final   Accepted and confirmed by: (SELLER) (BUYER)     UTSTARCOM, INC. BB Tec. Corp 33 Wood Ave South, 8/F, Iselin, 24-1, Nihonbashi-Hakozaki-cho NJ 08830, USA Chuo-ku, Tokyo 103-0015 Japan Masahiko Yabuki Hiroyki Akoka General Manager, Japan Liaison Office Installation Division     /s/ Masahiko Yabuki -------------------------------------------------------------------------------- /s/ Hiroyki Akoka -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- GENERAL TERMS AND CONDITIONS These general terms and conditions shall apply, except to the extent that any contrary provisions are set forth on the cover page. 1. Shipment: The goods covered hereby shall be shipped strictly within the period set forth on the cover. Seller shall ship the goods on a first class steamer or motor vessel classed not lower than Lloyd’s 100 AI or top classification in other equivalent registers owned and/or operated by a carrier of good reputation, and of the type normally used for transportation of the type of goods covered hereby. The goods shall be carried by a usual route or routes without any extraordinary deviation.         2. Decreased Costs: If Seller’s costs of performance are decreased after the date of this Contract by reason of any change of freight rates (including any freight surcharge), export duties, taxes or other governmental charges, or insurance rates (including War Risk), or if any change in exchange rate (including any change resulting from any currency devaluation or revaluation) decreases Seller’s costs or increases Seller’s return, Seller agrees to refund to Buyers the amount of such decreased cost or increase of income. However the price specified in each PO shall be fixed and no adjustment will be made.         3. Claim: Buyer shall have no obligation to inspect the goods upon their arrival at the port of destination and Buyer shall be entitled to make all claims to Seller at any time within fourteen (14) business days upon arrival of the goods after actual discovery by Buyer of any shortage in quantity or any defect in quality, merchantability or fitness of the goods. In addition to any other remedies hereunder, Buyer shall be entitled to receive replacements of the defective goods at seller’s cost or a refund or reduction of the purchase price of the defective goods.         4. Force Majeure: In the event of nonfulfilment or delayed performance of all or any part of this Contract, due directly or indirectly to any Act of Gods, government orders, rules or restrictions, fire, flood, war, strikes (including those against Buyer) or labor disputes, or any other casualties or contingencies beyond the control of Buyer or otherwise unavoidable, Buyers shall not be responsible for such nonfulfilment or delayed performance and may, at Buyer’s option, perform or cancel this Contract or any unfilled portion thereof.         5. Arbitration: Any dispute arising out of or relating to this Contract, its interpretation or breach, shall be settled by arbitration in Tokyo, Japan in accordance with the rules than obtaining of the Japan Commercial Arbitration Association. The award shall be final and binding upon both parties hereto.         6. Patents: Seller shall defend, indemnify and hold harmless or any of its customers for the goods from and against any and all expenses, loss or damages arising out   -------------------------------------------------------------------------------- of any claim made or threatened for infringement of any patent, utility model, design, trademark, copyright or other title right of any third party resulting from the importation, possession, use or resale of the goods or any part thereof in any country.         7. Warranty: Seller warrants from one (1) year from the shipment date that goods are of first quality and are free from defect in material, design and workmanship, that they are merchantable and fit for any use to which they are normally put and that they are fit for any particular use of which Buyers has given notice to Seller. For purposes of this Contract, Computers mean computer software, hardware, systems and networks, microprocessors, equipment with embedded chips and any other products, services, data and functions that directly or indirectly use or rely upon, in any manner, any of the foregoing, whether owned or operated by Seller or by any third party, to the extent that the same are required for or related to the performance of Seller’s obligations hereunder. In the event of any breach of warranty, Seller shall, at Buyers sole option, restore or repair the goods to the same state and level as warranted herein, or replace the goods with conforming goods, at Seller’s sole cost and expense, and Seller shall indemnify and hold Buyer and Buyer’s customers harmless from and against any loss, damage, claim, cost, expense and liability, including all indirect, incidental and consequential damages, which may be incurred by or asserted against Buyer or Buyer’s customers arising out of or related to Seller’s beach of warranty.         8. Product Liability: Seller shall defend, indemnify and hold harmless Buyer and/or any of its customers for the goods from and against any and all costs, expenses, losses, damages or liabilities arising out of or in relation to any claim made or threatened to be made by any third party based on any death, bodily injury or property damage occurring or suspected to occur directly or indirectly out of the goods (collectively the “Liabilities”), including without limitation, a claim based on the “Product Liability Act” of Japan Law No. 85 promulgated on July 1, 1994, as it may be amended.         9. Breach: In the event of any breach by the party hereof of any of the provisions of this Contract, the other party may by written notice to the other party cancel all or any part of this Contract and/or claim any damages resulting from such breach. The party in any breach shall be liable for any such damages, including but not limited to the amount of profit the other party would have received for the goods under any resale agreement. Notunderstanding the foregoing, the liability of Buyers shall, in no event, exceed the amount of provided on the cover for each commodity hereof. Any goods in Buyer’s hands on or after such cancellation may be returned by Buyer to Seller, may be held on Seller’s account or may be disposed of by Buyer for the account of Seller at a price and under circumstance which Buyer deems reasonable, all at Seller’s expense and risk.         10. Construction: The meaning of any term used herein and the obligations of both parties hereunder shall, to the extent that they may be applicable, be determined in   -------------------------------------------------------------------------------- accordance with the Uniform Customs and Practice for Documentary Credit and the Incoterms adopted by the International Chamber of Commerce and in effect on the date of this Contract. This Contract shall be governed by the laws of Japan. 11. Confidentiality: Neither Party shall disclose to a third party any part of this Agreement (including any other appendix) or any information disclosed by the other Party in connection with this Agreement without the consent of the other party. Neither Party shall use such disclosed information except to the extent necessary to perform its obligations or to exercise its rights hereunder. Notwithstanding the foregoing, either Party may disclose such information for Product cause, including compliance with a governmental order, provided that the disclosing party promptly shall notify the other Party of such disclosure. The prohibition of disclosure set forth above shall not apply to any information that: (1) already was in the public domain at the time of disclosure (2) becomes publicly know after it is disclosed through no fault of the receiving Party; (3) rightfully was in the possession of the receiving Party prior to the disclosure (4) was disclosed legally by a third party to the receiving Party free of a duty of confidentiality; (5) was developed independently by the receiving Party without using or making reference to the confidential information of the disclosing party; or Is clearly identified as non-confidential by the disclosing Party. *Other necessary terms shall be referred to [*].  

EXHIBIT 10(b)(17) Amendment Nineteen to Marketing Agreement This document is Amendment Nineteen to the Marketing Agreement, made and entered into effective June 1, 1993, and amended by Amendment One to Marketing Agreement dated September 16, 1993; Amendment Two to Marketing Agreement dated June 4, 1998; Amendment Three to Marketing Agreement dated September 25, 1998; Amendment Four to Marketing Agreement dated October 19, 1998; and Amendment Five to Marketing Agreement dated December 15, 1998; Amendment Six to Marketing Agreement dated March 25, 1999, Amendment Seven to Marketing Agreement dated May 10, 1999, Amendment Eight to Marketing Agreement dated June 24, 1999, Amendment Nine to Marketing Agreement dated August 5, 1999, Amendment Ten to Marketing Agreement dated October 1, 1999, Amendment Eleven to Marketing Agreement dated January 31, 2000, Amendment Twelve to Marketing Agreement dated March 1, 2000, Amendment Thirteen to Marketing Agreement dated April 19, 2000, Amendment Fourteen to Marketing Agreement dated July 31, 2000, Amendment Fifteen to Marketing Agreement dated September 25, 2000, Amendment Sixteen to Marketing Agreement dated October 31, 2000, Amendment Seventeen dated November 29, 2000, and Amendment Eighteen to Marketing Agreement dated January 24, 2001, (the “Agreement”), by and between American National Insurance Company (“American National”) a Texas corporation, and Legacy Marketing Group (“LMG”), a California corporation. In consideration of mutual covenants contained herein, the parties agree as follows: 1. Section 3.1 of the Agreement is hereby deleted in its entirety and the following new Section 3.1 shall be substituted therefore:   “3.1 Subject to termination as hereinafter provided, this Agreement shall remain in force and effect until the close of business on May 15, 2001, the term of this Agreement. This Agreement may be renewed by mutual agreement for successive terms of one (1) year unless terminated by either party by prior written notice to the other at least one hundred eighty (180) days prior to the end of the initial term or the renewal term.” Except as specifically amended hereby, all terms and provisions of the Marketing Agreement shall remain in full force and effect. IN WITNESS HEREOF, the parties hereto have executed this Agreement.       LEGACY MARKETING GROUP AMERICAN NATIONAL INSURANCE COMPANY   By: /s/ H. Lynn Stafford By: /s/ Kelly M. Collier   Title: Chief Information Officer Title: Vice President   Witness: /s/ Stephanie Molteni Witness: /s/ Jynx Yucra   Date: March 14, 2001 Date: March 22, 2001

Exhibit 10.1 Employment Agreement Agreement effective January 1, 2001, between MapInfo Corporation, One Global View, Troy, New York 12180 ("MapInfo" or "Company"), and MARK P. CATTINI, residing at 20 East Ridge Road, Loudonville, NY 12211 ("Cattini").   1.0     EMPLOYMENT AND TERM         1.1 MapInfo agrees to employ Cattini as President and Chief Executive Officer of the Company for a period of three years from January 1, 2001 to December 31st, 2003 (the "Contract Expiration Date").         1.2 Cattini agrees to aid in managing the operations of MapInfo under the supervision of the Board of Directors of MapInfo, to serve as a member of the MapInfo Board of Directors, to perform such other services as shall from time to time be assigned to him by the Board of Directors, and to diligently and competently devote his entire business time, skill and attention to such services.   2.0     COMPENSATION AND BENEFITS         2.1 The Company shall pay to Cattini a salary of not less than $ 250,00.00 per annum (retroactive to 10/01/00), in accordance with the standard payroll practices of the Company. Cattini's annual salary may be increased from time to time in accordance with the normal business practices of the Company.         2.2 The Company shall reimburse Cattini for all reasonable out-of-pocket expenses incurred in connection with the performance of his duties hereunder, payable in accordance with the standard expense account procedures of MapInfo.         2.3 Cattini shall be entitled to participate on the same basis, subject to the same qualifications, as other employees of the Company in any disability, pension, life insurance, health insurance, hospitalization and other fringe benefit plans in effect with respect to other employees of the Company, in accordance with the written terms of said plans which shall be controlling.         2.4 The Company shall pay all expenses of an annual physical for Cattini, to the extent such expenses are not covered by the Company's existing health insurance plan. The income tax implications of all of this compensation shall be the responsibility of Cattini.         2.5 In addition to his salary, effective 10/01/00, each year while he is employed Cattini will be eligible to earn incentive compensation in amounts to be determined by the Compensation Committee of the Board of Directors based on the Company's and Cattini's performance during each fiscal year ad follows:              2.5.1 an additional one-half of Cattini's annual base salary may be earned, payable quarterly, for achieving targeted Company objectives, and additional compensation may be earned, for achieving above targeted objectives, payable forty-five (45) days after the end of the fiscal year; and              2.5.2 Cattini's annual incentive compensation target may be increased from time to time in accordance with the normal business practices of the Company.         2.6 Also in addition to his salary, Cattini shall be granted Seventy five thousand (75,000) non-qualified stock options under the MapInfo 1993 Stock Incentive Plan (the "Plan") in accordance with the provisions of the Plan, a copy of which has been received by Cattini.              2.6.1 the exercise price of the options set at the fair market value of MapInfo Common Stock on such date that Cattini executes this agreement.         2.7 For termination other than cause, Cattini shall be provided reimbursement up to One-Hundred Fifty Thousand Dollars ($150,000) for the following receipted expenses:             2.7.1 Sale and move from Loudonville home: realtor fee and other customary closing costs, any loss on difference between purchase price and sale price, packing and shipping of all personal property from New York to the United Kingdom; and              2.7.2 Air transportation from New York to United Kingdom for Cattini, wife and children.         2.8 The company shall reimburse Cattini for the cost related to joining the Schuyler Meadows Country Club (approximately $10,000.00 one time fee), or a like Club in the surrounding Capital District area. All monthly costs for dues shall be paid by Cattini.   3.0     INTELLECTUAL PROPERTY, CONFIDENTIAL INFORMATION AND NON-COMPETITION Cattini reaffirms his previously executed attached Employee Intellectual Property, Confidential Information and Non-Competition Agreement.   4.0     IRREPARABLE INJURY         4.1 Both parties hereto recognize that the services to be rendered by Cattini during the term of his employment are special, unique and of extraordinary character, and Cattini acknowledges that any violation by him of Section 3 of this Agreement may cause the Company irreparable injury.        4.2 In the event of a breach or threatened breach by Cattini of the provisions of said Section 3, MapInfo shall be entitled to an injunction restraining Cattini from violating the terms thereof, and from providing any confidential information to any person, firm, corporation, association or other entity, whether or not Cattini is then employed by, or an officer, director, or owner thereof.         4.3 Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including recovery of damages from Cattini.   5.0     EARLY TERMINATION Definitions for purposes of this Agreement:         "Cause " shall be defined and limited to (i) the willful and continued failure by Cattini to substantially perform his duties hereunder (other than any such failure resulting from Cattini's incapacity due to physical or mental illness), or (ii) conviction for any crime other than simple offenses or traffic offenses; (iii) breach of Cattini's fiduciary responsibilities to the Company; (iv) conduct reflecting moral turpitude; (v) commission of fraud or gross misconduct in Cattini's dealings with or on behalf of the Company; (vi) breach of any duty of confidentiality owned the Company.         "Change in Control of the Company" shall mean an acquisition (directly or indirectly) resulting in more than 50% of the Company's voting stock or assets being acquired by one or more entities that thereby gain management control of the Company. This section shall govern in case of any conflict between the wording of this Agreement and the wording of the plan under which any options were granted to Cattini.         "Good Reason" shall mean a failure by the Company to comply with any material provision of this Agreement which has not been cured within ten (10) days after Cattini has given written notice of such noncompliance to the Company.         "Notice of Termination" shall mean a written notice to the other party that Cattini is terminating or to be terminated for one of the reasons set forth in this Agreement.         5.1 Cattini's employment hereunder may be terminated prior to the Contract Expiration Date only under any one of the following circumstances:              5.1.1 the death of Cattini;              5.1.2 a mental, physical or other disability or condition of Cattini which renders him incapable of performing his obligations under this Agreement for a period of three (3 consecutive months;              5.1.3 by Cattini for either (i)Good Reason or (ii)a Change in Control of the Company;              5.1.4 by the Company for Cause.         5.2 Any termination of Cattini's employment by the Company or by Cattini shall be communicated by written Notice of Termination to the other party hereto.         5.3 "Date of Termination" shall mean:              5.3.1 if Cattini's employment is terminated by his death, the date of his death;              5.3.2 if Cattini's employment is terminated by reason of the event specified in subsection 5.1.2. above, thirty (30) days after Notice of Termination is given (provided that Cattini shall not have returned to the performance of his duties on a full-time basis during such thirty (30) day period);              5.3.3 if Cattini's employment is terminated for Cause pursuant to subsection 5.1.4. above, the date the Notice of Termination is given or later if so specified in such Notice of Termination; and              5.3.4 if Cattini's employment is terminated for any other reason, the date on which a Notice of Termination is given.         5.4 If within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date fixed, either by arbitration award or by a final judgment, order or decree of a court of competent jurisdiction.   6.0     COMPENSATION UPON EARLY TEMINATION OR DISABILITY.         6.1 During any period that Cattini fails to perform his duties hereunder as a result of incapacity due to physical or mental illness ("disability period"), he shall continue to receive his full salary at the rate then in effect for such period until his employment is terminated pursuant to section 5.1.2 above, provided that payments so made to Cattini during the disability period shall be reduced by the sum of the amounts, if any, payable to Cattini at or prior to the time of any such payment under disability benefit plans of the Company, and which were not previously applied to reduce any such payment.         6.2. If Cattini's employment is terminated by his death, the Company shall have no further payment obligations to Cattini other than those arising from his employment prior to his death.         6.3 If Cattini's employment shall be terminated for Cause, the Company shall pay Cattini his full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and any incentive compensation earned under Section 2.5 through the Date of Termination, and the Company shall have no further obligations to Cattini under this Agreement.         6.4 If Cattini shall terminate his employment by resigning for other than Good Reason, the Company shall pay Cattini his full salary through the Date of Termination at that rate in effect at the Notice of Termination is given, and any incentive compensation earned under Section 2.5 as of the Date of Termination.         6.5 If Cattini's employment shall be terminated by MapInfo for reasons other than pursuant to Sections 5.1.2, 5.1.3 or 5.1.4 hereof or if Cattini shall terminate his employment for Good Reason, then              6.5.1 the Company shall pay to Cattini, in a lump sum at the option of Cattini and then within fourteen (14) days following the Date of Termination, his full base salary due to the end of the contract period (December 31, 2003), at the rate in effect at the time Notice of Termination is given, but in any event not less than one full year of salary regardless of the remaining number of months under this Agreement, together with any incentive compensation earned under Section 2.1.5 as of the Date of Termination; and              6.5.2 the Company shall continue Cattini's health and dental insurance coverage for the one year period following the Date of Termination on the same terms as provided to other MapInfo employees.              6.5.3 Provision of the above severance payments and benefits shall be contingent upon Cattini's execution of a general release of the company which is prepared by the company.         6.6 Upon any Change in Control of the Company, where Cattini is not the surviving CEO, or is offered a position not equivalent to his present position, then, at his option, his employment shall terminate, and:              6.6.1 Cattini shall be paid a sum equal to an average of his previous one (1) year base salary and bonuses paid by the Company, looking back one (1) year from the last day of employment with the Company; and              6.6.2 the Company shall continue, for a period of one year, to pay for Cattini's insurance, health, life and any other existing fringe benefits, or provide equivalents thereof.              6.6.3 Provision of the above severance payments and benefits shall be contingent upon Cattini's execution of a general release of the company which is prepared by the company.         6.7 Upon any Change in Control of the Company, all unexpired and unvested options of Cattini to purchase common stock of the Company shall become exercisable immediately as of the date of such Change in Control, for such period of time and upon such terms as are provided in the Plan under which the options were granted.   7.0     NOTICES All communications and notices hereunder shall be in writing and either personally delivered or mailed to the party at the address set forth above. Notices to MapInfo shall be addressed to the attention of the Chairman with a copy to the Executive Vice President/CFO.   8.0     ENTIRE AGREEMENT, NO WAIVER This Agreement and the agreements and exhibits referred to herein constitute the entire understanding between that parties and supersede all prior agreements or understandings between the parties except as to matters that have may be ongoing. No waiver or modification of the terms hereof shall be valid unless in writing signed by both parties hereto and only to the extent therein set forth.   9.0     SUCCESSORS.         9.1 The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Cattini, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company (or any successor to its business and/or assets) to obtain such agreement prior to the effectiveness of any such succession shall, at Cattini's option to treat it as such, be a breach of this Agreement, except that for the purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.         9.2 This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, administrators, executors, personal representatives, successors and assigns; provided, however, that except as provided in this Section 9, this Agreement may not be assigned by either of the parties hereto. If Cattini should die while any amounts would still be payable to him, all such amounts earned, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Cattini's designee or, if there be no such designee, to Cattini's estate.   10.0     ARBITRATION         10.1 Except as otherwise provided in Section 4.0 above, any dispute or claim relating to or arising out of the employment of the Company, whether based on contract or tort or otherwise, but not including statutory claims, shall be subject to final and binding arbitration in the State of New York in accordance with the applicable commercial arbitration rules of the American Arbitration Association in effect at the time the claim or dispute arose.         10.2 The arbitrators shall have jurisdiction to determine any such claim, and may grant any relief authorized by law for such claim with their decision based on and supported by written findings of fact and conclusions of law.         10.3. Any claim or dispute subject to arbitration shall be deemed waived, and shall be forever barred, if arbitration is not initiated within twelve (12) months of the date the claim or dispute first arose.   11.0     GOVERNING LAW AND FORUM. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to the choice of law provisions thereof, and the parties herein consent to the exclusive jurisdiction of the New York State Supreme Court County of Rensselaer, or the United States District Court for the Northern District of New York, as may be applicable. IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date and year first written above.     MAPINFO CORPORATION                       BY: Mark P. Cattini   Chairman of the Board  

    EXHIBIT 10(b) 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-10761 Lender: SunAmerica Inc. Current Maturity Date: July 30, 2002   Dear Ms. Potash - Turner: The amendment extending the maturity date of the above referenced agreement from July 30, 2002 to July 30, 2003 is accepted by the National Association of Securities Dealers, Inc. It is important to note that the limitations required by paragraph I, 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: June 28, 2001 JUL 0 2 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 June 30, 1998 ("Subordinated Loan Agreement") and amendment thereto dated as of May 22, 2000 ("Amendment No. 1") is dated as of June 5, 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 July 30, 2002 bearing  Loan Number 10-E-SLA-10761, 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 7.0% per annum effective as of July 31, 2002.     (The signature page follows.)     -2- --------------------------------------------------------------------------------             IN WITNESS WHEREOF the parties have set their hands and seal this 5th day of June, 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:  JUL 30 2002                                                                                                  LOAN NUMBER:  10-E-SLA-10761   -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: June 5, 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 July 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: June 5, 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 16th day of March 2000, 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 15th day of June, 2001.                                                                                                                /s/ Lawrence M. Goldman                                                                                                               Lawrence M. Goldman                                                                                                               Assistant Secretary   (Corporate Seal)     --------------------------------------------------------------------------------  

AMENDMENT NO. 1 TO THE SECURITY AGREEMENT AMENDMENT NO. 1 TO THE SECURITY AGREEMENT, dated September 4, 2001 (this "Amendment"), to the Amended and Restated Security Agreement, dated as of July 26, 2001, among MEMC ELECTRONIC MATERIALS, INC. ("MEMC"), MEMC Pasadena, Inc. and E.ON AG, as the initial lender and agent (the "Security Agreement"). W I T N E S S E T H : The parties hereto agree as follows: SECTION 1. Definitions. Capitalized terms used herein and not defined herein have the meanings assigned to them in the Security Agreement. SECTION 2. Amendment to the Security Agreement. The third WHEREAS clause in the preamble of the Security Agreement is hereby amended by deleting the WHEREAS clause in its entirety and inserting in lieu thereof the following: WHEREAS, the Existing Credit Agreement has been amended and restated pursuant to the Amended and Restated Revolving Credit Agreement (as such agreement may be further amended, restated, modified or supplemented at any time and from time to time from and after the date hereof, the "Credit Agreement"), dated as of July 26, 2001, among the Assignors, the lenders party thereto (the "Lenders") and the Agent, pursuant to which, among other things, MEMC Pasadena, has been added as a borrower thereunder; and SECTION 3. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. SECTION 4. Counterparts. This Amendment may be executed in any number of 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 instrument. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the first date first written above.   MEMC ELECTRONIC MATERIALS, INC., as Assignor By: /s/ James M. Stolze __________________________ Name: James M. Stolze Title: Executive Vice President and Chief Financial Officer By: /s/ Helene F. Hennelly __________________________ Name: Helene F. Hennelly Title: Corporate Vice President, General Counsel & Secretary MEMC PASADENA, INC., as Assignor By: /s/ Jonathon P. Jansky __________________________ Name: Jonathon P. Jansky Title: Chairman of the Board Accepted and Agreed to: E.ON AG as Agent By: /s/ Hans Gisbert Ulmke Name: Hans Gisbert Ulmke Title: Executive Vice President By: /s/ Dr. Michael Bangert______ Name: Dr. Michael Bangert Title: Vice President

EXHIBIT 10.11 AGREEMENT FOR INVENTORY FINANCING This AGREEMENT FOR INVENTORY FINANCING (as amended, supplemented or otherwise modified from time to time, this "Agreement") is hereby made this 28th day of February, 2001, by and between IBM Credit Corporation, a Delaware corporation with a place of business at 5000 Executive Parkway, Suite 450, San Ramon, CA 94583 ("IBM Credit"), and Egghead.Com, Inc., duly organized under the laws of the State of Delaware with its principal place of business at 1350 Willow Road, Menlo Park, CA 94025 ("Customer"). W I T N E S S E T H WHEREAS, in the course of Customer's operations, Customer intends to purchase from Persons approved in writing by IBM Credit for the purposes of this Agreement (the "Authorized Suppliers") computer hardware and software products manufactured or distributed by or bearing any trademark or trade name of such Authorized Suppliers (the "Products") (as of the date hereof the Authorized Suppliers are as set forth on Attachment E hereto); WHEREAS, Customer has requested that IBM Credit finance its purchase of Products from such Authorized Suppliers and IBM Credit Is willing to provide such financing to Customer subject to the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: SECTION 1. DEFINITIONS; ATTACHMENTS Special Definitions. The following terms shall have the following respective meanings in this Agreement (such meanings to be equally applicable to both the singular and the plural forms of the terms defined): "Accounts": as defined in the U.C.C. "Advance": any loan or other extension of credit by IBM Credit to, or on behalf of, Customer pursuant to this Agreement including, without limitation, Product Advances. "Affiliate": with respect to the Customer, any Person meeting one of the following: (i) at least 10% of such Person's equity is owned, directly or indirectly, by Customer; (ii) at least 10% of Customer's equity is owned, directly or indirectly, by such Person; or (iii) at least 10% of Customer's equity and at least 10% of such Person's equity is owned, directly or indirectly, by the same Person or Persons. All of Customer's officers, directors, joint venturers, and partners shall also be deemed to be Affiliates of Customer for purposes of this Agreement. "Agreement": as defined in the caption. "Auditors": a nationally recognized firm of independent certified public accountants selected by Customer and satisfactory to IBM Credit. "Authorized Suppliers": as defined in the recitals of this Agreement. "Available Credit": at any time, (1) the Maximum Advance Amount less (2) the Outstanding Advances at such time. "Average Daily Balance": for each Advance for a given period of time, the sum of the unpaid principal of such Advance as of each day during such period of time, divided by the number of days in such period of time. "Bank": as defined in Section 3.3. "Borrowing Base": as defined in Attachment A. "Business Day": any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are generally closed or on which IBM Credit is closed. "Closing Date": the date on which the conditions precedent to the effectiveness of this Agreement set forth in Section 5.1 hereof are satisfied or waived in writing by IBM Credit. "Code": the Internal Revenue Code of 1986, as amended or any successor statute. "Collateral": as defined in Section 4.1. "Collateral Management Report": a report to be delivered by Customer to IBM Credit from time to time, as provided herein, signed by the chief executive officer or chief financial officer of Customer, substantially in the form and detail of Attachment F hereto, detailing and certifying, among other items: a summary of Customer's inventory on hand financed by IBM Credit and Customers Eligible Accounts, the amount and aging of all of Customer's Accounts, Customer's inventory on hand financed by IBM Credit by quantity, type, model, Authorized Supplier's Invoice price to Customer and the total of the line item values for all inventory listed on the report, the amounts and aging of Customer's accounts payable as of a specified date, all of the Customer's IBM Credit borrowing activity during a specified period and the total amount of Customer's Borrowing Base as welt as Customer's Outstanding Product Advances, Available Credit and any Shortfall Amount as of a specified date. "Common Due Date": (1) the fifth day of a calendar month if the Product Financing Period expires on the first through tenth of such calendar month; (2) the fifteenth day of a calendar month if the Product Financing Period expires on the eleventh through twentieth of such calendar month; and (3) the twenty-fifth day of a calendar month if the Product Financing Period expires on the twenty-first through the last day of such calendar month. "Credit Line": as defined in Section 2 1. "Customer": as defined in the caption. "Default": either (1) an Event of Default or (2) any event or condition which, but for the requirement that notice be given or time lapse or both, would be an Event of Default. "Delinquency Fee Rate": as defined on Attachment A. "Eligible Accounts": as defined in Section 3.1. "Environmental Laws": all statutes, laws, judicial decisions, regulations, ordinances, and other governmental restrictions relating to pollution, the protection of the environment, occupational health and safety, or to emissions, discharges or release of pollutants, contaminants, hazardous substances or wastes into the environment. "Environmental Liability": any claim, demand, obligation, cause of action, allegation, order, violation, injury, judgment, penalty or fine, cost or expense, resulting from the violation or alleged violation of any Environmental Laws or the imposition of any Lien pursuant to any Environmental Laws. "ERISA": the Employee Retirement Income Security Act of 1974, as amended, or any successor statutes. "Event of Default": as defined in Section 9.1. "Financial Statements": the consolidated balance sheets (including, without limitation, securities such as stocks and investment bonds), statements of operations, statements of cash flows and statements of changes in shareholder's equity of Customer and its Subsidiaries for the period specified, prepared in accordance with GAAP and consistent with prior practices. "Floor Plan Lender: any Person who now or hereinafter provides inventory financing to Customer, provided that such Person executes an Intercreditor Agreement (as defined in Section 5.1 of this Agreement) or a subordination agreement with IBM Credit in form and substance satisfactory to IBM Credit. "Free Financing Period": for each Product Advance, the period, if any, in which IBM Credit does not charge Customer a financing charge. IBM Credit shall calculate the Customer's Free Financing Period utilizing a methodology that is consistent with the methodologies used for similarly situated customers of IBM Credit. The Customer understands that IBM Credit may not offer, may change or may cease to offer a Free Financing Period for the Customer's purchases of Products. "Free Financing Period Exclusion Fee": as defined in Attachment A. "GAAP": generally accepted accounting principles in the United States as in effect from time to time. "Governmental Authority": any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled (through stock or capital ownership or otherwise) by any of the foregoing. "Hazardous Substances": all substances, wastes or materials, to the extent subject to regulation as "hazardous substances" or "hazardous waste" under any Environmental Laws. "IBM Credit": as defined in the caption. "Indebtedness": with respect to any Person, (1) all obligations of such Person for borrowed money or for the deferred purchase price of property or services (other than trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices) or which is evidenced by a note, bond, debenture or similar instrument, (2) all obligations of such Person under capital leases (including obligations under any leases Customer may enter into, now or in the future, with IBM Credit), (3) all obligations of such Person in respect of letters of credit, banker's acceptances or similar obligations issued or created for the account of such Person, (4) liabilities arising under any interest rate protection, future, option swap, cap or hedge agreement or arrangement under which such Person is a party or beneficiary, (5) all obligations under guaranties by such Person and (6) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof. "Intellectual Property": as defined in Section 6.14. "Investment": with respect to any Person (the "Investor"), (1) any investment by the Investor in any other Person, whether by means of share purchase, capital contribution, purchase or other acquisition of a partnership or joint venture interest, loan, time deposit, demand deposit or otherwise, and (2) any guaranty by the Investor of any Indebtedness or other obligation of any other Person. "Lien(s)": any lien, claim, charge, pledge, security interest, deed of trust, mortgage, other encumbrance or other arrangement having the practical effect of the foregoing, including the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "Lockbox": as defined in Section 3.3. "Material Adverse Effect": a material adverse effect (1) on the business, operations, results of operations, assets, or financial condition of the Customer, (2) on the aggregate value of the Collateral or the aggregate amount which IBM Credit would be likely to receive (after giving consideration to reasonably likely delays in payment and reasonable costs of enforcement) in the liquidation of such Collateral to recover the Obligations in full, or (3) on the rights and remedies of IBM Credit under this Agreement. "Maximum Advance Amount": at any time, the lesser of (1) the Credit Line and (2) the Borrowing Base at such time. "Obligations": all covenants, agreements, warranties, duties, representations, loans, advances, interest (including interest accruing on or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to Customer, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), fees, reasonable expenses, indemnities, liabilities and Indebtedness of any kind and nature whatsoever now or hereafter arising, owing, due or payable from Customer to IBM Credit. "Other Charges": as set forth in Attachment A. "Other Documents": all security agreements, mortgages, leases, instruments, documents, guarantees, schedules of assignment, contracts and similar agreements executed by Customer and delivered to IBM Credit, pursuant to this Agreement or otherwise, and all amendments, supplements and other modifications to the foregoing from time to time. "Outstanding Advances": at any time of determination, the sum of (1) the unpaid principal amount of all Advances made by IBM Credit under this Agreement; and (2) any finance charge, fee, expense or other amount related to Advances charged to Customer's account with IBM Credit. "Outstanding Product Advances": at any time of determination, the sum of (1) the unpaid principal amount of all Product Advances made by IBM Credit under this Agreement; and (2) any finance charge, fee, expense or other amount related to Product Advances charged to Customer's account with IBM Credit. "PBGC": as defined in Section 6.12. "Permitted Indebtedness": any of the following: (1) Indebtedness to IBM Credit; (2) Indebtedness described in Section VII of Attachment B; (3) Indebtedness to any Floor Plan Lender, (4) Purchase Money Indebtedness; (5) guaranties in favor of IBM Credit; and (6) other Indebtedness consented to by IBM Credit in writing prior to incurring such Indebtedness. "Permitted Liens": any of the following: (1) Liens which are the subject of an Intercreditor Agreement, in effect from time to time between IBM Credit and any other secured creditor; (2) Purchase Money Security Interests; (3) Liens described in Section I of Attachment B; (4) Liens of warehousemen, mechanics, materialmen, workers, repairmen, common carriers, landlords and other similar Liens arising by operation of law or otherwise, not waived in connection herewith, for amounts that are not yet due and payable or being contested in good faith by appropriate proceedings promptly instituted and diligently conducted if an adequate reserve or other appropriate provisions shall have been made therefor as required to be in conformity with GAAP and an adverse determination in such proceedings could not reasonably be expected to have a Material Adverse Effect; (5) attachment or judgment Liens individually or in the aggregate not in excess of $50,000 (exclusive of (A) any amounts that are duly bonded to the satisfaction of IBM Credit or (B) any amount fully covered by insurance as to which the insurance company has acknowledged its obligation to pay such judgment in full); (6) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of Customer, (7) extensions and renewals of the foregoing Permitted Liens; provided that (A) the aggregate amount of such extended or renewed Liens do not exceed the original principal amount of the Indebtedness which it secures, (B) such Liens do not extend to any property other than property already previously subject to the Lien and (C) such extended or renewed Liens are on terms and conditions no more restrictive than the terms and conditions of the Liens being extended or renewed; (8) Liens arising from deposits or pledges to secure bids, tenders, contracts, leases, surety and appeal bonds and other obligations of like nature arising in the ordinary course of the Customer's business; (9) Liens for taxes, assessments or governmental charges not delinquent or being contested, in good faith, by appropriate proceedings promptly instituted and diligently conducted if an adequate reserve or other appropriate provisions shall have been made therefor as required in order to be in conformity with GAAP and an adverse determination in such proceedings could not reasonably be expected to have a Material Adverse Effect; (10) Liens arising out of deposits in connection with workers' compensation, unemployment insurance or other social security or similar legislation; (11) Liens arising pursuant to this Agreement; and (12) other Liens consented to by IBM Credit in writing prior to incurring such Lien. "Person": any individual, association, firm, corporation, partnership, trust, unincorporated organization or other entity whatsoever, "Plans": as defined in Section 8.12. "Policies": all policies of insurance required to be maintained by Customer under this Agreement or any of the Other Documents. "Prime Rate": as of the date of determination, the average of the rates of interest announced by Citibank, N.A., Chase Manhattan Bank and Bank of America National Trust 8 Savings Association (or any other bank which IBM Credit uses in its normal course of business of determining Prime Rate) as their prime or base rate, as of the last Business Day of the calendar month immediately preceding the date of determination, whether or not such announced rates are the actual rates charged by such banking institutions to their most creditworthy borrowers. "Products": as defined in the recitals of this Agreement. "Product Advance": any advance of funds made or committed to be made by IBM Credit for the account of Customer to an Authorized Supplier in respect of an invoice delivered or to be delivered by such Authorized Supplier to IBM Credit describing Products purchased by Customer. "Product Financing Charge": as specified in a billing statement. "Product Financing Period": for each Product Advance, equal to the Free Financing Period for such Product Advance or if there is no Free Financing Period, such period as IBM Credit may determine from time to time. "Purchase Money Indebtedness": any Indebtedness (including capital leases) incurred to finance the acquisition of assets (other than assets manufactured or distributed by or bearing any trademark or trade name of any Authorized Supplier) to be used in the Customer's business not to exceed the lesser of (1) the purchase price or acquisition cost of such asset and (2) the fair market value of such asset. "Purchase Money Security Interest": any security interest securing Purchase Money Indebtedness, which security interest applies solely to the particular asset acquired with the Purchase Money Indebtedness. "Requirement of Law": as to any Person, the articles of incorporation and by-laws of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other governmental authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Shortfall Amount": as defined in Section 2.5. "Shortfall Transaction Fee": as defined in Attachment A. "Special Account": as defined in Section 3.3. "Subsidiary": with respect to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at the time directly or indirectly owned by such Person. "Supplier Credits": as defined in Section 2.2. "Termination Date": shall mean the first anniversary of the date of this Agreement or such other date as IBM Credit and Customer may agree to from time to time. "Voting Stock": securities, the holders of which are ordinarily, in the absence of contingencies, entitled to elect the corporate directors (or persons performing similar functions). Other Defined Terms. Terms not otherwise defined in this agreement which are defined in the Uniform Commercial Code as in effect in the State of New York (the "U.C.C.") shall have the meanings assigned to them therein. Attachments. All attachments, exhibits, schedules and other addenda hereto, including, but not limited to, Attachment A and Attachment B, are specifically incorporated herein by reference and made a part of this Agreement. SECTION 2. CREDIT LINE; FINANCE CHARGES; OTHER CHARGES Credit Line. Subject to the terms and conditions set forth in this Agreement, on and after the Closing Date to but not including the date that is the earlier of (i) the date on which this Agreement is terminated pursuant to Section 10.1 and (ii) the date on which IBM Credit terminates the Credit Line pursuant to Section 9.2, 10.1 Credit agrees to extend to the Customer a credit line ("Credit Line") in the amount set forth in Attachment A pursuant to which IBM Credit will make to the Customer, from time to time, Advances in an aggregate amount at any one time outstanding not to exceed the Credit Line. Notwithstanding any other term or provision of this Agreement, IBM Credit may, at any time and from time to time, in its sole and absolute discretion (x) temporarily increase the amount of the Credit Line set forth in Attachment A and decrease the amount of the Credit Line to the amount of the Credit Line set forth in Attachment A, in each case upon written notice to the Customer, and (y) make Advances pursuant to this Agreement upon the request of Customer in an aggregate amount at any one time outstanding in excess of the Credit Line. Product Advances. Subject to the terms and conditions of this Agreement, IBM Credit shall make Product Advances in connection with Customer's purchase of Products from Authorized Suppliers upon at least a two-day prior written notice from Authorized Suppliers. Customer hereby authorizes and directs IBM Credit to pay the proceeds of Product Advances directly to the applicable Authorized Supplier in respect of invoices delivered to IBM Credit for such Products by such Authorized Supplier and acknowledges that (i) any delivery to IBM Credit of an invoice by an Authorized Supplier shall be deemed as a request for a Product Advance by Customer, and (ii) each such Product Advance constitutes a loan by IBM Credit to Customer pursuant to this Agreement as if the Customer received the proceeds of the Product Advance directly from IBM Credit. IBM Credit may, upon written notice to Customer, cease to Include a supplier as an Authorized Supplier. No finance charge shall accrue on any Product Advance during the Free Financing Period, if any, applicable to such Product Advance. Each Product Advance shall be due and payable on the Common Due Date for such Product Advance. Each Product Advance shall accrue a finance charge on the Average Daily Balance thereof from and including the first (1st) day following the end of the Free Financing Period, if any, for such Product Advance, or if no such Free Financing Period shall be in effect, from and including the date of invoice for such Product Advance, in each case, to and including the date such Product Advance shall become due arid payable in accordance with the terms of this Agreement. In addition, for any Product Advance with respect to which a Free Financing Period shall not be in effect, Customer shall pay a Free Financing Period Exclusion Fee. Such fee shall be due and payable on the Common Due Date for such Product Advance. If it is determined that amounts received from Customer were in excess of the highest rate permitted by law, then the amount representing such excess shall be considered reductions to principal of Advances. Customer acknowledges that IBM Credit does not warrant the Products. Customer shall be obligated to pay IBM Credit in full even if the Products are defective or fail to conform to the warranties extended by the Authorized Supplier. The Obligations of Customer shall not be affected by any dispute Customer may have with any manufacturer, distributor or Authorized Supplier. Customer will not assert any claim or defense which it may have against any manufacturer, distributor or Authorized Supplier against IBM Credit. Customer hereby authorizes IBM Credit to collect directly from any Authorized Supplier any credits, rebates, bonuses or discounts owed by such Authorized Supplier to Customer ("Supplier Credits"). Any Supplier Credits received by IBM Credit may be applied by IBM Credit to the Outstanding Advances. Any Supplier Credits collected by IBM Credit shall in no way reduce Customer's debt to IBM Credit in respect of the Outstanding Advances until such Supplier Credits are applied by IBM Credit; provided, however, that in the event any such Supplier Credits must be returned or disgorged or are otherwise unavailable for application, then Customer's Obligations will be reinstated as if such Supplier Credits had never been applied. IBM Credit may apply any payments and Supplier Credits received by IBM Credit to reduce finance charges first and then to principal amounts of Advances owed by Customer. IBM Credit may apply principal payments to the oldest (earliest) invoices (and related Product Advances) first, but, in any case, all principal payments will be applied in respect of the Outstanding Product Advances made for Products which have been sold, lost, stolen, destroyed, damaged or otherwise disposed of prior to any other application thereof. Customer will indemnify and hold IBM Credit harmless from and against any claims or demands asserted by any Person relating to or arising from the Products for any reason whatsoever, including, without limitation, the condition of the Products, any misrepresentation made about the Products by any representative of Customer, or any act or failure to act by Customer except to the extent such claims or demands are directly attributable to IBM Credit's gross negligence or willful misconduct. Nothing contained in the foregoing shall impair any rights or claims which the Customer may have against any manufacturer, distributor or Authorized Supplier. Finance and Other Charges. Finance charges for an Advance for a calendar month shall be equal to (i) one twelfth (1/12) of the applicable Product Financing Charge multiplied by (ii) the Average Daily Balance of such Advance for the period when such finance charge accrues during such calendar month multiplied by (iii) the actual number of days during such calendar month when such finance charge accrues divided by (iv) thirty (30). Late charges pursuant to subsection (D) of this Section 2.3 for an Advance for a calendar month shall be equal to (i) one twelfth (1/12) of the Delinquency Fee Rate multiplied by (ii) the Average Daily Balance of such Advance for the period when such Advance is past due during such calendar month multiplied by (iii) the actual number of days during such calendar month when such Advance is past due divided by (iv) thirty (30). The Customer hereby agrees to pay to IBM Credit the charges set forth as "Other Charges" in Attachment A. The Customer also agrees to pay IBM Credit additional charges for any returned items of payment received by IBM Credit. The Customer hereby acknowledges that any such charges are not interest but that such charges, if unpaid, will constitute part of the Outstanding Product Advances. The finance charges and Other Charges owed under this Agreement, and any charges hereafter agreed to in writing by the parties, are payable monthly on receipt of IBM Credit's bill or statement therefor or IBM Credit may, in its sole discretion, add unpaid finance charges and Other Charges to the Customer's Outstanding Product Advances. If any amount owed under this Agreement, including, without limitation, any Advance, is not paid within two (2) Business Days of the date of determination (whether at maturity, by acceleration or otherwise), the unpaid amount thereof will bear a late charge from and including the day after it was due and payable to and including the date IBM Credit receives payment thereof, at a per annum rate equal to the lesser of (a) the amount set forth in Attachment A to this Agreement as the "Delinquency Fee Rate" and (b) the highest rate from time to time permitted by applicable law. In addition, if any Shortfall Amount shall not be paid when due pursuant to Section 2.5 hereof, Customer shall pay IBM Credit a Shortfall Transaction Fee. If it is determined that amounts received from Customer were in excess of such highest rate, then the amount representing such excess, shall be considered reductions to principal of Advances. Customer Account Statements. IBM Credit will send statements of each transaction hereunder as well as monthly billing statements to Customer with respect to Advances and other charges due on Customer's account with IBM Credit. Each statement of transaction and monthly billing statement shall be deemed, absent manifest error, to be correct and shall constitute an account stated with respect to each transaction or amount described therein unless within seven (7) Business Days after such statement of transaction or billing statement is received by Customer, Customer provides IBM Credit written notice objecting that such amount or transaction is incorrectly described therein and specifying the error(s), if any, contained therein. IBM Credit may at any time adjust such statements of transaction or billing statements to comply with applicable law and this Agreement. Shortfall. If on any date the Outstanding Advances owed by Customer to IBM Credit exceeds the Maximum Advance Amount (such excess, the "Shortfall Amount"), Customer shall immediately pay to IBM Credit within two (2) Business Days an amount equal to such Shortfall Amount provided, however, payment by Customer to IBM Credit of such Shortfall Amount is accompanied by a current Collateral Management Report. Application of Payments. The Customer hereby agrees that all checks and other instruments delivered to IBM Credit on account of Customers Obligations shall constitute conditional payment until such items are actually collected by IBM Credit. The Customer waives the right to direct the application of any and all payments at any time or times hereafter received by IBM Credit on account of the Customer's Obligations. Customer agrees that IBM Credit shall have the continuing exclusive right to apply and reapply any and all such payments to Customer's Obligations in such manner as IBM Credit may deem advisable notwithstanding any entry by IBM Credit upon any of its books and records. Prepayment and Reborrowing By Customer. (A) Customer may at any time prepay, without notice or penalty, in whole or in part amounts owed under this Agreement. IBM Credit may apply payments made to it (whether by the Customer or otherwise) to pay finance charges and other amounts owing under this Agreement first and then to the principal amount owed by the Customer. (B) Subject to the terms and conditions of this Agreement, any amount prepaid or repaid to IBM Credit in respect to the Outstanding Advances may be reborrowed by Customer in accordance with the provisions of this Agreement. SECTION 3. CREDIT LINE ADDITIONAL PROVISIONS Ineligible Accounts. IBM Credit and Customer agree that IBM Credit shall have the sole right to determine eligibility of Accounts from an Account debtor for purposes of determining the Borrowing Base; however, without limiting such right, the following Accounts will be deemed to be ineligible for purposes of determining the Borrowing Base: Accounts created from the sale of goods and/or performance of services on non-standard terms or that allow for payment to be made more than thirty (30) days from the date of such sale or performance of services; Accounts unpaid more than ninety (90) days from date of invoice; Accounts payable by an account debtor if fifty percent (50%) or more of the aggregate outstanding balance of all such Accounts remain unpaid for more than ninety (90) days from the date of invoice; Accounts payable by an account debtor that is an Affiliate of Customer, or an officer, employee, agent, guarantor or stockholder of Customer or Affiliate of Customer, or is related to or has common shareholders, officers or directors with Customer, Accounts arising from consignment sales; Except for state, local and United States government institutions and public educational institutions, Accounts with respect to which the payment by the Account debtor is or may be conditional; Except for state, local and United States government institutions and public educational institutions, Accounts with respect to which: the Account debtor is not a commercial entity, or the Account debtor is not a resident of the United States; Accounts payable by any Account debtor to which Customer is or may become liable for goods sold or services rendered by such account debtor to Customer, Accounts arising from the sale or lease of goods purchased for a personal, family or household purpose; Accounts arising from the sale or other disposition of goods that have been used for demonstration purposes or loaned or leased by the Customer to another party; Accounts which are progress payment accounts or contra accounts; Accounts upon which IBM Credit does not have a valid, perfected, first priority security interest; Accounts payable by an Account debtor that is or Customer knows will become, subject to proceedings under United States Bankruptcy Law or other law for the relief of debtors; Accounts that are not payable in US dollars; Accounts payable by any Account debtor that is a remarketer of computer hardware and software products and whose purchases of such products from Customer have been financed by another person, other than IBM Credit, who pays the proceeds of such financing directly to Customer on behalf of such debtor ("Third Party Financer") unless (i) such Third Party Financer does not have a separate financing relationship with Customer or (ii) such Third Party Financer has a separate financing relationship with Customer and has waived its right to set off its obligations to Customer Accounts arising from the sale or lease of goods which are billed to any Account debtor but have not yet been shipped by Customer; Accounts with respect to which Customer has permitted or agreed to any extension, compromise or settlement, or made any change or modification of any kind or nature, including, but not limited to, any change or modification to the terms relating thereto; Accounts that do not arise from undisputed bonafide transactions completed in accordance with the terms and conditions contained in the invoices, purchase orders and contracts relating thereto; Accounts that are discounted for the full payment term specified in Customer's terms and conditions with its Account debtors, or for any longer period of time; Accounts on cash on delivery (C.O.D.) terms; Accounts arising from maintenance or service contracts that are billed in advance of full performance of service; Accounts arising from bartered transactions; Accounts arising from Incentive payments, rebates, discounts, credits, and refunds from a supplier unless (y) each incentive payment, rebate, discount, credit, and refund is (i) verifiable with Authorized Supplier, (ii) payable in cash, and (iii) deposited directly or indirectly into the Lockbox and (y) Authorized Supplier waives its right to setoff such amounts owed to Customer with any amount Customer may owe to the Authorized Supplier; and Any and all other Accounts that IBM Credit deems, in its sole and absolute discretion, to be ineligible. The aggregate of all Accounts that are not ineligible Accounts shall hereinafter be referred to as "Eligible Accounts". Reimbursement for Charges. Customer agrees to pay for all costs and expenses of Customer's bank in respect to collection of checks and other items of payment, all fees relating to the use and maintenance of the Lockbox and the Special Account and with respect to remittances of proceeds of the Advances hereunder. Lockbox and Special Account. Customer shall establish and maintain lockbox(es) (each, a "Lockbox") at the address(es) set forth in Attachment A with the financial institution(s) listed in Attachment A (each, a "Bank") pursuant to an agreement between the Customer and each Bank in form and substance satisfactory to IBM Credit. Customer shall also establish and maintain a deposit account which shall contain only proceeds of Customer's Accounts ("Special Account") with each Bank. Customer shall enter into and maintain a contingent blocked account agreement with each Bank for the benefit of IBM Credit in form and substance satisfactory to IBM Credit pursuant to which, among other things, such Bank shall agree that, upon an Event of Default, IBM Credit may provide notice to Bank that disbursements from the Special Account shall be made only as IBM Credit shall direct. However, upon the cure of such Event of Default, IBM Credit shall not be required to return the control of the Special Account to the Customer. Collections. Customer shall instruct all Account debtors to remit payments directly to a Lockbox. In addition, Customer shall have such instruction printed in conspicuous type on all invoices. Customer shall instruct such Bank to deposit all remittances to such Bank's Lockbox into its Special Account. Customer further agrees that it shall not deposit or permit any deposits of funds other than remittances paid in respect of the Accounts into the Special Account(s) or permit any commingling of funds with such remittances in any Lockbox or Special Account. Without limiting the Customer's foregoing obligations, if, at any time, Customer receives a remittance directly from an Account debtor, then Customer shall make entries on its books and records in a manner that shall reasonably identify such remittances and shall keep a separate account on its record books of all remittances so received and deposit the same into a Special Account. Until so deposited into the Special Account, Customer shall keep all remittances received in respect of Accounts separate and apart from customer's other property so that they are capable of identification as the proceeds of Accounts in which IBM Credit has a security interest. Application of Remittances and Credits. Customer shall apply all remittances against the aggregate of Customer's outstanding Accounts no later than the end of the Business Day on which such remittances are deposited Into the Special Account. Customer also agrees to apply each remittance against its respective Account no later than three (3) Business Days from the date such remittance is deposited into the Special Account. In addition, Customer shall promptly apply any credits owing in respect to any Account when due. Power of Attorney. Customer hereby irrevocably appoints IBM Credit, with full power of substitution, as its true and lawful attorney-in-fact with full power, in good faith and in compliance with commercially reasonable standards, in the discretion of IBM Credit, to: sign the name of Customer on any document or instrument that IBM Credit shall deem necessary or appropriate to perfect and maintain perfected the security interest in the Collateral contemplated under this Agreement and the Other Documents; endorse the name of Customer upon any of the items of payment of proceeds and deposit the same in the account of IBM Credit for application to the Obligations; and upon the occurrence and during the continuance of an Event of Default as defined in Section 9.1 hereof: demand payment, enforce payment and otherwise exercise all Customer's rights and remedies with respect to the collection of any Accounts; settle, adjust, compromise, extend or renew any Accounts; settle, adjust or compromise any legal proceedings brought to collect any Accounts; sell or assign any Accounts upon such terms, for such amounts and at such time or times as IBM Credit may deem advisable; discharge and release any Accounts; prepare, file and sign Customer's name on any Proof of Claim in Bankruptcy or similar document against any Account debtor; prepare, file and sign Customers name on any notice of lien, claim of mechanic's lien, assignment or satisfaction of lien or mechanic's lien, or similar document in connection with any Accounts; endorse the name of Customer upon any chattel paper, document, instrument, invoice, freight bill, bill of lading or similar document or agreement relating to any Account or goods pertaining thereto; endorse the name of Customer upon any of the items of payment of proceeds and deposit the same in the account of IBM Credit for application to the Obligation; sign the name of Customer to requests for verification of Accounts and notices thereof to Account debtors; sign the name of Customer on any document or instrument that IBM Credit shall deem necessary or appropriate to enforce any and all remedies it may have under this Agreement, at law or otherwise; make, settle and adjust claims under the Policies with respect to the Collateral and endorse Customer's name on any check, draft, instrument or other item of payment of the proceeds of the Policies with respect to the Collateral; and take control in any manner of any term of payment or proceeds and for such purpose to notify the postal authorities to change the address for delivery of mail addressed to Customer to such address as IBM Credit may designate. The power of attorney granted by this Section is for value and coupled with an interest and is irrevocable so long as this Agreement is in effect or any Obligations remain outstanding. Nothing done by IBM Credit pursuant to such power of attorney will reduce any of Customer's Obligations other than Customer's payment Obligations to the extent IBM Credit has received monies. SECTION 4. SECURITY -- COLLATERAL Grant. To secure Customer's full and punctual payment and performance of the Obligations (including obligations under any leases Customer may enter into, now or in the future, with IBM Credit) when due (whether at the stated maturity, by acceleration or otherwise), Customer hereby grants IBM Credit a security interest in all of Customers right, title and interest in and to the following property, whether now owned or hereafter acquired or existing and wherever located: all inventory and equipment and all parts thereof, attachments, accessories and accessions thereto, products thereof and documents therefor; all accounts, contract rights, chattel paper, instruments, deposit accounts, obligations of any kind owing to Customer, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services and all books, invoices, documents and other records in any form evidencing or relating to any of the foregoing; general intangibles; all rights now or hereafter existing in and to all mortgages, security agreements, leases or other contracts securing or otherwise relating to any of the foregoing; and all substitutions and replacements for all of the foregoing, all proceeds of all of the foregoing and, to the extent not otherwise included, all payments under insurance or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing. All of the above assets shall be collectively defined herein as the "Collateral", provided, however, that Collateral shall not include leasehold interests as a lessee, sub-lessee or sub-lessor with regard to real property leases and provided further that Collateral shall not include leasehold interests as a lessee under equipment leases. Customer covenants and agrees with IBM Credit that: (a) the security constituted to by this Agreement is in addition to any other security from time to time held by IBM Credit and (b) the security hereby created is a continuing security interest and will cover and secure the payment of all Obligations both present and future of Customer to IBM Credit. Further Assurances. Customer shall, from time to time upon the request of IBM Credit, execute and deliver to IBM Credit, or cause to be executed and delivered, at such time or times as IBM Credit may request such other and further documents, certificates and instruments that IBM Credit may deem necessary to perfect and maintain perfected IBM Credit's security interests in the Collateral and in order to fully consummate all of the transactions contemplated under this Agreement and the Other Documents. Customer shall make appropriate entries on its books and records disclosing IBM Credits security interests in the Collateral. SECTION 5. CONDITIONS PRECEDENT Conditions Precedent to the Effectiveness of this Agreement. The effectiveness of this Agreement is subject to the receipt by IBM Credit of, or waiver in writing by IBM Credit of compliance with, the following conditions precedent; this Agreement executed and delivered by Customer and IBM Credit; a favorable opinion of counsel for Customer in substantially the form of Attachment H; a certificate of the secretary or an assistant secretary of Customer, substantially in the form and substance of Attachment I hereto, certifying that, among other items, (i) Customer is duly organized under the laws of the State of its organization or incorporation and has its principal place of business as stated therein, (ii) Customer is registered to conduct business in specified states and localities, (iii) true and complete copies of the articles of incorporation, or corresponding organizational documents, as applicable, and by-laws of Customer are delivered therewith, together with all amendments and addenda thereto as in effect on the date thereof, (iv) the resolution as stated in the certificate is a true, accurate and compared copy of the resolution adopted by the Customer's Board of Directors or, if Customer is a limited liability company, by Customer's authorized members, authorizing the execution, delivery and performance of this Agreement and each Other Document executed and delivered in connection herewith, and (v) the names and true signatures of the officers of Customer authorized to sign this Agreement and the Other Documents; certificates dated as of a recent date from the Secretary of State or other appropriate authority evidencing the good standing of Customer in the jurisdiction of its organization and in each other jurisdiction where the ownership or lease of its property or the conduct of its business requires it to qualify to do business; copies of all approvals and consents from any Person in each case in form and substance satisfactory to IBM Credit, which are required to enable Customer to authorize, or required in connection with, (a) the execution, delivery or performance of this Agreement and each of the Other Documents, and (b) the legality, validity, binding effect or enforceability of this Agreement and each of the Other Documents; a lockbox agreement executed by Customer and each Bank, in form and substance satisfactory to IBM Credit; a contingent blocked account agreement executed by Customer and each Bank in form and substance satisfactory to IBM Credit; intercreditor agreements ("Intercreditor Agreement"), in form and substance satisfactory to IBM Credit, executed by each other secured creditor of Customer as set forth in Attachment A; UCC-1 financing statements for each jurisdiction reasonably requested by IBM Credit executed by Customer and each guarantor whose guaranty to IBM Credit is intended to be secured by a pledge of its assets; the statements, certificates, documents, instruments, financing statements, agreements and information set forth in Attachment A and Attachment B; and all such other statements, certificates, documents, instruments, financing statements, agreements and other information with respect to the matters contemplated by this Agreement as IBM Credit shall have reasonably requested. Conditions Precedent to Each Advance. No Advance will be required to be made or renewed by IBM Credit under this Agreement unless, on and as of the date of such Advance, the following statements shall be true to the satisfaction of IBM Credit: The representations and warranties contained in this Agreement or in any document, instrument or agreement executed in connection herewith are true and correct in all material respects on and as of the date of such Advance as though made on and as of such date; No event has occurred and is continuing or after giving effect to such Advance or the application of the proceeds thereof would result in or would constitute a Default; No event has occurred and is continuing which could reasonably be expected to have a Material Adverse Effect; and Both before and after giving effect to the making of such Advance, no Shortfall Amount exists. Except as Customer has otherwise disclosed to IBM Credit in writing prior to each request, each request (or deemed request pursuant to Section 2.2(A)) for an Advance hereunder shall be deemed to be a representation and warranty by Customer that, as of and on the date of such Advance, the statements set forth in (A) through (D) above are true statements. No such disclosures by Customer to IBM Credit shall in any manner be deemed to satisfy the conditions precedent to each Advance that are set forth in this Section 5.2. SECTION 6. REPRESENTATIONS AND WARRANTIES To induce IBM Credit to enter into this Agreement, Customer represents and warrants to IBM Credit as follows: Organization and Qualifications. Customer and each of its Subsidiaries (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has the power and authority to own its properties and assets and to transact the businesses in which it presently is engaged and (iii) is duly qualified and is authorized to do business and is in good standing in each jurisdiction where it presently is engaged in business and is required to be so qualified. As of the Closing Date, Egghead.com Advertising, Inc., EO Corporation, Surplus Software, Inc., EH Direct, Inc., MPI Corp., and D.J. & J. Software Corp. are dormant companies that own no assets. Rights in Collateral; Priority of Liens. Customer and each of its Subsidiaries owns the property granted by it respectively as Collateral to IBM Credit, free and clear of any and all Liens in favor of third parties except for the Liens otherwise permitted pursuant to Section 8.1. The Liens granted by the Customer and each of its Subsidiaries pursuant to this Agreement, the Guaranties and the Other Documents in the Collateral constitute the valid and enforceable first, prior and perfected Liens on the Collateral, except to the extent any Liens that are prior to IBM Credit's Liens are (i) the subject of an Intercreditor Agreement or (ii) Purchase Money Security Interests in product of a brand that is not financed by IBM Credit. No Conflicts. The execution, delivery and send performance by Customer of this Agreement and each of the Other Documents (i) are within its corporate or limited liability company power, (ii) are duly authorized by all necessary corporate or limited liability company actions; (iii) are not in contravention in any respect of any Requirement of Law or any indenture, contract, lease, agreement, instrument or other commitment to which it is a party or by which it or any of its properties are bound; (iv) do not require the consent, registration or approval of any Governmental Authority or any other Person (except such as have been duly obtained, made or given, and are in full force and effect); and (v) will not, except as contemplated herein, result in the imposition of any Liens upon any of its properties. Enforceability. This Agreement and all of the other documents executed and delivered by the Customer in connection herewith are the legal, valid and binding obligations of Customer, and are enforceable in accordance with their terms, except as such enforceability may be limited by the effect of any applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors' rights generally or the general equitable principles relating thereto. Locations of Offices, Records and Inventory. The address of the principal place of business and chief executive office of Customer is as set forth on Attachment B or on any notice provided by Customer to IBM Credit pursuant to Section 7.7(C) of this Agreement. The books and records of Customer are maintained exclusively at such location. There is no jurisdiction in which Customer has any assets, equipment or inventory (except for vehicles and inventory in transit for processing) other than those jurisdictions identified on Attachment B or on any notice provided by Customer to IBM Credit pursuant to Section 7.7(C) of this Agreement. Attachment B, as amended from time to time by any notice provided by Customer to IBM Credit in accordance with Section 7.7(C) of this Agreement, also contains a complete list of the legal names and addresses of each warehouse at which the Customer's inventory is stored. None of the receipts received by Customer from any warehouseman states that the goods covered thereby are to be delivered to bearer or to the order of a named person or to a named person and such named person's assigns. Fictitious Business Names. Customer has not used any company or fictitious name during the five (5) years preceding the date of this Agreement, other than those listed on Attachment B. Organization. If Customer is a corporation, all of the outstanding capital stock of Customer has been validly issued, is fully paid and nonassessable. No Judgments or Litigation. Except as set forth on Attachment B, no judgments, orders, writs or decrees are outstanding against Customer in excess of $100,000 nor is there now pending or, to the best of Customers knowledge after due inquiry, threatened, any litigation, contested claim, investigation, arbitration, or governmental proceeding by or against Customer which has had or could reasonably be expected to have a Material Adverse Effect. No Defaults. The Customer is not in default under any term of any indenture, contract, lease, agreement, instrument or other commitment to which it is a party or by which it, or any of its properties are bound. Customer has no knowledge of any dispute regarding any such indenture, contract, lease, agreement, instrument or other commitment. No Default or Event of Default has occurred and is continuing. Labor Matters. Except as set forth on any notice provided by Customer to IBM Credit pursuant to Section 7.1(H) of this Agreement, the Customer is not a party to any labor dispute. There are no strikes or walkouts or labor controversies pending or threatened against the Customer which could reasonably be expected to have a Material Adverse Effect. Compliance with Law. Customer has not violated or failed to comply with any Requirement of Law or any requirement of any self regulatory organization. ERISA. Each "employee benefit plan", "employee pension benefit plan", "defined benefit plan", or "multi-employer benefit plan", which Customer has established, maintained, or to which it is required to contribute (collectively, the "Plans") is in compliance with all applicable provisions of ERISA and the Code and the rules and regulations thereunder as well as the Plan's terms and conditions. There have been no "prohibited transactions" and no "reportable event" has occurred within the last 60 months with respect to any Plan. Customer has no "multi-employer benefit plan". As used in this Agreement the terms "employee benefit plan", "employee pension benefit plan", "defined benefit plan", and "multi-employer benefit plan" have the respective meanings assigned to them in Section 3 of ERISA and any applicable rules and regulations thereunder. The Customer has not incurred any "accumulated funding deficiency" within the meaning of ERISA or incurred any liability to the Pension Benefit Guaranty Corporation (the "PBGC") in connection with a Plan (other than for premiums due in the ordinary course). Compliance with Environmental Laws. Except as otherwise disclosed in Attachment B: The Customer has obtained all government approvals required with respect to the operation of their businesses under any Environmental Law. (i) the Customer has not generated, transported or disposed of any Hazardous Substances; (ii) the Customer is not currently generating, transporting or disposing of any Hazardous Substances; (iii) the Customer has no knowledge that (a) any of its real property (whether owned, leased, or otherwise directly or indirectly controlled) has been used for the disposal of or has been contaminated by any Hazardous Substances, or (b) any of its business operations have contaminated lands or waters of others with any Hazardous Substances; (iv) the Customer and its respective assets are not subject to any Environmental Liability and, to the best of the Customer's knowledge, any threatened Environmental Liability; (v) the Customer has not received any notice of or otherwise learned of any governmental investigation evaluating whether any remedial action is necessary to respond to a release or threatened release of any Hazardous Substance for which the Customer may be liable; (vi) the Customer is not in violation of any Environmental Law, (vii) there are no proceedings or investigations pending against Customer with respect to any violation or alleged violation of any Environmental Law; provided however, that the parties acknowledge that any generation, transportation, use, storage and disposal of certain such Hazardous Substances in Customer's or its Subsidiaries' business shall be excluded from representations (i) and (ii) above, provided, further, that Customer is at all times generating, transporting, utilizing, storing and disposing such Hazardous Substances in accordance with all applicable Environmental Laws and in a manner designed to minimize the risk of any spill, contamination, release or discharge of Hazardous Substances other than as authorized by Environmental Laws, Intellectual Property. Customer possesses such assets, licenses, patents, patent applications, copyrights, service marks, trademarks, trade names and trade secrets and all rights and other property relating thereto or arising therefrom ("Intellectual Property") as are necessary or advisable to continue to conduct its present and proposed business activities. Licenses and Permits. Customer has obtained and holds in full force and effect all franchises, licenses, leases, permits, certificates, authorizations, qualifications, easements, rights of way and other rights and approvals which are necessary for the operation of its businesses as presently conducted. Customer is not in violation of the terms of any such franchise, license, lease, permit, certificate, authorization, qualification, easement, right of way, right or approval. Investment Company. The Customer is not (i) an investment company or a company controlled by an investment company within the meaning of the Investment Company Act of 1940, as amended, (ii) a holding company or a subsidiary of a holding company, or an Affiliate of a holding company or of a subsidiary of a holding company, within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any other law which purports to regulate or restrict its ability to borrow money or to consummate the transactions contemplated by this Agreement or the Other Documents or to perform its obligations hereunder or thereunder. Taxes and Tax Returns. Customer has timely filed all federal, state, and local tax returns and other reports which it is required by law to file, and has either duly paid all taxes, fees and other governmental charges indicated to be due on the basis of such reports and returns or pursuant to any assessment received by the Customer, or made provision for the payment thereof in accordance with GAAP. The charges and reserves on the books of the Customer in respect of taxes or other governmental charges are in accordance with GAAP. No tax liens have been filed against Customer or any of its property. Status of Accounts. Each Account is based on an actual and bonafide sale and delivery of goods or rendition of services to customers, made by Customer, in the ordinary course of its business; the goods and inventory being sold and the Accounts created are its exclusive property and are not and shall not be subject to any Lien, consignment arrangement, encumbrance, security interest or financing statement whatsoever (other than Permitted Liens). The Customer's customers have accepted goods or services and owe and are obligated to pay the full amounts stated in the invoices according to their terms. There are no proceedings or actions known to Customer which are pending or threatened against any Material Account debtor (as defined in Section 7.14(B) of this Agreement) of any of the Accounts which could reasonably be expected to result in a Material Adverse Effect on the debtor's ability to pay the full amounts due to Customer. Affiliate/Subsidiary Transactions. Customer is not a party to or bound by any agreement or arrangement (whether oral or written) to which any Affiliate or Subsidiary of the Customer is a party except (i) in the ordinary course of and pursuant to the reasonable requirements of Customer's business and (ii) upon fair and reasonable terms no less favorable to Customer than it could obtain in a comparable arm's-length transaction with an unaffiliated Person. Accuracy and Completeness of Information. All factual information furnished by or on behalf of the Customer to IBM Credit or the Auditors for purposes of or in connection with this Agreement or any of the Other Documents, or any transaction contemplated hereby or thereby is or will be true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information not misleading at such time. Recording Taxes. All recording taxes, recording fees, filing fees and other charges payable in connection with the filing and recording of this Agreement have either been paid in full by Customer or arrangements for the payment of such amounts by Customer have been made to the satisfaction of IBM Credit. Indebtedness. Customer (i) has no indebtedness, other than Permitted Indebtedness; and (ii) has not guaranteed the obligations of any other Person (except as permitted by Section 8,4). SECTION 7. AFFIRMATIVE COVENANTS Until termination of this Agreement and the indefeasible payment and satisfaction of all Obligations: Financial and Other Information. Customer shall cause to be furnished to IBM Credit the following information within the following time periods: as soon as available and in any event within ninety (90) days after the end of each fiscal year of Customer the Form 10-K Annual Report filed with the Securities and Exchange Commission for that fiscal year just ended; as soon as available and in any event within forty-five (45) days after the end of each fiscal quarter of Customer the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission for that quarter just ended; as soon as available and in any event within sixty (60) days after the end of each fiscal year of Customer (i) projected Financial Statements, broken down by quarter, for the current and following fiscal year; and (ii) if composed, a narrative discussion relating to such projected Financial Statements; as soon as available and in any event within thirty (30) days after the end of each six-month period ending June 30, revised projected Financial Statements, broken down by quarter, for (i) the current fiscal year from the beginning of such six-month period to the fiscal year end and (ii) the following fiscal year; promptly after Customer obtains knowledge of (i) the occurrence of a Default or Event of Default, or (ii) the existence of any condition or event which would result in the Customer's failure to satisfy the conditions precedent to Advances set forth in Section 5, a certificate of the chief executive officer or chief financial officer of Customer specifying the nature thereof and the Customer's proposed response thereto, each in reasonable detail; promptly after Customer obtains knowledge of (i) any proceeding(s) being instituted or threatened to be instituted by or against Customer in any federal, state, local or foreign court or before any commission or other regulatory body (federal, state, local or foreign), or (ii) any actual or prospective change, development or event which, in any such case, has had or could reasonably be expected to have a Material Adverse Effect, a certificate of the chief executive officer or chief financial officer of Customer specifying the nature thereof and the Customer's proposed response thereto, each in reasonable detail; promptly after Customer obtains knowledge that (i) any order, judgment or decree in excess of $100,000 shall have been entered against Customer or any of its properties or assets, or (ii) it has received any notification of a material violation of any Requirement of Law from any Governmental Authority, a certificate of the chief executive officer or chief financial officer of Customer specifying the nature thereof and the Customer's proposed response thereto, each in reasonable detail; promptly after Customer learns of any material labor dispute to which Customer may become a party, any strikes or walkouts relating to any of its plants or other facilities, and the expiration of any labor contract to which Customer is a party or by which it is bound, a certificate of the chief executive officer or chief financial officer of Customer specifying the nature thereof and the Customer's proposed response thereto, each in reasonable detail; within five (5) Business Days after request by IBM Credit, any written certificates, schedules and reports together with all supporting documents as IBM Credit may reasonably request relating to the Collateral or the Customer's or any guarantor's business affairs and financial condition; by the fifth and twentieth day of each month, or as otherwise agreed in writing, a Collateral Management Report as of a date no earlier than the last day of the immediately preceding month and the fifteenth of each month, respectively; Along with the Financial Statements set forth in Section 7.1(A) and (B), the name, address and phone number of each of its Account debtors primary contacts for each Account on the Accounts aging report contained in its most recent Collateral Management Report; and upon the request of IBM Credit, copies of all Financial Statements and reports which Customer sends to its stockholders, and all Financial Statements and reports which Customer may make to, or file with, the Securities and Exchange Commission or any successor or analogous governmental authority. Each certificate, schedule and report provided by Customer to IBM Credit shall be signed by an authorized officer of Customer, which signature shall be deemed a representation and warranty that the information contained in such certificate, schedule or report is true and accurate in all material respects on the date as of which such certificate, schedule or report is made and does not omit to state a material fact necessary in order to make the statements contained therein not misleading at such time. Each Financial Statement delivered pursuant to this Section 7.1 shall be prepared in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods. Customer shall cause the audited Financial Statements and accompanying documents set forth in Section 7.1(A)(i) to be delivered directly by the Auditors to IBM Credit only via first class mail. Location of Collateral. The inventory, equipment and other tangible Collateral shall be kept or sold at the addresses as set forth on Attachment B or on any notice provided by Customer to IBM Credit in accordance with Section 7.7(C). Such locations shall be certified quarterly to IBM Credit substantially in the form of Attachment G. Changes in Customer. Customer shall provide thirty (30) days prior written notice to IBM Credit of any change in Customer's name, chief executive office and principal place of business, organization, form of ownership or structure; provided, however, that Customer's compliance with this covenant shall not relieve it of any of its other obligations or any other provisions under this Agreement or any of the Other Documents limiting actions of the type described in this Section. Legal Entity Existence. Customer shall (A) maintain its legal entity existence, maintain in full force and effect all licenses, bonds, franchises, leases and qualifications to do business, and all contracts and other rights necessary to the profitable conduct of its business, (B) continue in, and limit Its operations to, the same general lines of business as presently conducted by it unless otherwise permitted in writing by IBM Credit and (C) comply with all Requirements of Law. ERISA. Customer shall promptly notify IBM Credit in writing after it learns of the occurrence of any event which would constitute a "reportable event" under ERISA or any regulations thereunder with respect to any Plan, or that the PBGC has instituted or will institute proceedings to terminate any Plan. Notwithstanding the foregoing, the Customer shall have no obligation to notify IBM Credit as to any "reportable event" as to which the 30-day notice requirement of Section 4043(b) has been waived by the PBGC, until such time as such Customer is required to notify the PBGC of such reportable event. Such notification shall include a certificate of the chief financial officer of Customer's setting forth details as to such "reportable event" and the action which Customer proposes to take with respect thereto, together with a copy of any notice of such "reportable event" which may be required to be filed with the PBGC, or any notice delivered by the PBGC evidencing its intent to institute such proceedings. Upon request of IBM Credit, Customer shall furnish, or cause the plan administrator to furnish, to IBM Credit the most recently filed annual report for each Plan. Environmental Matters. (A) Customer and any other Person under Customer's control (including, without limitation, agents and Affiliates under such control) shall (1) comply with all Environmental Laws in all material respects, and (ii) undertake to use commercially reasonable efforts to prevent any unlawful release of any Hazardous Substance by Customer or such Person into, upon, over or under any property now or hereinafter owned, leased or otherwise controlled (directly or indirectly) by Customer. (B) Customer shall notify IBM Credit, promptly upon its obtaining knowledge of (i) any non-routine proceeding or investigation by any Governmental Authority with respect to the presence of any Hazardous Substances on or in any property now or hereinafter owned, leased or otherwise controlled (directly or indirectly) by Customer, (ii) all claims made or threatened by any Person or Governmental Authority against Customer or any of Customer's assets relating to any loss or injury resulting from any Hazardous Substance, (iii) Customer's discovery of evidence of unlawful disposal of or environmental contamination by any Hazardous Substance on any property now or hereinafter owned, leased or otherwise controlled (directly or indirectly) by Customer, and (iv) any occurrence or condition which could constitute a violation of any Environmental Law. Collateral Books and Records/Collateral Audit. (A) Customer agrees to maintain books and records pertaining to the Collateral in such detail, form and scope as is consistent with good business practice, and agrees that such books and records will reflect IBM Credit's interest in the Collateral. (B) Customer agrees that IBM Credit or its agents may enter upon the premises of Customer at any time and from time to time, during normal business hours and upon reasonable notice under the circumstances, and at any time at all on and after the occurrence and during the continuance of an Event of Default for the purposes of (i) inspecting the Collateral, (ii) inspecting and/or copying (at Customer's expense) any and all records pertaining thereto, and (iii) discussing the affairs, finances and business of Customer with any officers, employees and directors of Customer or with the Auditors. Customer also agrees to provide IBM Credit with such reasonable information and documentation that IBM Credit deems necessary to conduct the foregoing activities, Upon the occurrence and during the continuance of an Event of Default which has not been waived by IBM Credit in writing, IBM Credit may conduct any of the foregoing activities in any manner that IBM Credit deems reasonably necessary. (C) Customer shall give IBM Credit thirty (30) days prior written notice of any change in the location of any Collateral, the location of its books and records or in the location of its chief executive office or place of business from the locations specified in Attachment B, and will execute in advance of such change and cause to be filed and/or delivered to IBM Credit any financing statements, landlord or other lien waivers, or other documents reasonably required by IBM Credit, all in form and substance reasonably satisfactory to IBM Credit. (D) Customer agrees to advise IBM Credit promptly, in reasonably sufficient detail, of any substantial change relating to the type, quantity or quality of the Collateral, or any event which could reasonably be expected to have a Material Adverse Effect on the value of the Collateral or on the security interests granted to IBM Credit herein. Insurance; Casualty Loss. (A) Customer agrees to maintain with financially sound and reputable insurance companies: (i) insurance on its properties, (ii) public liability insurance against claims for personal injury or death as a result of the use of any products sold by it and (iii) insurance coverage against other business risks, in each case, in at least such amounts and against at least such risks as are usually and prudently insured against in the same general geographical area by companies of established repute engaged in the same or a similar business. Customer will furnish to IBM Credit, upon its written request, the insurance certificates with respect to such insurance. In addition, all Policies so maintained are to name IBM Credit as an additional insured as its interest may appear. (B) Without limiting the generality of the foregoing, Customer shall keep and maintain, at its sole expense, the Collateral insured for an amount not less than the amount set forth on Attachment A from time to time opposite the caption "Collateral Insurance Amount" against all loss or damage under an "all risk" Policy with companies mutually acceptable to IBM Credit and Customer, with a lender's loss payable endorsement or mortgage clause in form and substance reasonably satisfactory to IBM Credit designating that any loss payable thereunder with respect to such Collateral shall be payable to IBM Credit. Upon receipt of proceeds by IBM Credit the same shall be applied on account of the Customer's Outstanding Advances. Customer agrees to instruct each insurer to give IBM Credit, by endorsement upon the Policy issued by it or by independent instruments furnished to IBM Credit, at least ten (10) days written notice before any Policy shall be altered or canceled and that no act or default of Customer or any other person shall affect the right of IBM Credit to recover under the Policies. Customer hereby agrees to direct all insurers under the Policies to pay all proceeds with respect to the Collateral directly to IBM Credit. If Customer fails to pay any cost, charges or premiums, or if Customer fails to insure the Collateral, IBM Credit may pay such costs, charges or premiums. Any amounts paid by IBM Credit hereunder shall be considered an additional debt owed by Customer to IBM Credit and are due and payable immediately upon receipt of an invoice by IBM Credit. Taxes. Customer agrees to pay, when due, all taxes lawfully levied or assessed against Customer or any of the Collateral before any penalty or interest accrues thereon unless such taxes are being contested, in good faith, by appropriate proceedings promptly instituted and diligently conducted and an adequate reserve or other appropriate provisions have been made therefor as required in order to be in conformity with GAAP and an adverse determination in such proceedings could not reasonably be expected to have a Material Adverse Effect. Compliance With Laws. Customer agrees to comply with all Requirements of Law applicable to the Collateral or any part thereof, or to the operation of its business. Fiscal Year. Customer agrees to maintain its fiscal year as a year ending December 31 unless Customer provides IBM Credit at least thirty (30) days prior written notice of any change thereof. Intellectual Property. Customer shall do and cause to be done all things necessary to preserve and keep in full force and effect all registrations of Intellectual Property which the failure to do or cause to be done could reasonably be expected to have a Material Adverse Effect. Maintenance of Property. Customer shall maintain all of its material properties (business and otherwise) in good condition and repair (ordinary wear and tear excepted) and pay and discharge all costs of repair and maintenance thereof and all rental and mortgage payments and related charges pertaining thereto and not commit or permit any waste with respect to any of its material properties. Collateral. Customer shall: from time to time upon request by IBM Credit, provide IBM Credit with access to copies of all invoices, delivery evidences and other such documents relating to each Account; promptly upon Customer's obtaining knowledge thereof, furnish to and inform IBM Credit of all material adverse information relating to the financial condition of any Account debtor whose outstanding obligations to Customer constitute two percent (2%) or more of the Accounts at such time (a "Material Account Debtor"); promptly upon Customer's learning thereof, notify IBM Credit in writing of any event which would cause any obligation of a Material Account debtor to become an Ineligible Account; keep all goods rejected or returned by any Account debtor and all goods repossessed or stopped in transit by Customer from any Account debtor segregated from other property of Customer, holding the same in trust for IBM Credit until Customer applies a credit against such Account debtor's outstanding obligations to Customer or sells such goods in the ordinary course of business, whichever occurs earlier; stamp or otherwise mark chattel paper and instruments now owned or hereafter acquired by it in conspicuous type to show that the same are subject to IBM Credit's security interest and immediately thereafter deliver or cause such chattel paper and instruments to be delivered to IBM Credit or any agent designated by IBM Credit with appropriate endorsements and assignments to vest title and possession in IBM Credit; use commercially reasonable efforts to collect all Accounts owed; promptly notify IBM Credit of any loss, theft or destruction of or damage to any of the Collateral. Customer shall diligently file and prosecute its claim for any award or payment in connection with any such loss, theft, destruction of or damage to Collateral. Customer shall, upon demand of IBM Credit, make, execute and deliver any assignments and other instruments sufficient for the purpose of assigning any such award or payment to IBM Credit, free of encumbrances of any kind whatsoever; consistent with reasonable commercial practice, observe and perform all matters and things necessary or expedient to be observed or performed under or by virtue of any lease, license, concession or franchise forming part of the Collateral in order to preserve, protect and maintain all the rights of IBM Credit thereunder; consistent with reasonable commercial practice, maintain, use and operate the Collateral and carry on and conduct its business in a proper and efficient manner so as to preserve and protect the Collateral and the earnings, incomes, rents, issues and profits thereof; and at any time and from time to time, upon the request of IBM Credit, and at the sole expense of Customer, Customer will promptly and duly execute and deliver such further instruments and documents and take such further action as IBM Credit may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the security interests granted herein and the payment of any and all recording taxes and filing fees in connection therewith. Subsidiaries. Customer shall immediately notify IBM Credit in writing in the event Egghead.com Advertising, Inc., EO Corporation, Surplus Software, Inc., EH Direct, Inc., MPI Corp., D.J. & J. Software Corp. or any other Subsidiary of Customer has assets in excess of $10,000 or otherwise becomes operational or active. In addition, Customer will immediately, but in no event later than five (5) days after such notification, cause any Subsidiary that is an operating company, becomes active or has assets in excess of $10,000, to (i) execute a collateralized guaranty guarantying Customer's Obligations, such guaranty to be in form and substance satisfactory to IBM Credit, in its sole discretion, (ii) grant to IBM Credit a security interest in all of such Subsidiary's assets pursuant to the collateralized guaranty, and (iii) execute UCC-1 Financing Statements for each jurisdiction requested by IBM Credit. In connection with the foregoing, IBM Credit shall receive an opinion of counsel in form and substance satisfactory to it and from counsel satisfactory to it. IBM Credit may require that any Subsidiaries of Customer become parties to this Agreement or any other agreement executed in connection with this Agreement as guarantors or sureties. Customer will comply, and cause all Subsidiaries of Customer to comply with Sections 7 and 8 of this Agreement, as if such sections applied directly to such Subsidiaries. Financial Covenants; Additional Covenants. Customer acknowledges and agrees that Customer shall comply with the financial covenants and other covenants set forth in the attachments, exhibits and other addenda incorporated herein and made a part of this Agreement. SECTION 8. NEGATIVE COVENANTS Until termination of this Agreement and the indefeasible payment and satisfaction of all Obligations hereunder. Liens. The Customer will not, directly or indirectly mortgage, assign, pledge, transfer, create, incur, assume, permit to exist or otherwise permit any Lien or judgment to exist on any of its property, assets, revenues or goods, whether real, personal or mixed, whether now owned or hereafter acquired, except for Permitted Liens. Disposition of Assets. The Customer will not, directly or indirectly, sell, lease, assign, transfer or otherwise dispose of any assets other than (i) sales of inventory in the ordinary course of business and short term rental of inventory as demonstrations in amounts not material to Customer, and (ii) voluntary dispositions of individual assets and obsolete or worn out property in the ordinary course of business, provided, that the aggregate book value of all such assets and property so sold or disposed of under this section 8.2 (ii) in any fiscal year shall not exceed 5% of the consolidated assets of the Customer as of the beginning of such fiscal year. Legal Entity Changes. The Customer will not, without the prior written consent of IBM Credit, directly or indirectly, merge, consolidate, liquidate, dissolve or enter into or engage in any operation or activity materially different from that presently being conducted by Customer. Guaranties. The Customer will not, directly or indirectly, assume, guaranty, endorse, or otherwise become liable upon the obligations of any other Person except (i) by the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (ii) by the giving of indemnities in connection with the sale of inventory or other asset dispositions permitted hereunder, and (iii) for guaranties in favor of IBM Credit. Restricted Payments. The Customer will not, directly or indirectly: (i) declare or pay any dividend (other than dividends payable solely in common stock of Customer or membership interest if Customer is a limited liability company) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of capital stock of Customer or any warrants, options or rights to purchase any such capital stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Customer; or (ii) make any optional payment or prepayment on or redemption (including, without limitation, by making payments to a sinking or analogous fund) or repurchase of any indebtedness (other than the Obligations). Investments. The Customer will not, directly or indirectly, make, maintain or acquire any Investment in any Person other than: interest bearing deposit accounts (including certificates of deposit) which are insured by the Federal Deposit Insurance Corporation ("FDIC") or a similar federal insurance program; direct obligations of the government of the United States of America or any agency or instrumentality thereof or obligations guaranteed as to principal and interest by the United States of America or any agency thereof; stock or obligations issued to Customer in settlement of claims against others by reason of an event of bankruptcy or a composition or the readjustment of debt or a reorganization of any debtor of Customer; commercial paper of any company organized under the laws of any State of the United States or any bank organized or licensed to conduct a banking business under the laws of the United States or any State thereof having the short-term highest rating then given by Moody's Investor's Services, Inc. or Standard & Poor's Corporation; and the publicly traded equity or debt obligations of any corporation provided all such investments shall be and at all times remain rated "investment grade" by Moody's or S&P. Affiliate/Subsidiary Transactions. The Customer will not, directly or indirectly, enter into any transaction with any Affiliate or Subsidiary, including, without limitation, the purchase, sale or exchange of property or the rendering of any service to any Affiliate or Subsidiary of Customer except in the ordinary course of business and pursuant to the reasonable requirements of Customer's business upon fair and reasonable terms no less favorable to Customer than could be obtained in a comparable arm's-length transaction with an unaffiliated Person. ERISA. The Customer will not (A) terminate any Plan so as to incur a material liability to the FBGC, (B) permit any "prohibited transaction" involving any Plan (other than a "multi-employer benefit plan") which would subject the Customer to a material tax or penalty on "prohibited transactions" under the Code or ERISA, (C) fail to pay to any Plan any contribution which they are obligated to pay under the terms of such Plan, if such failure would result in a material "accumulated funding deficiency", whether or not waived, (D) allow or suffer to exist any occurrence of a "reportable event" or any other event or condition, which presents a material risk of termination by the PBGC of any Plan (other than a "multi-employer benefit plan"), or (E) fail to notify IBM Credit as required in Section 7.5. As used in this Agreement, the terms "accumulated funding deficiency" and "reportable event" shall have the respective meanings assigned to them in ERISA, and the term "prohibited transaction" shall have the meaning assigned to it in the Code and ERISA. For purposes of this Section 8.8, the terms "material liability", "tax", "penalty', "accumulated funding deficiency" and "risk of termination" shall mean a liability, tax, penalty, accumulated funding deficiency or risk of termination which could reasonably be expected to have a Material Adverse Effect. Additional Negative Pledges. Customer will not, directly or indirectly, create or otherwise cause or permit to exist or become effective any contractual obligation which may restrict or inhibit IBM Credit's rights or ability to sell or otherwise dispose of the Collateral or any part thereof after the occurrence and during the continuance of an Event of Default. Storage of Collateral with Bailees and Warehousemen. Collateral shall not be stored with a bailee, warehouseman or similar party without the prior written consent of IBM Credit unless Customer will, concurrently with the delivery of such Collateral to such party, cause such party to issue and deliver to IBM Credit, warehouse receipts in the name of IBM Credit evidencing the storage of such Collateral. Accounts. The Customer shall not permit or agree to any extension, compromise or settlement or make any change or modification of any kind or nature with respect to any Account, including any of the terns relating thereto, which would affect IBM Credit's ability to collect payment on any Account in whole or in part, except for such extensions, compromises or settlements made by Customer in the ordinary course of its business, provided, however, that the aggregate amount of such extensions, compromises or settlements does not exceed five percent (5%) of the Customers Accounts at any time. Indebtedness. The Customer will not create, incur, assume or permit to exist any Indebtedness, except for Permitted Indebtedness. Loans. The Customer will not make any loans, advances, contributions or payments of money or goods to any Subsidiary, Affiliate or parent company or to any officer, director or stockholder of Customer or of any such company (except for compensation for personal services actually rendered), except for transactions expressly authorized in this Agreement. SECTION 9. DEFAULT Event of Default. Any one or more of the following events shall constitute an Event of Default by the Customer under this Agreement and the Other Documents; The failure to make timely payment of the Obligations or any part thereof when due and payable; if such failure shall remain unremedied for two (2) Business Days after written notice thereof shall have been given to Customer by IBM Credit during which period Customer shall be charged the Delinquency Fee Rate set forth in Attachment A beginning on the day after the payment was due and including the day payment is received; Customer fails to comply with the financial covenants set forth on Attachment A, Section 7.4 or Section 8 hereof; Customer or any of its Affiliates fail to comply with or observe any term, covenant or agreement contained in this Agreement or any Other Documents (not covered by (A) or (B) above), if such failure shall remain unremedied for two (2) Business Days after the earlier of (i) Customer obtains actual knowledge thereof and (ii) written notice thereof shall have been given to Customer by IBM Credit or for such other period of time as IBM Credit may agree to in writing; Any representation, warranty, statement, report or certificate made or delivered by or on behalf of Customer or any of its officers, employees or agents or by or on behalf of any guarantor to IBM Credit was false in any material respect at the time when made or deemed made; The occurrence of any event or circumstance which could reasonably be expected to have a Material Adverse Effect; Customer, any Subsidiary or any guarantor shall generally not pay its debts as such debts become due, become or otherwise declare itself insolvent, file a voluntary petition for bankruptcy protection, have filed against it any involuntary bankruptcy petition, cease to do business as a going concern, make any assignment for the benefit of creditors, or a custodian, receiver, trustee, liquidator, administrator or person with similar powers shall be appointed for Customer, any Subsidiary or any guarantor or any of its respective properties or have any of its respective properties seized or attached, or take any action to authorize, or for the purpose of effectuating, the foregoing, provided, however, that Customer, any Subsidiary or any guarantor shall have a period of forty-five (45) days within which to discharge any involuntary petition for bankruptcy or similar proceeding; The use of any funds borrowed from IBM Credit under this Agreement for any purpose other than as provided in this Agreement; The entry of any judgment against Customer or any guarantor in an amount in excess of $100,000 and such judgment is not satisfied, dismissed, stayed or superseded by bond within thirty (30) days after the day of entry thereof (and in the event of a stay or supersedes bond, such judgment is not discharged within thirty (30) days after termination of any such stay or bond) or such judgment is not fully covered by insurance as to which the insurance company has acknowledged its obligation to pay such judgment in full; The dissolution or liquidation of Customer, any Subsidiary or any guarantor, or Customer or any guarantor or its directors or stockholders shall take any action to dissolve or liquidate Customer or any guarantor; Any "going concern" or like qualification or exception, or qualification arising out of the scope of an audit by an Auditor of its opinion relative to any Financial Statement delivered to IBM Credit under this Agreement; The issuance of a warrant of distress for any rent or taxes with respect to any premises occupied by Customer in or upon which the Collateral, or any part thereof, may at any time be situated and such warrant shall continue for a period of ten (10) Business Days from the date such warrant is issued; Customer suspends business; The occurrence of any event or condition that permits the holder of any Indebtedness arising in one or more related or unrelated transactions to accelerate the maturity thereof or the failure of Customer to pay when due any such Indebtedness; Any guaranty of any or all of the Customer's Obligations executed by any guarantor in favor of IBM Credit, shall at any time for any reason cease to be in full force and effect or shall be declared to be null and void by a court of competent jurisdiction or the validity or enforceability thereof shall be contested or denied by any such guarantor, or any such guarantor shall deny that it has any further liability or obligation thereunder or any such guarantor shall fail to comply with or observe any of the terms, provisions or conditions contained in any such guaranty; Customer is in default under the material terms of any of the Other Documents after the expiration of any applicable cure periods; There shall occur a "reportable event" with respect to any Plan, or any Plan shall be subject to termination proceedings (whether voluntary or involuntary) and there shall result from such "reportable event" or termination proceedings a liability of Customer to the PBGC which in the reasonable opinion of IBM Credit will have a Material Adverse Effect; Any "person" (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) acquires a beneficial interest in 50% or more of the Voting Stock of Customer. Acceleration. Upon the occurrence and during the continuance of an Event of Default which has not been waived in writing by IBM Credit, IBM Credit may, in its sole discretion, take any or all of the following actions, without prejudice to any other rights it may have at law or under this Agreement to enforce its claims against the Customer. (a) declare all Obligations to be immediately due and payable (except with respect to any Event of Default set forth in Section 9.1(F) hereof, in which case all Obligations shall automatically become immediately due and payable without the necessity of any notice or other demand) without presentment, demand, protest or any other action or obligation of IBM Credit; and (b) immediately terminate the Credit Line hereunder. Remedies. (A) Upon the occurrence and during the continuance of any Event of Default which has not been waived in writing by IBM Credit, IBM Credit may exercise all rights and remedies of a secured patty under the U.C.C. Without limiting the generality of the foregoing, IBM Credit may: (i) remove from any premises where same may be located any and all documents, instruments, files and records (including the copying of any computer records), and any receptacles or cabinets containing same, relating to the Collateral, or IBM Credit may use (at the expense of the Customer) such of the supplies or space of the Customer at Customer's place of business or otherwise, as may be necessary to properly administer and control the Collateral or the handling of collections and realizations thereon; (ii) bring suit, in the name of the Customer or IBM Credit and generally shall have all other rights respecting said Accounts, including without limitation the right to accelerate or extend the time of payment, settle, compromise, release in whole or in part any amounts owing on any Accounts and issue credits in the name of the Customer or IBM Credit; (iii) sell, assign and deliver the Accounts and any returned, reclaimed or repossessed merchandise, with or without advertisement, at public or private sale, for cash, on credit or otherwise, at IBM Credit's sole option and discretion, and IBM Credit may bid or become a purchaser at any such sale; and (iv) foreclose the security interests created pursuant to this Agreement by any available judicial procedure, or to take possession of any or all of the Collateral without judicial process and to enter any premises where any Collateral may be located for the purpose of taking possession of or removing the same. (B) Upon the occurrence and during the continuance of an Event of Default which has not been waived in writing by IBM Credit, IBM Credit shall have the right to sell, lease, or otherwise dispose of all or any part of the Collateral, whether in its then condition or after further preparation or processing, in the name of Customer or IBM Credit, or in the name of such other party as IBM Credit may designate, either at public or private sale or at any broker's board, in lots or in bulk, for cash or for credit, with or without warranties or representations, and upon such other terms and conditions as IBM Credit in its sole discretion may deem advisable, and IBM Credit shall have the right to purchase at any such sale. If IBM Credit, in its sole discretion determines that any of the Collateral requires rebuilding, repairing, maintenance or preparation, IBM Credit shall have the right, at its option, to do such of the aforesaid as it deems necessary for the purpose of putting such Collateral in such saleable form as IBM Credit shall deem appropriate. The Customer hereby agrees that any disposition by IBM Credit of any Collateral pursuant to and in accordance with the terms of a repurchase agreement between IBM Credit and the manufacturer or any supplier (including any Authorized Supplier) of such Collateral constitutes a commercially reasonable sale. The Customer agrees, at the request of IBM Credit, to assemble the Collateral and to make it available to IBM Credit at places which IBM Credit shall select, whether at the premises of the Customer or elsewhere, and to make available to IBM Credit the premises and facilities of the Customer for the purpose of IBM Credit's taking possession of, removing or putting such Collateral in saleable form. If notice of intended disposition of any Collateral is required by law, it is agreed that ten (10) Business Days notice shall constitute reasonable notification. (C) Unless expressly prohibited by the licensor thereof, if any, IBM Credit is hereby granted, upon the occurrence and during the continuance of any Event of Default which has not been waived in writing by IBM Credit, an irrevocable, non-exclusive license to use, assign, license or sublicense all computer software programs, data bases, processes and materials used by the Customer in its businesses or in connection with any of the Collateral. (D) The net cash proceeds resulting from IBM Credit's exercise of any of the foregoing rights (after deducting all charges, costs and expenses, including reasonable attorneys' fees) shall be applied by IBM Credit to the payment of Customer's Obligations, whether due or to become due, in such order as IBM Credit may in it sole discretion elect. Customer shall remain liable to IBM Credit for any deficiencies, and IBM Credit in turn agrees to remit to Customer or its successors or assigns, any surplus resulting therefrom. (E) The enumeration of the foregoing rights is not intended to be exhaustive and the exercise of any right shall not preclude the exercise of any other rights, all of which shall be cumulative. Waiver. If IBM Credit seeks to take possession of any of the Collateral by any court process Customer hereby irrevocably waives to the extent permitted by applicable law any bonds, surety and security relating thereto required by any statute, court rule or otherwise as an incident to such possession and any demand for possession of the Collateral prior to the commencement of any suit or action to recover possession thereof. In addition, Customer waives to the extent permitted by applicable law all rights of set-off it may have against IBM Credit. Customer further waives to the extent permitted by applicable law presentment, demand and protest, and notices of non-payment, non-performance, any right of contribution, dishonor, and any other demands, and notices required by law. SECTION 10. MISCELLANEOUS Term; Termination. This Agreement shall remain in force until the earlier of (i) the Termination Date, (ii) the date specified in a written notice by the Customer that they intend to terminate this Agreement which date shall be no less than thirty (30) days following the receipt by IBM Credit of such written notice, and (iii) termination by IBM Credit after the occurrence and during the continuance of an Event of Default. Upon the date that this Agreement is terminated, all of Customer's Obligations shall be immediately due and payable in their entirety, even if they are not yet due under their terms. Until the indefeasible payment in full of all of Customer's Obligations, no termination of this Agreement or any of the Other Documents shall in any way affect or impair (i) Customer's Obligations to IBM Credit including, without limitation, any transaction or event occurring prior to and after such termination, or (ii) IBM Credit's rights hereunder, including, without limitation, IBM Credit's security interest in the Collateral. On and after a Termination Date IBM Credit may, but shall not be obligated to, upon the request of Customer, continue to provide Advances hereunder. Indemnification. The Customer hereby agrees to Indemnify and hold harmless IBM Credit and each of its officers, directors, agents and assigns (collectively, the "Indemnified Persons") against all losses, claims, damages, liabilities or other expenses (including reasonable attorneys' fees and court costs now or hereinafter arising from the enforcement of this Agreement, the "Losses") to which any of them may become subject insofar as such Losses arise out of or are based upon any event, circumstance or condition (a) occurring or existing on or before the date of this Agreement relating to any financing arrangements IBM Credit may from time to time have with (i) Customer, (ii) any Person that shall be acquired by Customer or (iii) any Person that Customer may acquire all or substantially all of the assets of, or (b) directly or indirectly, relating to the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby or thereby or to any of the Collateral or to any act or omission of the Customer in connection therewith. Notwithstanding the foregoing, the Customer shall not be obligated to indemnify IBM Credit for any Losses incurred by IBM Credit which are a result of IBM Credit's gross negligence or willful misconduct. The indemnity provided herein shall survive the termination of this Agreement. If either party brings any action or asserts any claim against the other party which arises out of this Agreement or any Other Documents, the party which does not prevail in such action or claim shall pay to the prevailing party all costs and expenses of the prevailing party's defense of such action or claim including, but not limited to, all attorney's fees. Additional Obligations. IBM Credit, without waiving or releasing any Obligation or Default of the Customer, may perform any Obligations of the Customer that the Customer shall fail or refuse to perform and IBM Credit may, at any time or times hereafter, but shall be under no obligation to do so, pay, acquire or accept any assignment of any security interest, lien, encumbrance or claim against the Collateral asserted by any person. All sums paid by IBM Credit in performing in satisfaction or on account of the foregoing and any expenses, including reasonable attorney's fees, court costs, and other charges relating thereto, shall be a part of the Obligations, payable on demand and secured by the Collateral. LIMITATION OF LIABILITY. NEITHER IBM CREDIT NOR ANY OTHER INDEMNIFIED PERSON SHALL HAVE ANY LIABILITY WITH RESPECT TO ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED BY CUSTOMER IN CONNECTION WITH THIS AGREEMENT, ANY OTHER AGREEMENT, ANY DELAY, OMISSION OR ERROR IN THE ELECTRONIC TRANSMISSION OR RECEIPT OF ANY E-DOCUMENT, OR ANY CLAIMS IN ANY MANNER RELATED THERETO. NOR SHALL IBM CREDIT OR ANY OTHER INDEMNIFIED PERSON HAVE ANY LIABILITY TO CUSTOMER OR ANY OTHER PERSON FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY IT OR THEM HEREUNDER, EXCEPT FOR ITS OR THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IN THE EVENT CUSTOMER REQUESTS IBM CREDIT TO EFFECT A WITHDRAWAL OR DEBIT OF FUNDS FROM AN ACCOUNT OF CUSTOMER, THEN IN NO EVENT SHALL IBM CREDIT BE LIABLE FOR ANY AMOUNT IN EXCESS OF ANY AMOUNT INCORRECTLY DEBITED, EXCEPT IN THE EVENT OF IBM CREDIT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. NO PARTY SHALL BE LIABLE FOR ANY FAILURE TO PERFORM ITS OBLIGATIONS IN CONNECTION WITH ANY E-DOCUMENT, WHERE SUCH FAILURE RESULTS FROM ANY ACT OF GOD OR OTHER CAUSE BEYOND SUCH PARTY'S REASONABLE CONTROL (INCLUDING, WITHOUT LIMITATION, ANY MECHANICAL, ELECTRONIC OR COMMUNICATIONS FAILURE) WHICH PREVENTS SUCH PARTY FROM TRANSMITTING OR RECEIVING E-DOCUMENTS. Alteration/Waiver. This Agreement and the Other Documents may not be altered or amended except by an agreement in writing signed by the Customer and by IBM Credit. No delay or omission of IBM Credit to exercise any right or remedy hereunder, whether before or after the occurrence of any Event of Default, shall impair any such right or remedy or shall operate as a waiver thereof or as a waiver of any such Event of Default. In the event that IBM Credit at any time or from time to time dispenses with any one or more of the requirements specified in this Agreement or any of the Other Documents, such dispensation may be revoked by IBM Credit at any time and shall not be deemed to constitute a waiver of any such requirement subsequent thereto. IBM Credit's failure at any time or times to require strict compliance and performance by the Customer of any undertakings, agreements, covenants, warranties and representations of this Agreement or any of the Other Documents shall not waive, affect or diminish any right of IBM Credit thereafter to demand strict compliance and performance thereof. Any waiver by IBM Credit of any Default by the Customer under this Agreement or any of the Other Documents shall not waive or affect any other Default by the Customer under this Agreement or any of the Other Documents, whether such Default is prior or subsequent to such other Default and whether of the same or a different type. None of the undertakings, agreements, warranties, covenants, and representations of the Customer contained in this Agreement or the Other Documents and no Default by the Customer shall be deemed waived by IBM Credit unless such waiver is in writing signed by an authorized representative of IBM Credit. Severability. If any provision of this Agreement or the Other Documents or the application thereof to any Person or circumstance is held invalid or unenforceable, the remainder of this Agreement and the Other Documents and the application of such provision to other Persons or circumstances will not be affected thereby, the provisions of this Agreement and the Other Documents being severable in any such instance. One Loan. All Advances heretofore, now or at any time or times hereafter made by IBM Credit to the Customer under this Agreement or the Other Documents shall constitute one loan secured by IBM Credit's security interests in the Collateral and by all other security interests, liens and encumbrances heretofore, now or from time to time hereafter granted by the Customer to IBM Credit or any assignor of IBM Credit. Additional Collateral. All monies, reserves and proceeds received or collected by IBM Credit with respect to other property of the Customer in possession of IBM Credit at any time or limes hereafter are hereby pledged by Customer to IBM Credit as security for the payment of Customer's Obligations and shall be applied promptly by IBM Credit on account of the Customer's Obligations; provided, however, IBM Credit may release to the Customer such portions of such monies, reserves and proceeds as IBM Credit may from time to time determine, in its sole discretion. No Merger or Novations. Notwithstanding anything contained in any document to the contrary, it is understood and agreed by the Customer and IBM Credit that the claims of IBM Credit arising hereunder and existing as of the date hereof constitute continuing claims arising out of the Obligations of Customer under any Other Documents. Customer acknowledges and agrees that such Obligations outstanding as of the date hereof have not been satisfied or discharged and that this Agreement is not intended to effect a novation of the Customer's Obligations under any Other Documents. Neither the obtaining of any judgment nor the exercise of any power of seizure or sale shall operate to extinguish the Obligations of the Customer to IBM Credit secured by this Agreement and shall not operate as a merger of any covenant in this Agreement, and the acceptance of any payment or alternate security shall not constitute or create a novation and the obtaining of a judgment or judgments under a covenant herein contained shall not operate as a merger of that covenant or affect IBM Credit's rights under this Agreement. Paragraph Titles. The Section titles used in this Agreement and the Other Documents are for convenience only and do not define or limit the contents of any Section. Binding Effect; Assignment. This Agreement and the Other Documents shall be binding upon and inure to the benefit of IBM Credit and the Customer and their respective successors and assigns: provided, that the Customer shall have no right to assign this Agreement or any of the Other Documents without the prior written consent of IBM Credit. Notices; E-Business Acknowledgment. Except as otherwise expressly provided in this Agreement, any notice required or desired to be served, given or delivered hereunder shall be in writing, and shall be deemed to have been validly served, given or delivered (i) upon receipt if deposited in the United States mails, first class mail, with proper postage prepaid, (ii) upon receipt of confirmation or answerback if sent by telecopy, or other similar facsimile transmission, (iii) one Business Day after deposit with a reputable overnight courier with all charges prepaid, or (iv) when delivered, if hand-delivered by messenger, all of which shall be properly addressed to the party to be notified and sent to the address or number indicated as follows: (i) If to IBM Credit at: (ii) If to Customer at: IBM Credit Corporation Egghead.Com, Inc. 5000 Executive Parkway, Suite 450 1350 Willow Road San Ramon, CA 94583 Menlo Park, CA 94025 Attention: Region Manager, West Attention: John Labbett Facsimile: 925-277-5675 EVP, Chief Financial Officer Facsimile: 650-328-7858 or to such other address or number as each party designates to the other in the manner prescribed herein. Each party may electronically transmit to or receive from the other party certain documents set forth in Attachment J ("E-Documents") via the Internet or electronic data interchange ("EDI"). Any transmission of data which is not an E-Document shall have no force or effect between the parties. EDI transmissions may be sent directly or through any third party service provider ("Provider") with which either party may contract. Each party shall be liable for the acts or omissions of its Provider while handling E-Documents for such party, provided, that if both parties use the same Provider, the originating party shall be liable for the acts or omissions of such Provider as to such E-Document. Some information to be made available to Customer will be specific to Customer and will require Customer's registration with IBM Credit before access is provided. After IBM Credit has approved the registration submitted by Customer, IBM Credit shall provide an ID and password(s) to an individual designated by Customer ("Customer Recipient"). Customer accepts responsibility for the designated individual's distribution of the ID and password(s) within its organization and Customer will take reasonable measures to ensure that passwords are not shared or disclosed to unauthorized individuals. Customer will conduct an annual review of all IDs and passwords to ensure they are accurate and properly authorized. IBM CREDIT MAY CHANGE OR DISCONTINUE USE OF AN ID OR PASSWORD AT ITS DISCRETION AT ANY TIME. E-Documents shall not be deemed to have been properly received, and no E-Document shall give rise to any obligation, until accessible to the receiving party at such party's receipt computer at the address specified herein. Upon proper receipt of an E-Document, the receiving party shall promptly transmit a functional acknowledgment in return. A functional acknowledgment shall constitute conclusive evidence that an E-Document has been properly received. If any transmitted E-Document is received in an unintelligible or garbled form, the receiving party shall promptly notify the originating party in a reasonable manner. In the absence of such a notice, the originating party's records of the contents of such E-Document shall control. Each party shall use those security procedures which are reasonably sufficient to ensure that all transmissions of E-Documents are authorized and to protect its business records and data from improper access. Any E-Document received pursuant to this Section 10.12 shall have the same effect as if the contents of the E-Document had been sent in paper rather than electronic form. The conduct of the parties pursuant to this Section 10.12 shall, for all legal purposes, evidence a course of dealing and a course of performance accepted by the parties. The parties agree not to contest the validity or enforceability of E-Documents under the provisions of any applicable law relating to whether certain agreements are to be in writing or signed by the party to be bound thereby, The parties agree, as to any E-Document accompanied by the Customer's ID, that IBM Credit can reasonably rely on the fact that such E-Document is properly authorized by Customer. E-Documents, if introduced as evidence on paper in any judicial, arbitration, mediation or administrative proceedings, will be admissible as between the parties to the same extent and under the same conditions as other business records originated and maintained in documentary form. Neither party shall contest the admissibility of copies of E-Documents under either the business records exception to the hearsay rule or the best evidence rule on the basis that the E-Documents were not originated or maintained in documentary form. CUSTOMER RECIPIENT INFORMATION for Internet transmissions: Name of Customer's Designated Central Contact Authorized to Receive IDs and Passwords: John Labbett, Executive Vice President, Chief Financial Officer e-mail Address: [email protected] Phone Number: (650) 470-2783 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto were upon the same instrument. ATTACHMENT A MODIFICATIONS. IBM Credit may modify the Collateral Insurance Amount set forth in Attachment A from time to time by providing Customer with a new Attachment A. Any such new Attachment A shall be effective as of the date specified in the new Attachment A. SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW. TO INDUCE IBM CREDIT TO ACCEPT THIS AGREEMENT AND THE OTHER DOCUMENTS, THE CUSTOMER HEREBY IRREVOCABLY AND UNCONDITIONALLY: SUBMITS ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND ANY OTHER AGREEMENT, OR FOR THE RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND ANY FEDERAL DISTRICT COURT IN NEW YORK; CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREINAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID. TO CUSTOMER AT ITS ADDRESS SET FORTH IN SECTION 10.13 OR AT SUCH OTHER ADDRESS OF WHICH IBM CREDIT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION. AGREES THAT THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND THE OTHER DOCUMENTS SHALL BE GOVERNED BY THE LAWS (WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS) OF THE STATE OF NEW YORK. JURY TRIAL WAIVER. EACH OF IBM CREDIT AND THE CUSTOMER HEREBY IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING ANY COUNTERCLAIM) OF ANY TYPE IN WHICH IBM CREDIT AND THE CUSTOMER ARE PARTIES AS TO ALL MATTERS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT EXECUTED IN CONNECTION HEREWITH. IN WITNESS WHEREOF, the Customer has read this entire Agreement, and has caused its authorized representatives to execute this Agreement and has caused its corporate seal, if any, to be affixed hereto as of the date first written above. IBM Credit Corporation Egghead.Com, Inc. By: /s/ Thomas S. Curcio By: /s/ John E. Labbett Print Name: Thomas S. Curcio Print Name: John E. Labbett Title: Manager of Credit Title: Executive Vice President/Chief Financial Officer -------------------------------------------------------------------------------- ATTACHMENT A, ("AIF ATTACHMENT A") TO AGREEMENT FOR INVENTORY FINANCING ("AIF AGREEMENT") DATED February 28, 2001 Customer Name: Egghead.com, Inc. Effective Date of this AIF Attachment A: February 28, 2001 Fees, Rates and Repayment Terms: Credit Line: Twenty Million Dollars ($20,000,000.00); Borrowing Base: 70% of the amount of the Customer's Eligible Accounts as of the date of determination as reflected in the Customer's most recent Collateral Management Report; Notwithstanding the terms of Section 3.1(W) of the Agreement, Accounts arising from Incentive payments, rebates, discounts and refunds which are (i) verifiable by Authorized Suppliers, and (ii) payable by Authorized Suppliers by check to the Lockbox will be deemed to be Eligible Accounts. 100% of the Customer's inventory in the Customer's possession as of the date of determination as reflected in the Customer's most recent Collateral Management Report constituting Products (other than service parts) financed through a Product Advance by IBM Credit, provided, however, IBM Credit has a first priority security interest in such Products and such Products are new and in un-opened boxes. The value to be assigned to such inventory shall be based upon the Authorized Supplier's invoice price to Customer for Products net of all applicable price reduction credits. Collateral Insurance Amount: Eight Million Dollars ($8,000,000.00) Delinquency Fee Rate: Prime Rate plus 6.500% Shortfall Transaction Fee: Shortfall Amount multiplied by 0.30% Free Financing Period Exclusion Fee: For each Product Advance made by IBM Credit pursuant to Customers financing plan where there is no Free Financing Period associated with such Product Advance there will be a fee equal to the Free Financing Period Exclusion Fee. For a 30 day payment plan when Prime Rate is 8% the Free Financing Period Exclusion Fee is 1.08% of the invoice amount. This fee will very by .0125% with each .25% change in Prime Rate (e.g. Prime Rate of 7.25%, the charge is 1.0425% of the invoice amount). The fee accrues as of the Date of Note and is payable as stated in the billing Statement. Other Charges: Application Processing Fee: $15,000.00 (Paid) Closing Fee: $25,000.00 Annual Facility Fee (payable annually on the facility anniversary date): $40,000.00, or .20% of the maximum credit line, whichever is greater. Bank Account Customer's Lockbox(es) and Special Account(s) will be maintained at the following Bank(s): Name of Bank: Address: Phone: Lockbox Address: Special Account #: Financial Covenants: Not Applicable Additional Conditions Precedent Pursuant to Section 5.1(J) of the Agreement: Executed Contingent Blocked Account Amendment: Executed Waiver of Landlord Lien for all premises in which a landlord has the right of levy for rent; A Certificate of Location of Collateral whereby the Customer certifies where Customer presently keeps or sells inventory, equipment and other tangible Collateral; Subordination or Intercreditor Agreements from all creditors having a lien which is superior to IBM Credit in any assets that IBM Credit relies on to satisfy Customer's obligations to IBM Credit; Listing of all creditors providing accounts receivable financing to Customer; A Collateral Management Report in the form of Attachment F as of the Closing Date; An Opinion of Counsel substantially in the form and substance of Attachment H whereby the Customers counsel states his or her opinion about the execution, delivery and performance of the Agreement and other documents by the Customer; A Corporate Secretary's Certificate substantially in the form and substance of Attachment I certifying to, among other items, the resolutions of Customer's Board of Directors authorizing borrowing by Customer; Termination or release of Uniform Commercial Code filing by another creditor as required by IBM Credit; A copy of an all-risk insurance certificate pursuant to Section 7.8 (B) of the Agreement; AIF ATTACHMENT B TO AGREEMENT FOR INVENTORY FINANCING ("AIF AGREEMENT") Customer: Egghead.com, Inc. Liens: Locations of Offices, Records and Inventory: Principal Place of Business and Chief Executive Office: Locations of Assets, Inventory and Equipment (including warehouses): Location Leased (Y/N)   Fictitious Names: Organization: Subsidiaries: Name Jurisdiction Owner % Owned                         Affiliates: Name Capacity             Judgments: Environmental Matters: Indebtedness: AIF ATTACHMENT B TO AGREEMENT FOR INVENTORY FINANCING ("AIF AGREEMENT") Customer: Egghead.com, Inc. Liens: Locations of Offices, Records and Inventory: Principal Place of Business and Chief Executive Office: 1350 Willow Road, Menlo Park, CA 94025 Locations of Assets, Inventory and Equipment (including warehouses): Location Leased (Y/N) 521 Chkalou Drive, Vancouver, WA 98683 Y 3301 SE Columbia Way, Bldg 45, Vancouver, WA 98661 Y Fictitious Names: Organization: Subsidiaries: Name Jurisdiction Owner % Owned See attached list. None operational.               Affiliates: Name Capacity None.       Judgments: None. Environmental Matters: None. Indebtedness: None. Egghead.com, Inc. Subsidiaries Item IV.(A) Subsidiaries Legal/dba Name Address Relation FEIN E O Corporation 1350 Willow Road, Menlo Park CA 94025 Subsidiary   D J & J Software Corporation 1350 Willow Road, Menlo Park CA 94025 Subsidiary 91-1233491 Surplus Software, Inc. 1350 Willow Road, Menlo Park CA 94025 Subsidiary 93-1083982 EH Direct, Inc. 1350 Willow Road, Menlo Park CA 94025 Subsidiary 91-1610131 MPI Corporation 1350 Willow Road, Menlo Park CA 94025 Subsidiary 91-1610133 Egghead.com Advertising, Inc. 1350 Willow Road, Menlo Park CA 94025 Subsidiary   EH Direct is known as Surplus Direct   IF ATTACHMENT E TO AGREEMENT FOR INVENTORY FINANCING ("AIF AGREEMENT") Customer: Egghead.com, Inc. AUTHORIZED SUPPLIERS IBM Tech Data Corp. Ingram AIF ATTACHMENT F TO AGREEMENT FOR INVENTORY FINANCING ("AIF AGREEMENT") Customer. Egghead.com, Inc. Collateral Management Report (CMR) Accounts as of _________ (Date) COLLATERAL STATUS : Accounts Receivable less than 90 days aged from invoice date: Commercial     Total Eligible X 70%     plus   IBMCC Financed Inventory   X 100% Total Collateral   = LOAN STATUS :       IBMCC Loan Value   less       * * if negative please include paydown. Signatures: Authorized Customer Signature (Date) IBM Credit Corporation (Date) The above officer or delegated individual of _________________ certifies that he or she is authorized to provide this information on behalf of _________________ and agrees that to the best of his or her knowledge the information is accurate.   AIF ATTACHMENT F TO AGREEMENT FOR INVENTORY FINANCING ("AIF AGREEMENT') Customer (Legal Name) Egghead.com, Inc. Collateral Management Report (CMR) Accounts as of: 2-21-2001 COLLATERAL STATUS :   Other Values Gross Collateral Advance % Net Collateral 1. Previous assigned A/R balance:   $0     (previous CMR line 4) Date: __/__/__         2. Additions to A/R (2A+B):   $0     A. New Billings $0       B. Adjustments $0       3. Deductions from A/R (3A+B+C):   $0     A. Cash Receipts $0       B. Credits $0       C. Adjustments $0       4. New Assigned A/R balance (1+2-3):   $0     5. A/R Aging Report (Date: __/__/__)   $0     **New Assigned A/R Balance and A/R Aging Report         (Lines 4 and 5) must be equal**         6. Less Adjustments:   $0     A. Unapplied Cash $0       B. Other $0       7. Adjusted assigned A/R balance (4-6):   $27,651,231     8. Less Ineligible A/R:   $0     A. A/R Over 90 Days $671,597       B. 50% Rule (estimate) $30,000       C. Contra Accts (A/P offsets) $0       D. Other $0       E. Non-Trade (see Note below) $22,066,094       F. Egghead.com related $43,018       G. ____________________ $0       H. ____________________ $0       9. Total Eligible A/R Collateral:   $4,840,522 70% $3,388,365 (Line 7 - Line 8 X Advance Rate)         10. Other A/R Collateral:         A. MDF (<90 days)   $596,646 70% $417,652 B. ____________________   $0 $0 $0 11. Inventory Collateral:         A. IBM Credit Financed Eligible Inventory   $0 $0 $0 B. ____________________   $0 $0 $0 C. ____________________   $0 $0 $0 12. Other Collateral:         A. RMA   $0 $0 $0 B. Price Protection   $0 $0 $0 C. ____________________   $0 $0 $0 D. ____________________   $0 $0 $0 13. Total Net Eligible Collateral (9+10+11+12)       $3,806,017 Note: Non-trade account balance is high do to several days credit card cash receipts not yet applied to Accounts Receivable   LOAN STATUS :   Other Values Gross Collateral Advance % Net Collateral 1. Net IBM Credit Outstandings   $0     (1A- (B+C+D+E+F+G+H+I)+J)         A. Gross IBM Credit Outstandings (RFS): $0       Less: $0       B. Suspense $0       C. Disputes $0       D. In Transit (__ Days) $0       E. QSL / QSA $0       F. Other $0       G. ____________________ $0       H. ____________________ $0       I. ____________________ $0       Plus:         J. Product Received Not Billed (RNB) $0       2. Funds in Lockbox (2A+B)   $0     A. Cleared Funds (transferred not posted) $0       B. Unavailable Funds (float) $0       3. Loan Balance (Line 1 - Line 2)   $0     4. Collateral Excess / Shortfall:   $0     (Collateral Line 13 - Loan Line 3:         (Loan balance available)         5. Advances from IBM Credit to Customer   $0     (5A+B+C)         A. Cash Advances from Lockbox $0       B. Cash Advances from IBM Credit $0       C. WCO Cash Advance $0       6. New Adjusted O/S Balance (3+5)   $0     7. Remaining Credit Line Availability   $0     (Collateral Line 13 - Loan Line 6)         8. WCO Payment Advance $0         Signatures: /s/ John E. Labbett 2/21/01 Authorized Customer Signature (Date) IBM Credit Corporation (Date) The above officer or delegated individual of Egghead.com, Inc. certifies that he or she is authorized to provide this information on behalf of Egghead.com, Inc. and agrees that to the best of his or her knowledge the information is accurate.   AIF ATTACHMENT H TO AGREEMENT FOR INVENTORY FINANCING ("AIF AGREEMENT") Form of Opinion of Customer's Counsel {LETTERHEAD OF CUSTOMER'S COUNSEL} {DATE} IBM Credit Corporation _____________________ _____________________ Re: ________________________ Ladies and Gentlemen: We have acted as counsel for _________________________, a _________________________ corporation (the "Borrower") in connection with (A) the execution and delivery of that certain Agreement for Inventory Financing, dated as of _________________________, 20___ (the "Financing Agreement"), by and among the Borrower and IBM Credit Corporation ("IBM Credit"), and (B) the other agreements, instruments, and documents executed and delivered by the Borrower in connection with the Financing Agreement. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Financing Agreement. In this connection, we have examined the following documents: i. The Certificate of Incorporation and the By-laws of the Borrower, each as amended to date; ii. The records of the proceedings taken by the Board of Directors of the Borrower in connection with the execution, delivery, and performance of the Financing Documents to which they are a party (as defined below); iii. The Financing Agreement; iv. The Contingent Blocked Account Amendment; v. Acknowledgment copies of the UCC-1 Financing Statements listed on Exhibit A hereto (the "Financing Statements") executed by the Borrower naming it as Debtor and IBM Credit as Secured Party and filed in the offices set forth on Exhibit A; vi. {Additional Documents ff necessary} The documents referred to in clauses (iii) through (vi) above are hereinafter referred to as the Financing Documents. In our examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies, and the authenticity of the originals of such latter documents, and, regarding documents executed by parties other than the Borrower, that those parties had the power and the capacity to enter into, execute, deliver and perform all obligations under such documents, the due authorization of all requisite action with respect to such documents, and the validity and binding effect of such documents upon such other patties. As to any facts material to this opinion, we have relied upon the representations and warranties of the Borrower contained in each of the Financing Documents, and in certificates delivered by the Borrower pursuant to each of the Financing Documents, statements, and representations of officers and other representatives of the Borrower, and, as to the matters addressed therein, certificates or correspondence from public officials. For purposes of the opinion set forth in Paragraph 4, the term "Material Contracts" means the agreements and instruments to which the Borrower is subject which have been identified to us by officers of the Borrower and set forth on Exhibit B hereto as the agreements and instruments which are material to the business or financial condition of the Borrower; and the term "Material Orders" means those orders and decrees to which the Borrower is subject which have been identified to us by officers of the Borrower and set forth in Exhibit C hereto as the orders and decrees, agreements, and instruments which are material to the business or financial condition of the Borrower. As used herein, the term "UCC" refers to the Uniform Commercial Code as in effect in the State of New York. We are members of the bar in the State of ____________ and express no opinion as to the laws of any other jurisdiction except the General Corporation Law of the State of ________________ and the federal laws of the United States of America. Based on the foregoing, and subject to the assumptions and qualifications set forth herein, we are of the opinion that: 1. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and is duly qualified and authorized to do business and in good standing as a foreign corporation in each jurisdiction where, to our knowledge, it presently is engaged in business and is required to be qualified. 2. Borrower has all requisite corporate power and authority (a) to own, lease, and operate its properties and assets and to carry on its business as now being conducted; and (b) to execute, delivery, and performance of the Financing Documents to which it is a party. 3. All corporate action on the part of the Borrower requisite for the execution, delivery, and performance of the Financing Documents to which it is a party has been duly taken. 4. The execution, delivery, and performance by the Borrower of the Financing Documents to which it is a party will not (a) violate, be in conflict with, result in the breach of, or constitute (with due notice or lapse of time, or both) a default under (i) the Certificate of Incorporation or By-laws of Borrower or any resolution of its Board of Directors or any committee thereof, (ii) any Material Contract, or (iii) any federal or state law (including, without limitation, environmental or occupational health, and safety law), regulation, rule, Material Order, or legal requirement of any federal, state, or public authority or agency applicable to Borrower; or (b) result in the creation or imposition of a lien of any nature whatsoever upon any of the Borrower's property or assets other than as represented by the Financing Documents. 5. Borrower has obtained any and all consents, approvals, or other authorizations required to be obtained pursuant to its Certificate of Incorporation and By-laws in connection with the execution, delivery, and performance of the Financing Documents. No consent, approval, or authorization of or by any court, administrative agency, other governmental authority, or any other Person is required in connection with the execution, delivery, and performance by the Borrower of the Financing Documents that has not already been obtained. 6. To our knowledge, there are no actions, proceedings, or investigations pending or threatened against the Borrower which question the validity of the Financing Documents to which it is a party or relating to the transactions contemplated thereby. 7. Each of the Financing Documents has been duly executed and delivered by duly authorized officer of the Borrower and constitutes the legal, valid, and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except that, in each case, (i) enforcement may be subject to and limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other laws now or hereafter in effect relating to creditors' rights generally, (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought, and (iii) certain of the remedial provisions including waivers with respect to the exercise of remedies against the Collateral contained in the Financing Documents may be unenforceable in whole or in part, but the inclusion of such provisions does not affect the validity of the Financing Documents, each taken as a whole and, the Financing Documents, each taken as a whole, contain adequate remedial provisions for the practical realization of the security purported to be afforded thereby. 8. The Financing Agreement is effective to create in favor of IBM Credit a valid security interest within the meaning of the UCC in the Collateral as security for the obligations purported to be secured thereby; and (ii) the Financing Statements are in appropriate form and upon filing in the state where Customer's principal place of business and chief executive office is located will result in a perfected security interest (as such term is defined in Section 9-303 of the UCC) of IBM Credit in the Collateral in which security interests to which Article 9 of the UCC applies. 9. Borrower is not an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. This opinion is rendered solely to and for the benefit of IBM Credit in connection with the execution and delivery of the Financing Documents and may not be relied upon by any other person, firm, or corporation without our prior written consent, except that it may be furnished to any prospective purchaser of a participation in the rights of IBM Credit and may be furnished to and relied upon by any Person which hereafter acquires such a participation. This opinion is limited to laws as currently in effect on the date hereto and to the facts as they currently exist, We assume no obligation to revise, supplement or otherwise update this opinion. Very truly yours,     AIF ATTACHMENT I TO AGREEMENT FOR INVENTORY FINANCING ("AIF AGREEMENT") CORPORATE SECRETARY'S CERTIFICATE AS TO RESOLUTIONS AUTHORIZING BORROWING BY CORPORATION IBM CREDIT CORPORATION I, John Labbett, certify that I am the Secretary of Egghead.com, Inc. ("Customer") and that I am custodian of the Customer's organizational books and records, including the minutes of the meetings of the Customer's Board of Directors. I further certify as follows: 1. Customer is a corporation organized under the laws of the State of Delaware, and has its principal of business at 1350 Willow Road, Menlo Park, CA 94025. 2. Customer is registered to conduct business or as otherwise required in the following states and localities: California, Washington 3. True and complete copies of the Customer's Articles of Incorporation and By-laws ("Governing Documents") are delivered herewith, together with all amendments and addenda thereto as in effect on the date hereof. 4. The following is a true, accurate and compared copy of a Resolution (the "Resolution") adopted by the Customer's Board of Directors at a special meeting thereof held on due notice at which there was present a quorum authorized to adopt the Resolution and the entire proceedings of which were proper and in accordance with the Customer's Governing Documents. The Resolution was duly made, seconded and unanimously adopted, remains in full force and effect and has not been revoked, annulled, amended or modified in any manner whatsoever, and each authorization and empowerment contained in the Resolution is permitted and proper under the Customer's Governing Documents: Please see attached as a true excerpt from the minutes of the board of directors meeting held on January 10, 2001. 5. Appearing below are the names, titles and specimen signatures of at least three Authorized Person as defined in the Resolution cited in the preceding paragraph, (list at least three such Authorized Persons): Authorized Person(s) Title Signature (print) (print) Jeffrey F. Sheahan President & CEO /s/ Jeffrey F. Sheahan John E. Labbett EVP & CFO /s/ John E. Labbett David D. Tilton Director of Finance /s/ David D. Tilton The foregoing is not intended to be a comprehensive or exclusive list of the Customer's Authorized Persons. Upon request, Customer will promptly provide to IBM Credit additional certificates containing the name, title and specimen signature of other Authorized Persons, and IBM Credit may now and in the future rely on the signature of any Authorized Person whether or not listed on this or any other certificate or on the signature page(s) hereof, if consistent with the books and records of the Customer. IN WITNESS WHEREOF, I have signed this certificate this 28th day of February, 2001. /s/ John E. Labbett Name: John E. Labbett     AIF ATTACHMENT J TO AGREEMENT FOR INVENTORY FINANCING ("AIF AGREEMENT") E-BUSINESS SCHEDULE A ("SCHEDULE A") Customer Name: Egghead.com, Inc. Effective Date of This Schedule A: , 20___ E-DOCUMENTS - SUPPLIERS: Invoices Payment Report/Remittance Advice E-DOCUMENTS - CUSTOMERS: Invoices Remittance Advice Transaction Approval Billing Statement Payment Planner Auto Cash Statements of Transaction Common Dispute Form     Omitted Attachments to Exhibit 10.11 Attachment C - Compliance Certificate - Not applicable Attachment D Attachment G - Certificate of Location of Collateral Section 1. DEFINITIONS; ATTACHMENTS 1 1.1 Special Definitions 1 1.2 Other Defined Terms 7 1.3 Attachments 7 Section 2. CREDIT LINE; FINANCE CHARGES; OTHER CHARGES 8 2.1 Credit Line 8 2.2 Product Advances. 8 2.3 Finance and Other Charges. 9 2.4 Customer Account Statements 10 2.5 Shortfall 10 2.6 Application of Payments 10 2.7 Prepayment and Reborrowing By Customer 11 Section 3. CREDIT LINE ADDITIONAL PROVISIONS 11 3.1 Ineligible Accounts 11 3.2 Reimbursement for Charges 13 3.3 Lockbox and Special Account 13 3.4 Collections. 13 3.5 Application of Remittances and Credits 13 3.6 Power of Attorney 14 Section 4. SECURITY -- COLLATERAL 15 4.1 Grant 15 4.2 Further Assurances 16 Section 5. CONDITIONS PRECEDENT 16 5.1 Conditions Precedent to the Effectiveness of this Agreement 16 5.2 Conditions Precedent to Each Advance 17 Section 6. REPRESENTATIONS AND WARRANTIES 18 6.1 Organization and Qualifications 18 6.2 Rights in Collateral; Priority of Liens 18 6.3 No Conflicts 18 6.4 Enforceability 18 6.5 Locations of Offices, Records and Inventory 18 6.6 Fictitious Business Names 19 6.7 Organization 19 6.8 No Judgments or Litigation 19 6.9 No Defaults 19 6.10 Labor Matters 19 6.11 Compliance with Law 19 6.12 ERISA 19 6.13 Compliance with Environmental Laws. 20 6.14 Intellectual Property 20 6.15 Licenses and Permits 20 6.16 Investment Company 20 6.17 Taxes and Tax Returns 21 6.18 Status of Accounts 21 6.19 Affiliate/Subsidiary Transactions 21 6.20 Accuracy and Completeness of Information 21 6.21 Recording Taxes 21 6.22 Indebtedness 21 Section 7. AFFIRMATIVE COVENANTS 21 7.1 Financial and Other Information 22 7.2 Location of Collateral 23 7.3 Changes in Customer 23 7.4 Legal Entity Existence 23 7.5 ERISA 24 7.6 Environmental Matters 24 7.7 Collateral Books and Records/Collateral Audit 24 7.8 Insurance; Casualty Loss 25 7.9 Taxes 25 7.10 Compliance With Laws 26 7.11 Fiscal Year 26 7.12 Intellectual Property 26 7.13 Maintenance of Property 26 7.14 Collateral 26 7.15 Subsidiaries 27 7.16 Financial Covenants; Additional Covenants 27 Section 8. NEGATIVE COVENANTS 28 8.1 Liens 28 8.2 Disposition of Assets 28 8.3 Legal Entity Changes 28 8.4 Guaranties 28 8.5 Restricted Payments 28 8.6 Investments 28 8.7 Affiliate/Subsidiary Transactions 29 8.8 ERISA 29 8.9 Additional Negative Pledges 29 8.10 Storage of Collateral with Bailees and Warehousemen 29 8.11 Accounts 30 8.12 Indebtedness 30 8.13 Loans 30 Section 9. DEFAULT 30 9.1 Event of Default 30 9.2 Acceleration 32 9.3 Remedies 32 9.4 Waiver 33 Section 10. MISCELLANEOUS 33 10.1 Term; Termination 33 10.2 Indemnification 34 10.3 Additional Obligations 34 10.4 LIMITATION OF LIABILITY 34 10.5 Alteration/Waiver 35 10.6 Severability 35 10.7 One Loan 35 10.8 Additional Collateral 36 10.9 No Merger or Novations 36 10.10 Paragraph Titles 36 10.11 Binding Effect; Assignment 36 10.12 Notices; E-Business Acknowledgment 36 10.13 Counterparts 38 10.14 ATTACHMENT A MODIFICATIONS 38 10.15 SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW 38 10.16 JURY TRIAL WAIVER 39 --------------------------------------------------------------------------------

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.26 June 19, 2001 James Schmidt CTO HearMe Dear Jim, You are among a select group of executives who we believe are crucial to HearMe's transition over the next six months based on your relationships with customers, vendors and employees. The Compensation Committee of the Board of Directors has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of HearMe's executive team, including yourself, to their assigned duties without distraction in the face of potentially disruptive circumstances arising from the possibility of a change in control of the Company and/or the Company's dissolution. If you remain employed with the Company and devote your full attention and time, during normal business hours, to the business and affairs of the Company, and use your best efforts to perform faithfully and efficiently such responsibilities for the next several months, the Company will do the following. •You will be eligible to receive a retention bonus in the amount of $150,000 (less applicable taxes). To earn this retention bonus you must remain an employee in good standing through November 30, 2001. The retention bonus will be paid on November 30, 2001, or earlier in the event HearMe is either acquired by another company (in which case payment will be on the close of the transaction) or, if HearMe terminates your employment without "cause," on the last day of your employment. •You have been granted an option to purchase 100,000 shares of HearMe common stock with an exercise price of $0.40 per share. This option was granted to you on April 23, 2001. All of these options (100%) will vest on the earlier date of the closing date of the sale of the Company or February 28, 2002. •You will be eligible for an extension of your exercise period for all vested options from the 90 days provided in your option agreement(s) to one year following your termination of employment if you remain an employee in good standing through November 30, 2001. The retention bonus, options, and the extension of your exercise period are based on the premise that you stay with HearMe and perform at or above the expectation level in your position. This letter does not change the at-will nature of your employment relationship with HearMe. The specifics of the terms and conditions under which the benefits described above are being offered to you are described in more detail in the attached Exhibit A: HearMe, Change of Control/Retention Agreement. Please read and sign this Agreement. Thank you for your continued support and hard work. Sincerely, Rob Csongor Chief Executive Officer Acknowledge receipt by signing below and returning original to John Alexander. Signature:      --------------------------------------------------------------------------------   Date:      -------------------------------------------------------------------------------- Name:   James Schmidt         -------------------------------------------------------------------------------- EXHIBIT A HEARME CHANGE OF CONTROL / RETENTION AGREEMENT     This Change of Control / Retention Agreement (the "Agreement") is made and entered into by and between Jim Schmidt (the "Employee") and HearMe (the "Company"), effective as of the latest date set forth by the signatures of the parties hereto below (the "Effective Date"). RECITALS     A.  It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. Additionally, a number of activities will be required of the Employee that are outside the normal scope of his or her responsibility in the event that the Company elects to dissolve. The Board of Directors of the Company (the "Board") recognizes that such considerations can be a distraction to the Employee and can cause the Employee to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its stockholders and creditors to assure that the Company will have the continued dedication and objectivity of the Employee, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company and notwithstanding any increased duties required of him or her in the future.     B.  The Board believes that it is in the best interests of the Company, its stockholders and its creditors to provide the Employee with an incentive to continue his/her employment and to motivate the Employee to maximize the value of the Company, for the benefit of its stockholders and/or creditors, despite the possibility of a Change of Control and/or dissolution.     C.  The Board believes that it is necessary and appropriate to provide the Employee with certain benefits in order to provide the Employee with incentives and encouragement to remain with the Company notwithstanding the possibility of a Change of Control and/or dissolution.     D.  Certain capitalized terms used in the Agreement are defined in Section 7 below.     The parties hereto agree as follows:     1.  Term of Agreement.  This Agreement shall terminate on the date that all obligations of the parties hereto with respect to this Agreement have been satisfied.     2.  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, whether with or without Cause and with or without notice, 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 available in accordance with the Company's established employee plans or pursuant to other written agreements with the Company.     3.  Retention Bonus.  In order to incent the Employee to remain employed with the Company for the next several months and provide added stockholder and creditor value during this difficult and uncertain business climate, Employee will be eligible to receive a cash bonus of $150,000, less applicable tax withholdings. To earn this retention bonus you, the Employee must remain an employee in good standing through November 30, 2001. This means that the Company shall not have terminated the Employee's employment for Cause (including a deemed termination under the definition below) prior to November 30, 2001. This retention bonus will be paid on November 30th, or earlier as follows: (a) in the event the Company undergoes a Change of Control that closes prior to November 30, 2001, on the closing date of the transaction, or (b) in the event the Company terminates the Employee's employment without Cause prior to November 30, 2001, on the last day of his or her employment. If 2 -------------------------------------------------------------------------------- the Employee's employment terminates prior to November 30, 2001 for any reason other than as a result of the Company's terminating his or her employment for Cause, the Employee shall not be entitled to payment of any portion of the retention bonus.     4.  Option Grant.  In order to incent the Employee to continue to build shareholder value and remain employed with the Company for the next several months and provide added stockholder and creditor value during this difficult and uncertain business climate, the Company has granted the Employee an option (the "Option") to purchase 100,000 shares of Common Stock of the Company with an exercise price of $0.40 per share. The Option was granted on April 23, 2001, is a nonstatutory stock option under applicable tax law, has a term of ten (10) years, and is subject to the terms and conditions of the Company's 1999 Stock Incentive Plan and a standard stock option agreement. The Option will vest in full (meaning that the Employee will be able to exercise and retain all (100%) of shares underlying the Option) on the earlier date of the closing date of a Change of Control of the Company, February 28, 2002, or the date Employee is terminated by the Company without Cause.     5.  Extension of Exercise Period.  As further incentive for the Employee's continuing employment, the Company will grant an extension of the period in which he or she has to exercise all vested (as of the date the Employee's employment terminates) options held by him or her from the 90 days provided for in the applicable option agreements to one year following the termination of employment. The extension of the option exercise period shall be extended if the Employee remains employed until the earlier to occur of (a) November 30, 2001, (b) the closing date of the Company, or (c) the date the Company terminates the Employee's employment without Cause. Except as provided in the prior sentence, this extension shall not be available in the event the Employee's employment terminates prior to November 30, 2001 for any reason other than a termination without Cause by the Company.     6.  Other Terminations.  Other than as specified above in this Agreement, the Employee shall not be entitled to any benefits or payments in connection with termination of his or her employment with the Company (other than those benefits to which he or she is entitled under then-applicable Company policies or applicable law). If the Employee's employment is terminated for Cause (including a deemed termination under the definition below), he or she shall not be entitled to any benefits provided for under this Agreement. In the event of the Employee's death or termination of his or her employment as a result of a Disability, in either case occurring before the date on which this Agreement provides that a benefit is to be provided, then the Employee (or his or her heirs) shall be entitled to any such benefit.     7.  Definition of Terms.  The following terms referred to in this Agreement shall have the following meanings:     (a)  Cause.  "Cause" for termination of the Employee's employment with the Company shall exist in the event of (i) an act of personal dishonesty taken by the Employee in connection with his or her responsibilities as an employee and intended to result in substantial personal enrichment of the Employee, (ii) Employee's being convicted of, or entering a plea of nolo contendre to, a felony, or (iii) a willful act by the Employee which constitutes misconduct and which is injurious to the Company; or material violations of this Agreement, any other agreement between the Employee and the Company (including without limitation any confidentiality, proprietary information and inventions assignment agreement(s)) or of Employer's written policies as set forth in Employer's employee handbook. In addition, "Cause" for termination of the Employee's employment shall exist, whether or not the Company chooses to terminate his or her employment, such that the Employee's employment shall be deemed to have terminated for Cause, for purposes of this Agreement only, in the event of the Employee's failure to devote his or her full time and attention, during normal business hours, to the business and affairs of the Company in a manner that meets or exceeds the Board's performance expectations with respect to an officer holding the Employee's position, provided that in the event the Employee's performance falls below this level, 3 -------------------------------------------------------------------------------- the Company shall provide notice to the Employee of such performance shortfall and, if the shortfall is curable, the Employee shall have five (5) business days in which to cure the shortfall.     (b)  Change of Control.  "Change of Control" means the occurrence of any of the following events:      (i) Any "person" (as such term is used in Sections 13(d) and 14(d) Section 13(d) of the Securities Exchange Act of 1934, as amended is or becomes the "beneficial owner" (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 without the approval of the Board of Directors of the Company; or     (ii) A merger or consolidation of the Company, whether or not approved by the Board of Directors of the Company, other than a merger or consolidation which would result in holders of more than fifty percent (50%) of the voting power represented by the voting securities of the Company outstanding immediately prior thereto continuing to hold (either by the voting securities remaining outstanding or by being converted into voting securities of the surviving entity) more than 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 the Company sells all or substantially all of the Company's assets.     (c)  Disability.  "Disability" shall mean that the Employee has been unable to perform his or her Company duties as the result of his or her 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 acceptable to the Employee or the Employee's legal representative (such Agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may be effected only after at least 30 days' written notice by the Company of its intention to terminate the Employee's employment as a result of the Disability. In the event that the Employee resumes the performance of substantially all of his or her duties hereunder before the termination of his or her employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked.     8.  Successors.       (a)  Company's Successors.  Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and/or assets which executes and delivers the assumption agreement described in this Section 7 8(a) or which becomes bound by the terms of this Agreement by operation of law.     (b)  Employee's Successors.  The terms of this Agreement and all rights of the 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.     9.  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 Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party 4 -------------------------------------------------------------------------------- shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.     (b)  Whole Agreement.  No agreements, representations or understandings (whether oral or written and whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof. This Agreement represents the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior arrangements and understandings regarding same matter. This Agreement supercedes any arrangements in any offer letters, addendums to offer letters or any other agreements.     (c)  Choice of Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California, with the exception of its conflict of laws provisions.     (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)  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 set forth below.     HEARME         By:             Title:   Chief Executive Officer     Date:      --------------------------------------------------------------------------------   , 2001     James Schmidt         Date:      --------------------------------------------------------------------------------   , 2001 5 -------------------------------------------------------------------------------- QuickLinks EXHIBIT A HEARME CHANGE OF CONTROL / RETENTION AGREEMENT RECITALS

EXHIBIT 10.66   PRODUCT SUPPLY AGREEMENT between LONZA BIOLOGICS PLC and ABGENIX, INC. Relating to Product Supply from SWFH THIS AGREEMENT is made the                           day of                                                       2000 BETWEEN LONZA BIOLOGICS PLC of 228 Bath Road, Slough, Berkshire SL1 4DY, England, a company incorporated under the laws of England and Wales, (hereinafter referred to as "LB") and ABGENIX, INC. of 7601 Dumbarton Circle, Fremont CA 94555, USA, a Delaware Corporation, (hereinafter referred to as "Abgenix"). WHEREAS A.         LB and Abgenix have entered into the Services Agreements and the Option Agreement (as herein defined); B.          In consideration for the sums paid by Abgenix pursuant to the Option Agreement, Abgenix has been granted the right during the Option Period (as defined therein) to negotiate exclusively with LB for the supply of Product (as defined herein) from the Facility (as defined herein) the supply of which is intended to utilise one hundred percent (100%) of the fermentation capacity of the Facility for producing such products; and C.          Pursuant to Abgenix rights under the Option Agreement, the parties hereto have negotiated terms upon which LB agrees to supply and Abgenix agrees to purchase the Services (as herein defined) on the terms and conditions set out herein. NOW THEREFORE it is hereby agreed by and between the parties as follows: 1.          In this Agreement, its recitals and all the Schedules hereto, words and phrases defined in the Terms for Manufacturing Services set out in Schedule 4 hereto shall have the meanings set out therein. 2.          This Agreement shall take effect on the Effective Date and, unless terminated in accordance with Clause 18 or Clause 7.6 of Schedule 4 hereto, shall continue until its expiry pursuant to Clause 4 of Schedule 4 hereto. 3.          Subject to the Terms for Manufacturing Services set out in Schedule 4 hereto LB agrees to carry out the Services as provided for herein and Abgenix agrees to pay the Price therefor as provided in Schedule 3 together with any additional costs and expenses that fall due hereunder. 4.          Any notice or other communication to be given under this Agreement shall be delivered personally or sent by first class pre-paid post or facsimile transmission addressed as follows:   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. If to Abgenix to: Abgenix Inc 7601 Dumbarton Circle Fremont CA 94555 USA For the attention of:   President Facsimile:   +1 510 608 6511 Copy to:   Director of Legal Affairs If to LB to: Lonza Biologics plc 228 Bath Road Slough Berkshire SL1 4DY England For the attention of:   Head of Legal Services Facsimile:   +44 (0)1753 777001 or to such other destination as either party hereto may hereafter notify to the other in accordance with the provisions of this clause.  All other such notices or other communications shall be deemed to have been served as follows: 4.1        if delivered personally, at the time of such delivery; 4.2        if sent by first class pre-paid post, ____ business days (Saturdays, Sundays and Bank or other public holidays excluded) after being placed in the post: 4.3        if sent by facsimile, upon receipt of the transmission confirmation slip showing completion of the transmission 4.4        if by express mail or by courier, within ____ days after being despatched.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written.   SIGNED BY R.H. Rupp and LP Thomas For and in behalf of   LONZA BIOLOGICS PLC                  Title President and VP Sales & Marketing, respectively --------------------------------------------------------------------------------       November 24, 2000 and November 30, 2000, respectively --------------------------------------------------------------------------------                    Date       SIGNED BY Kurt Leutzinger For and in behalf of   ABGENIX INC       Chief Financial Officer: --------------------------------------------------------------------------------           Title                   November 10, 2000 --------------------------------------------------------------------------------                    Date     The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. SCHEDULE 1 SPECIFICATIONS 1.          Definitions              For the purposes of this document: "Abgenix Materials" shall mean those materials supplied to LB by Abgenix pursuant to this Agreement or the Services Agreements which materials are more particularly set out in Part A of Schedule 2 hereto. "Cell Line" shall mean: 1.  ____________ 2.  ____________ "Product" shall mean: 1.  ____________ 2.  ____________ New cell lines and new products may be added to the above definitions pursuant to____to this Agreement. SECTION A:  ____________   ____________   SECTION B:  ____________   ____________   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. SCHEDULE 2 SERVICES A.         SUPPLY OF ABGENIX MATERIALS AND ABGENIX INFORMATION B.          ACTIVITIES TO BE UNDERTAKEN BY LB Stage 1 Operation and Use of the Facility Stage 2 Production of GMP Product at _______litre scale. A.         SUPPLY OF ABGENIX MATERIALS AND ABGENIX INFORMATION Abgenix shall supply, have LB provide on terms to be agreed or cause to have supplied to LB sufficient purified reference standard for the Product and ampoules of the Cell Lines from an appropriate cell bank sufficient for LB to provide the Services and for each product not previously produced by LB for Abgenix, Abgenix shall in addition supply, have LB provide on terms to be agreed or cause to have supplied to LB the following: (i)          Information on the Cell Line or new cell lines (where relevant) expressing the Product or the new products to allow a safety assessment by  Biological Safety Committee at LB.  This information needs to be reviewed before the Cell Lines or new Cell Lines can be sent to LB. (ii)         Following compliance with (i) above, sufficient ampoules of viable frozen cells of the Cell Line or new cell line (where relevant) containing approximately ____ cells/ampoule.  The Cell Line or new cell line shall be fully cloned and suitable for use in the performance of the Services.  Any disagreement as to the suitability of the Cell Line(s) or new cell lines in question for use in the Service shall be referred to the Steering Committee. (iii)        Sufficient purified reference standard for the new product (where relevant) or Product.  LB shall notify Abgenix of the quantities of reference standard required. (v)        Copies of the Abgenix test reports for all virus testing carried out on the Cell Line or new cell line.  This information needs to be reviewed by the Q.A. department at LB to determine acceptability. If unacceptable, the virus testing will be repeated by LB at Abgenix cost.  Any dispute as to the suitability of any virus test result shall be referred to the Steering Committee.              LB's current requirement for tests to be completed are set out in Appendix A to this Schedule 2. (vi)       Full genealogy and history of the Cell Line or new cell line (where relevant) to the date of transfer of the new cell line(s) or Cell Line, along with culture, productivity and stability study data on all linearly related stocks (if available). (vii)      Appropriate and sufficient Process information, to the extent the same is under Abgenix ownership or control for LB to provide the Services.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. B.          ACTIVITIES TO BE PERFORMED BY LB 1.0        Stage 1 - Operation and Use of the Facility Throughout the term of the Agreement, LB will make available and maintain the Facility for the manufacture of Product(s) at _______ in accordance with the principles and requirements of cGMP. 2.0        Stage 2 - Production of GMP Product at ________ litre scale 2.1        Objective              LB will manufacture Batches of Product at ________ litre scale in accordance with the principles of cGMP using the Facility provided under Stage 1 of this Agreement. 2.2        Activities For each Batch of Product ordered by Abgenix hereunder, LB shall; 2.2.1     recover ampoules of the cell bank for the Cell Line and expand cultures to complete an airlift fermentation at ________ litre scale in the Facility using the Process for the Cell Line for that Product.  Each Batch shall be produced as one lot from one ampoule of the cell bank provided by Abgenix. 2.2.2     Clarify culture supernatant and concentrate, and purify concentrate using the Process for that Product. Note:    Additional Product and in Process samples may be taken at Abgenix request for further analyses.  These additional tests may be performed by LB at a price and under terms to be agreed. 2.2.3     Deliver Product to Abgenix. Note:    During clinical trials it may be possible to ship Product from LB to Abgenix in quarantine at the written request of Abgenix.  In order to ship in quarantine a letter will need to be provided by Abgenix stating that the Product will not be used in human clinical studies until a Certificate of Analysis is issued by LB.  Licensed Product for in market supply shall not be shipped in quarantine. 2.2.4     Test Product against the draft Specification or Specification (once this has been agreed pursuant to Clause 2 of Schedule 4 hereto). 2.2.5     Review requirements (if any) for Process modifications in order to meet the draft Specification for manufacture of subsequent Batches and notify Abgenix of such proposed modifications.  Any such Process modifications are subject to agreement between LB and Abgenix in accordance with Schedule 4 hereto. 2.2.6     Undertake cGMP review of lot documentation and define Product disposition.  Issue a Certificate of Analysis (if appropriate). The following information will be provided to Abgenix: * supernatant antibody concentration * step yields for each chromatography step and buffer exchange operations * copies of key test data * outline of the manufacturing Process including the yield at manufacturing scale * summary listing of deviations * listing of in-Process bioburden test results *____________ *____________   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 2.3        Timescale LB shall schedule production of Batches as described in Schedule 4 hereto. Stage 2 shall be complete for each Batch upon the later of delivery of Product or completion of review of documentation. It is estimated that Stage 2 will be completed for each Batch approximately 5 months from the commencement of each Batch. Where appropriate (as outlined by activity 2.2.3) and where requested by Abgenix LB shall use all reasonable efforts to deliver Product under quarantine approximately nine (9) weeks from the commencement of each Batch. APPENDIX A TO SCHEDULE 2 ____________   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. SCHEDULE 3 PRICE AND TERMS OF PAYMENT 1.          Price              In consideration for performance of the Services, Abgenix shall pay LB the Price as determined by reference to the following: 1.1        The Price for the Services shall consist of: 1.1.1     the Suite Fee, which shall be the Price for performance of the Services (excluding the Raw Materials Fee), calculated in accordance with Clauses 1.2, 1.4 and 1.5 below; and 1.1.2     the Raw Materials Fee, namely the Price for Stage 2 of the Services, calculated in accordance with Clauses 1.3, 1.5 and 1.6 below. Save as provided for by the terms and conditions of this Agreement, Abgenix shall not be obliged to make further payment in respect of the Services set out in Stages 1 and 2 of Schedule 2. 1.2        The Suite Fee for the calendar year 2001 shall be _______________.  The Suite Fee shall be inflated in accordance with the provisions of Clauses 1.4 and 1.5 below. 1.3        The Raw Materials Fee shall be equal to the costs to LB of acquiring the Raw Materials for use in the Processes plus a handling charge of ____________ of such costs.  LB shall use reasonable endeavours to purchase Raw Materials at a fair market rate for same.  For Raw Materials totally consumed by production of one Batch the costs to LB of Raw Materials shall be demonstrated to the Steering Committee by LB by reference to the costed bill of materials for the Process in question prepared by LB based on its understanding of the cost of the Raw Materials in question projected for the relevant accounting period.  For Raw Materials totally consumed by production of one Batch or by reference to purchase orders issued by LB in respect of Raw Materials purchased by LB specifically for the purposes of performing the Services which Raw Materials are to be used in more than one Batch, the costs to LB of such Raw Materials shall be demonstrated to Abgenix by LB by reference to invoices received by LB. LB shall make the records pertaining to the calculation of the Raw Material Fee available for audit, no more than once in any calendar year, within a reasonable period of receiving a written request for such records, to independent auditors, provided always such auditors have accepted the same obligations of confidence as Abgenix hereunder (in respect of such records). 1.4        The Price quoted in Clauses 1.2 and 1.3 above is applicable to Services performed during the calendar year 2001.  The Price may be increased no more than once in any calendar year as follows: 1.4.1     For the calendar year ____, and each subsequent calendar year during which the Agreement subsists ("the calendar year in question"), LB may require by _____days notice to Abgenix in writing, to be served no later than ________ of the year preceding the calendar year in question, that the Suite Fee be increased for the calendar year in question.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 1.4.2     The Raw Materials Fee will vary in any event in accordance with the costs incurred in respect of Raw Materials by LB as provided by Clause 1.3 above, but will not otherwise be increased. 1.4.3     In the event of notification under Clause 1.4.1, the Suite Fee for each month of the calendar year in question shall equal the Suite Fee for the year preceding the calendar year in question adjusted by the ________. 1.4.4     Any Price alteration whether made pursuant to this Clause 1.4 or otherwise shall apply to the Price falling due to LB pursuant to any provision of this Agreement during the calendar year in question irrespective of whether firm orders have been placed for Services prior to the relevant Price alteration taking effect. 1.5        In addition to the Price alterations which are applied pursuant to Clause 1.4 alterations shall be made to the ___________________.  These shall include, but not be limited to changes in the Price caused by mutually agreed alteration of the Process or the draft Specification or the Specification as established at the Effective Date, provided Abgenix has received a written estimate of the costs and a reasonable demonstration of the items of cost or expense in question.  Such additional Price alterations shall be considered for application at the time the Price for supply of Product is fixed each year. 1.6        Abgenix shall pay LB the Price for the Services against LB's invoices therefor, as follows: 1.6.1     subject to the provisions of Clause 7.4 of Schedule 4 hereto relating to refunds of the Suite Fee, the Suite Fee shall be payable quarterly in advance commencing with the month in which the Suite Fee Commencement Date falls, irrespective of whether Product has been ordered for delivery hereunder.  At the Effective Date, this is estimated to be ___________.  LB will keep Abgenix promptly informed, via the Steering Committee, of changes in the estimated date for this activity and shall use reasonable commercial endeavours to ensure the fitness of the Facility for the Services in a timely fashion.  The Suite Fee shall be payable in respect of each month during the time this Agreement subsists; and 1.6.2     LB shall be entitled to issue the invoice in respect of the Raw Materials Fee for the production of each Batch of Product pursuant to Stage 2 of the Services, upon commencement of the Services relating to the Batch of Product in question.  For the avoidance of doubt, Services in respect of a Batch of Product commence upon the removal of the first ampoule of cells from the relevant cell bank stocks at LB's premises with the intent that such cells shall be used in performance of the Services.  No Raw Material Fee shall be levied in respect of Services performed under Stage 2 of Schedule 2 which do not result in delivery of any Product.  Advance payment of a Raw Materials Fee in respect of such Services shall be credited to Abgenix.              Notwithstanding this Clause 1.6.2 above, the Raw Materials Fee in respect of components, including but not limited to column matrices, which are purchased for use in performing the Process to produce more than one production Batch will be payable by Abgenix at such time as the Raw Materials in question are received by LB.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 1.7        Regulatory Support and Quality Assurance 1.7.1     The Price has been calculated to include regulatory support for two (2) audits (at mutually convenient times) by Abgenix personnel of up to three (3) days each prior to commencement of the Services and, thereafter, up to two (2) audits (at mutually convenient times) by Abgenix personnel of up to three (3) days each in any one calendar year during the Term of this Agreement.  Subject to Clause 1.7.2 of this Schedule 3 below, in the event LB is required by Abgenix to provide any additional regulatory or quality assurance support or development services (including but not limited to those process validation services listed in Appendix 1 hereto) associated therewith to Abgenix in respect of Product or the Services, whether pursuant to Clauses 7.9 or 12.1, or due to Abgenix own requirements or those of any regulatory or other similar body, such support will be provided on terms and conditions and at a price to be agreed. 1.7.2     In the event Abgenix conducts an audit of the Facility pursuant to its rights under Clause 1.7.1 and, as a result of default on the part of LB, Abgenix has just cause to conduct further audits of LB's premises in order to satisfy itself as to the matters of default in question, Abgenix shall be entitled, without additional payment to LB, to conduct up to two (2) additional audits (at mutually convenient times) of LB's premises in order to so satisfy itself of the matters in question.  Any requirement to conduct further audits beyond this number shall be performed on terms and conditions and at a price to be agreed.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. SCHEDULE 4 TERMS FOR MANUFACTURING SERVICES FROM LB'S SOUTHWEST FERMENTER HALL FACILITY FOR ABGENIX, INC. 1.          Interpretation 1.1        In these Terms, unless the context requires otherwise: 1.1.1     "Abgenix Information" means all technical and other information known to, controlled or owned by Abgenix and not known to LB prior to its disclosure by Abgenix to LB or otherwise subsequently, independently, licensed to LB by a third party and not in the public domain relating to the Abgenix Materials, the Process(es) and the Product(s), from time to time supplied by Abgenix to LB. 1.1.2     "Abgenix Materials" means the materials supplied by Abgenix to LB pursuant to this Agreement (if any) and identified as such by Schedule 1 hereto or supplied pursuant to previous Services Agreements between the parties.  Abgenix Materials shall include the Cell Lines (subject to any residual rights of LB including but not limited to the LB Patent Rights or the LB Know-How). 1.1.3     "Abgenix Patent Rights" means all Patent Rights of which Abgenix is from time to time the owner. 1.1.4     "Abgenix Tests" means the tests (if any) to be carried out on the Product immediately following receipt of the Product by Abgenix, particulars of which are set out in Schedule 1 as modified from time to time by written agreement between the parties. 1.1.5     "Affiliate" means any company, partnership or other entity, which directly or indirectly controls, is controlled by or is under common control with the relevant party to this Agreement.  "control" means the ownership of fifty per cent (50%) or more of the issued share capital or the legal power to direct or cause the direction of the general management and policies of the party in question. 1.1.6     "Agreement" means this Product Supply Agreement between LB and Abgenix. 1.1.7     "Batch" means the quantity of total bulk purified Product (including samples) which is produced as a result of the completion of one operation of the Process for the Product in question in the Facility in accordance with cGMP. 1.1.8     "Binding Order" shall have the meaning ascribed to it by Clause 5.4 of Schedule 4. 1.1.9     "Cell Line" means the cell line or cell lines used in the manufacture of Product, particulars of which are set out in the definition of Cell Line in Schedule 1 hereto, as the same may be amended from time to time in accordance with the provisions of this Agreement.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 1.1.10   "cGMP" means Good Manufacturing Practices and General LB Products Standards as promulgated under the US Federal Food Drug and Cosmetic Act at 21CFR (Chapters 210, 211, 600 and 610) and the Guide to Good Manufacturing Practices for Medicinal Products as promulgated under European Directive 91/356/EEC.  LB's operational quality standards are defined in internal GMP policy documents.  Additional product-specific development documentation and validation work may be required to support regulatory applications and to conduct clinical trials or market a product. 1.1.11   "Delivery Date" shall mean the date determined  in accordance with Clause 5 below upon which, the later of either the date: (i)          a given Batch of Product to be produced pursuant to Stage 2 of the Services; or (ii)         the Certificate of Analysis (or lot review documentation in the case of Product being assessed against a draft Specification) relating thereto; is to be ready for delivery to Abgenix ex works LB's premises (Incoterms 2000). 1.1.12   "Effective Date" shall mean the date of signature of this Agreement by both parties. 1.1.13   "Facility" means the ______ fermenter train and associated ancillary equipment known as the South West Fermenter Hall located at LB's premises in Slough, Berkshire and the purification equipment from which Product will be produced hereunder. 1.1.14   "LB Know-How" means all technical and other information known to, owned or controlled by LB from time to time other than Abgenix Information and information in the public domain. 1.1.15   "LB Patent Rights" means all Patent Rights of which LB is from time to time the owner. 1.1.16   "Minimum Requirement" shall have the meaning ascribed to it by Clause 5.2 of this Schedule 4. 1.1.17   "Optimum Capacity" shall have the meaning ascribed to it by Clause 5.2 of this Schedule 4. 1.1.18   "Option Agreement" means the agreement between the parties hereto dated ________, pursuant to which LB is undertaking certain engineering and validation works at the Facility and Abgenix has been granted certain rights to negotiate the terms of this Agreement. 1.1.19   "Patent Rights" means all patents and patent applications of any kind throughout the world. 1.1.20   "Price" means the price for the Services as specified in Schedule 3, consisting of the Suite Fee and the Raw Materials Fee. 1.1.21   "Process" means the process(es) for the production of the Product(s) from the Cell Line(s), agreed between the parties and established first under the Services Agreements and including any improvements thereto from time to time made by agreement between the parties hereto. 1.1.22   "Product" means all or any part of the product(s) (including any sample thereof), particulars of which are set out under the definition of Product in Schedule 1 hereto (as amended from time to time by agreement between the parties hereto).   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 1.1.23   "Producer Price Index" or "PPI" means at the time of the relevant operation of Clause 1.4 of Schedule 3 hereto, the percentage increase in the then most current published United Kingdom Government statistics for the United Kingdom Retail Price Index as measured against the later of the index most current at the Effective Date or that last considered under this Agreement for the purposes of Clause 1.4 of Schedule 3 hereto, plus ____________________ the Steering Committee shall meet to decide whether operation of this Clause 1.1.23 is fair and reasonable, having regard to the actual increases in the costs of operating the Facility incurred by LB.  In such event the Producer Price Index shall only be calculated to exceed _____________ to the extent LB's cost increases exceed such percentage and to the extent required to ensure that LB's percentage profit margin on revenues receivable by LB under this Agreement is maintained and not increased or decreased by virtue of such increase in the PPI.. 1.1.24   "Raw Materials" means materials, ingredients, additives, purification resins, reagents, and costs for virus testing by Testing Laboratories which are purchased or used by LB in the performance of the Services and which are consumed by performance of the Services whether following their first use or otherwise. 1.1.25   "Raw Materials Fee" means that part of the Price which is payable to LB by Abgenix in respect of the Raw Materials utilised in the performance of the Services and calculated in accordance with Clause 1.3 and 1.4 of Schedule 3 hereto. 1.1.26   "Services" means all or any part of the services which are the subject of the Agreement particulars of which are set out in Schedule 2 hereto. 1.1.27   "Services Agreements" means all or any of the agreements between the parties dated _______________, pursuant to which LB agreed to provide research and development services to Abgenix in relation to certain cell lines for the manufacture of certain antibody products, and such other agreements between the parties hereto as may be agreed in writing by the parties shall be known as Services Agreements. 1.1.28   "Specification" means the specification for Product(s) particulars of which are set out in Schedule 1 hereto and such modifications to the same as are agreed pursuant to Clause 2.1 or Clause 10.1 of this Schedule 4. 1.1.29   "Steering Committee" means the committee established pursuant to this Agreement, the function and powers of which are more particularly described by Clause 9 of this Schedule 4. 1.1.30   "Suite Fee" means that part of the Price which is payable to LB in respect of the Services as determined by sections 1.2, 1.4 and 1.5 of Schedule 3 hereto, which fee comprises: (i)          storage of the cell banks of the Cell Line (ii)         preparation and maintenance of manufacturing documents for the manufacture of bulk Product (iii)        performance of the cell culture Process (iv)       purification of Product (v)        analysis of Product according to the Specification for Product (vi)       review of completed Batch records; and (vii)      the costs of operating the Facility (including but not limited to the supply of utilities).   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 1.1.31   "Suite Fee Commencement Date" means the first day of the month in which LB notifies Abgenix in writing that the Facility is fit for the Services to commence, and in which the Facility is in fact fit for the Services to commence. 1.1.32   "Supply Deficiency" shall have the meaning ascribed by Clause 7.3 of this Schedule 4. 1.1.33   "Supply Failure" shall have the meaning ascribed by Clause 7.5 of this Schedule 4. 1.1.34   "Terms of Payment" means the terms of payment specified in Schedule 3.  For the avoidance of doubt all invoices and payments shall be in pounds sterling unless otherwise agreed. 1.1.35   "Testing Laboratories" means any third party instructed by LB to carry out tests on the Abgenix Materials or the Product. Unless the context requires otherwise, words and phrases defined in any other part of the Agreement shall bear the same meanings in these Terms, references to the singular number include the plural and vice versa, references to Schedules are references to schedules to the Agreement, and references to Clauses are references to clauses of these Terms. 2.          Applicability of Terms 2.1        No variation of or addition to these Terms shall be effective unless in writing and signed by an authorised signatory on behalf of LB and Abgenix.  For the avoidance of doubt, and subject always to the provisions of Clause 10.1 relating to changes to the draft Specification or Specification, amendments to the draft Specification or the Specification for Product(s) and the decision to convert the draft Specification to Specification shall be effective if reduced to writing and signed by the authorised representative for such purpose of each party, which representative shall be designated from time to time by the parties.              It is intended that the decision to convert the draft Specification to a Specification shall take place, in the case of each Product, with the full knowledge of the Steering Committee, only following the completion of five (5) Batches of the Product in question in accordance with cGMP (e.g. two (2) Batches plus three (3) consistency Batches and following the performance of services to complete consistency studies in respect of the Product in question.              For the avoidance of doubt, any amendment to the scope of the Services set out herein (including but not limited to the performance of consistency studies) shall be undertaken on terms and conditions to be agreed. 3.          Supply by Abgenix 3.1        Pursuant to the Services Agreements and/or Schedule 2 hereto Abgenix has supplied or shall supply to LB the Abgenix Information and the Abgenix Materials together with full details of any known hazards relating to the Abgenix Materials, their storage and use.  Abgenix shall be obliged to notify LB of any changes in or additions to such information from time to time during the time this Agreement subsists.  Property in the Abgenix Materials supplied to LB shall remain vested in Abgenix.              Abgenix shall ensure the adequate and timely supply of further amounts of the Abgenix Materials in sufficient quantity to facilitate LB's performance of the Services, provided LB shall provide Abgenix timely notice of its requirements in this regard.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 3.2        Abgenix hereby grants LB the non-exclusive right to use the Abgenix Information, the Abgenix Patent Rights and the Abgenix Materials solely for the purpose of LB performing its obligations under this Agreement.  Without prejudice to any pre-existing or future rights vested in LB pursuant to pre-existing or future agreements between the parties, LB hereby undertakes not to use the Abgenix Materials (or any part thereof) for any other purpose without Abgenix specific written consent obtained in advance.  Save to the extent expressly granted by this Clause 3.2 no licences are granted to LB to use the Abgenix Materials, the Abgenix Patent Rights or the Abgenix Information, and no licences shall arise or be deemed to have arisen by default estoppel or otherwise. 3.3        LB shall: 3.3.1     at all times use all reasonable endeavours to keep the Abgenix Materials secure and safe from loss and damage in such manner as LB stores its own material of similar nature; 3.3.2     not part with possession of the Abgenix Materials or the Product, save for the purpose of tests at the Testing Laboratories or as instructed by Abgenix; 3.3.3     procure that all Testing Laboratories are subject to the obligations of confidence no less onerous than those obligations of confidence imposed on LB under this Agreement; and 3.3.4     without prejudice to LB's entitlement to receive payment hereunder and without prejudice to LB's own proprietary rights in the Process, the LB Know-How and the LB Patent Rights, LB accepts that it shall not by virtue  of this Agreement acquire any right or title in, or to, the Abgenix Materials or the Product. 3.4        Abgenix warrants that: 3.4.1     Abgenix is and shall at all times throughout the duration of the Agreement remain entitled to supply the Cell Line(s), the other Abgenix Materials and Abgenix Information to LB. 3.4.2     to the best of Abgenix knowledge and belief the use by LB of the Cell Line(s), other Abgenix Materials, Abgenix Information and/or the Abgenix Patent Rights for the Services will not infringe any rights (including, without limitation, any intellectual or industrial property rights) vested in any third party in respect of which Abgenix is not properly licensed to exploit for the purposes of LB performing the Services and; 3.4.3     that Abgenix will notify LB in writing, promptly, in the event that it is no longer entitled to supply the Cell Line(s), other Abgenix Materials, Abgenix Information and/or the Abgenix Patents for the Services or use of the same or infringes or is alleged to infringe any rights (including, without limitation, any intellectual or industrial property rights) vested in third parties.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 3.5        Abgenix undertakes to indemnify and to maintain LB properly indemnified against any loss, damage, costs and expenses of any nature (including reasonable court costs and legal fees incurred by LB or ordered by a court of competent jurisdiction as payable by LB on a full indemnity basis) (collectively "Costs"),  to the full extent that LB suffers such Costs out of any breach of the warranties given in Clause 3.4 above or any claims alleging LB's use of the Cell Line(s), other Abgenix Materials, the Abgenix Information, the Abgenix Patent Rights or any Process steps or components which are or become part of the Process by virtue of requests by Abgenix that they should be included in the Process , in the course of the Services, infringes any rights (including without limitation any intellectual or industrial property rights) vested in a third party (whether or not Abgenix knows or ought to have known about the same). 3.6        The obligations of Abgenix under Clause 3.4 and 3.5 shall survive the termination for whatever reason of the Agreement. 4.          Term 4.1        This Product Supply Agreement shall take effect on its signature and shall unless terminated pursuant to Clause 18 or Clause 7.6 of this Schedule 4, remain in effect until the _______ anniversary of the delivery of the first Batch of Product produced hereunder pursuant to Stage 2 of the Services.  The parties may from time to time agree to extend the term of this Agreement by one or more calendar years.  Extensions to the term of the Agreement can be made annually by mutual agreement, which agreement shall be reached not less than ________ calendar months before the date on which the Agreement would otherwise expire. 5.          Capacity, Order Quantities and Order Procedures 5.1        It is the intention of the parties that, subject to the rights and obligations of the parties set out herein, Abgenix shall, during the term of this Agreement, have available to it and be entitled to utilise one hundred percent (100%) of the fermentation capacity of the Facility and purification capacity reasonably acceptable to Abgenix for the manufacture of Product.  The Minimum Requirements and Optimum Capacity at the Effective Date are based upon LB's estimates and representations as of the Effective Date regarding the capacity of the Facility.  LB has based such estimates and representations upon LB's current operating practices at the Effective Date and upon its knowledge of the Products and Processes defined herein at the Effective Date.              From time to time, the Steering Committee shall review and assess the capacity of the Facility.  In the event, as a result of such review, LB reasonably believes that the operation of its then standard practices and procedures for the same, unchanged, Processes relating to the same Products, should result in a change to the Optimum Capacity of the Facility, LB shall notify Abgenix of this fact.  In such event, the parties shall negotiate in good faith a proportionate adjustment to those provisions of this Agreement which relate to the Minimum Requirements and Optimum Capacity of the Facility.              For the avoidance of doubt any changes to the capacity of the Facility which derive from alterations to the Processes, Products or methods of operation of the Facility shall be governed by Clauses 10 and/or 15 of this Schedule 4 (as applicable).   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 5.2        Product will be ordered by number of Batches to be delivered to Abgenix in accordance with Clause 5.3 below.  During such time as the Process(es) being performed hereunder remain(s) unchanged, up to ________ Batches may be ordered for delivery in each calendar year during which this Agreement subsists ("Optimum Capacity").  The actual number of Batches which can be delivered pursuant to this Agreement in any one calendar year will depend on the sequence and combination of Products requested by Abgenix and accepted by LB.  Notwithstanding the provisions of this Clause 5.2 however, and subject to Abgenix adhering to the ordering procedures set out herein, and the terms of this Agreement, LB shall, if requested by Abgenix, be obliged to accept and deliver to Abgenix orders placed for at least twelve (12) Batches of Product in any one calendar year ("Minimum Requirement"). Notwithstanding the acceptance of a Binding Order for supply of Product in 2001 or 2001, the actual availability of Batches for delivery (if any) during 2001 and 2002 shall depend on the Suite Fee Commencement Date. Due account shall be taken by the parties of the Suite Fee Commencement Date and the effect its timing has on the available capacity of the Facility during 2001 and 2002. Subject to LB's obligations under Clause 1.6.1 of Schedule 3 hereto, it is accepted that alterations in the Suite Fee Commencement Date may entitle LB to reduce the number of Batches to be delivered in 2001 and/or 2002 without liability under Clause 7. 5.3        Abgenix shall place its orders for Batches of Product as follows: 5.3.1     within ______ days of the Effective Date Abgenix shall provide LB with a written statement of the number and sequence of Batches of Product it wishes to receive delivery of during the calendar year 2001 together with the preferred Delivery Dates therefor; 5.3.2     by __________ of each subsequent calendar year during which the Agreement subsists, until and except for the last calendar year during which this Agreement subsists, Abgenix shall provide LB with a written statement of the number and sequence of Batches of Product it wishes to receive delivery of between ________ of the calendar year following that in which the statement is issued and during which this Agreement subsists (the calendar year in question) together with its preferred Delivery Dates therefor; and 5.3.3     by ________ of each subsequent calendar year during which this Agreement subsists, until and except for the last calendar year during which this Agreement subsists, Abgenix shall provide LB with a written statement of the number and sequence of Batches of product it wishes to receive delivery of between __________ of the calendar year following that in which the statement is issued and during which this Agreement subsists (the calendar year in question) together with its preferred Delivery Dates therefor. 5.4        LB shall use all reasonable commercial endeavours to meet the requirements of Abgenix and shall within _____ working days of receipt by LB of a statement from Abgenix pursuant to Clause 5.3 above confirm in writing whether it is able to accept an order for the Product requested.  Subject always to Clause 1.6.1 of Schedule 3 and the fact LB is obliged to accept and deliver orders for at least the Minimum Requirement then in force, if LB is unable to accept an order as requested due to the requirements or operative procedures of Clause 5.1 or 5.2 (above), the provisions of Clause 13 or Clause 19 below, or due to the need to satisfy LB's rights under Clause 10 below, the Steering Committee shall determine the alterations to the request which are acceptable to both parties, having regard to the Optimum Capacity then in force, the operational requirements of the Facility (including but not limited to requirements for maintenance) and the nature and combination of the Products requested for delivery.  LB shall be responsible for confirming, in writing, the decision of the Steering Committee within _______ of that decision.  If LB receives no dispute over the interpretation of the said decision within a further _______ days such decision shall be binding.  Any dispute over the decision in question shall be determined by operation of Clause 20 of this Schedule 4.              Written confirmation by LB of its acceptance of a statement or the decision of the Steering Committee shall also confirm the Delivery Dates for the Batches of Product concerned.  Such written confirmation shall constitute a firm commitment from Abgenix to purchase and pay the Price for, and LB to supply the Services in question ("Binding Order").   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 5.5        Notwithstanding Clauses 5.2 and 5.4 above and subject to LB's obligations in respect of ensuring the fitness of the Facility for the Services set out in Schedule 3 hereto, Abgenix accepts that in the event the Suite Fee Commencement Date falls after ________, no _________________, and LB may not be able to deliver the full Minimum Requirement during the calendar year 2002.  ______________. 5.6        Subject always to LB's rights under Clause 10 of this Schedule 4, Abgenix may request LB's consent to increase the number of Batches in a Binding Order at any time.  LB shall not unreasonably withhold its consent to any such request from Abgenix, but shall not be obliged to consent to an increase in the number of Batches to be delivered to Abgenix during any order period above the Minimum Requirement applicable to such period.  Additionally LB shall not be required to increase the number of Batches in circumstances where Abgenix has provided LB with written authorisation to offer capacity to third parties pursuant to Clause 13.1 and LB has made a bona fide commitment (or plans in good faith imminently to conclude such a commitment) to a third party to supply services from the Facility, and such commitment would preclude the increase Abgenix requests.  Any such change to a Binding Order shall only be undertaken on terms to be agreed between the parties. 5.7        Subject always to LB's rights under Clause 10 of this Schedule 4, LB shall not unreasonably withhold its consent to any request from Abgenix to change the sequence of Products to be supplied pursuant to a Binding Order.  Abgenix acknowledges that if such change results in an actual decrease in capacity of the Facility, such change may result in a decrease in the number of Batches which will be supplied pursuant to the Binding Order in question.  Any such change to a Binding Order shall only be undertaken on terms to be agreed as set out in Clause 10 of this Schedule 4.  LB shall only modify the sequence of Products to be supplied pursuant to a Binding Order upon the written request of Abgenix, or with the prior written consent of Abgenix. 5.8        Abgenix shall not be entitled to amend a Binding Order in such a way as to affect Batches of Product in progress or Batches of Product in respect of which perishable Raw Materials have been committed by LB.  LB shall use reasonable commercial endeavours to accommodate Abgenix requests for such changes.  Any change to a Binding Order shall however only be undertaken on terms to be agreed. 6.          Additional Capacity 6.1        Without any prejudice to LB's rights to negotiate with any third parties or LB's obligations under Clause 7.3 below in the event of a Supply Deficiency, in the event that capacity (other than capacity in the Facility) becomes unexpectedly available during the term of this Agreement LB will promptly notify Abgenix.  LB will consider favourably any request from Abgenix for additional manufacturing capacity.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 7.          Provision of the Services 7.1        LB shall diligently carry out the Services as provided in Schedule 2 and as required pursuant to the terms of this Agreement and shall use all reasonable commercial efforts to achieve the estimated timescales therefor. 7.2        Subject to Abgenix rights set out in Clauses 7.3, 7.4, 7.6 and 7.8 below, Abgenix shall not be entitled to cancel any unfulfilled part of the Services or to refuse to accept the Services on grounds of late performance, late delivery or failure to produce the estimated quantities of Product for delivery.  LB shall not otherwise than as set out in this Clause 7 be liable for any loss, damage, costs or expenses of any nature, whether direct or consequential, occasioned by: 7.2.1     any delay in performance or delivery howsoever caused; or 7.2.2     any failure to produce the estimated quantities or number of Batches of Product for delivery. 7.3        In the event Abgenix has, pursuant to a current Binding Order under the terms of this Agreement, ordered for delivery in a given calendar year, a number of Batches of Product (whether such Product is to be released against a draft Specification or Specification) which is equal to or greater then the then current Minimum Requirement and LB fails (due solely to its own fault, negligence act or omission) within the calendar year in question, to deliver a number of Batches which is at least equal to the then current Minimum Requirement, the difference between the number of Batches actually delivered during that calendar year and the then Minimum Requirement shall constitute a "Supply Deficiency" for the purposes of this Agreement.              In the event of a Supply Deficiency, LB shall take the following steps to remedy the Supply Deficiency: 7.3.1     utilise any capacity of the Facility which is not, during the calendar year in question, allotted to the performance of the Services or to performance of services for third parties pursuant to Clause 13 below; or 7.3.2     utilise suitable LB production capacity (other than the Facility) not at the time in question committed to third party customers; or 7.3.2     co-ordinate and co-operate with Abgenix, via the Steering Committee, to re-schedule Batches of Product ordered hereunder in order to maximise LB's opportunity to rectify the Supply Deficiency in question whilst minimising the disruption to any Binding Order then in force. 7.4        In the event that, not withstanding the steps in Clause 7.3 above having been undertaken the Supply Deficiency has not been rectified within twelve (12) calendar months from its occurrence Abgenix may elect at its discretion to require LB to: 7.4.1     pay to Abgenix a sum, or provide Abgenix a credit against future payments, equal to the proportion of the Monthly Suite Fee applicable to the manufacture of the number of Batches of Product which is the subject of the Supply Deficiency ("the Failed Batch Credit"); or   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 7.4.2     continue to use all reasonable commercial efforts to remedy the Supply Deficiency within the subsequent calendar year by manufacturing extra replacement Batch(es) (which absent such Supply Deficiency could otherwise be deemed a Batch delivered in excess of the Minimum Requirement for such period).              For the sake of illustration, without limitation, if in a calendar year LB delivers ________ Batches of Product and if during such calendar year Abgenix actually ordered the Minimum Requirement of Product (for the sake of this illustration ___________ a Supply Deficiency of  _______Batch would be deemed to have occurred.  If Abgenix elected the remedy provided in Clause 7.4.2 above, and if Abgenix orders the Minimum Requirement of _______ Batches of Product during the following calendar year, then in the following calendar year LB shall deliver to Abgenix ________ Batches of Product, with the understanding that Abgenix shall not be obliged to pay LB any additional amount (other than the Raw Materials fee, to the extent the same has not been previously paid to LB) for the 13th Batch that would otherwise require payments set forth in this Clause 7. 7.5        In the event Abgenix has a Binding Order for delivery of at least the Minimum Requirement then applying (provided the Minimum Requirement is not less than ________ Batches) and a Supply Deficiency arises or a situation of Force Majeure exists such that LB delivers zero Batches of Product in the period specified in the then current Binding Order for delivery of ___________ Batches of Product, such event shall constitute a Supply Failure and shall entitle but not oblige Abgenix to the rights attaching to a Supply Failure which are set out in Clause 7.6. 7.6        7.6.1     In the event of a Supply Failure LB shall within _______ of the Supply Failure arising notify Abgenix in writing of its understanding as to the cause of the Supply Failure (in so far as this can be established in that time), the outline measures necessary to rectify the cause and an estimate of the period (if any) during which the Facility shall continue to be unfit for performance of the Services as a result of the cause in question. 7.6.2     Following receipt by Abgenix of notification under Clause 7.6.1 from LB Abgenix shall, within ______ thereafter, notify LB in writing whether Abgenix shall: 7.6.2.1  treat the Supply Failure as a Supply Deficiency; or 7.6.2.2  elect to terminate the Agreement. 7.6.3     In the event Abgenix notifies LB under Clause 7.6.2.1 that it wishes to treat the Supply Failure as a Supply Deficiency, the provisions of Clauses 7.3 and 7.4 shall apply __________________. 7.6.4     Alternatively, in the event Abgenix notifies LB under Clause 7.6.2.2 that it wishes to terminate the Agreement: 7.6.4.1  the provisions of Clauses 18.1, 18.2, 18.3, 18.5 and 18.7 shall apply, save that (subject to Clause 7.6.5 below), in the event that as a direct result of the Supply Failure Abgenix enters in to a binding commitment with a third party pursuant to which Abgenix is obliged to source all its requirements for Product from that third party, the Suite Fee payable to LB under Clause 18.1 shall be reduced _______ of that which would otherwise be payable to LB during such time as Abgenix continues to be bound to the third party in question to source all its requirements for Product from the third party in question; and   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 7.6.4.2  Abgenix may notify LB in writing of its wish to take a licence from LB to utilise the Process or any part thereof for any particular Product either at its own facility or that of a third party co-marketing partner of Abgenix or contract manufacturer.  The parties shall negotiate in good faith the terms upon which such a licence may be granted.  Such negotiations shall be based on LB's standard terms for the grant of such licences and the transfer of such technology applying at the time in question and in addition shall take account of the fact that the licence is to be granted as a result of a Supply Failure.  It is the intent of the parties to negotiate the terms of such licence prior to the first delivery of Product by LB hereunder.  If, however, the Supply Failure occurs before the parties finalise such terms, the parties shall proceed with all reasonable speed using all commercially reasonable endeavours to conclude such licence.              For the avoidance of doubt this provision shall not constitute the grant of any licence or the right to any licence.  This provision is a statement of intent to conduct good faith negotiations on a date to be established. 7.6.5     in the event of a Supply Failure, notwithstanding the provisions of this Clause 7.6 above, the Suite Fee shall not fall due during such period as in LB's reasonable opinion, the Facility is not fit for the performance of the Services. 7.7        In the event pursuant to a Binding Order (or an amendment to a Binding Order) LB delivers more than the Minimum Requirement in any calendar year, LB shall be entitled payments in addition to the Price for Services relation to such Batches from Abgenix as follows ("Performance Payments"): 7.7.1     for the first such Batch in excess of the Minimum Requirement ______ of the Suite Fee applicable at the time the Batch in question is delivered; plus 7.7.2     for the second such Batch in excess of the Minimum Requirement _______ of the Suite Fee applicable at the time the Batch in question is delivered; plus 7.7.3     for the third such Batch in excess of the Minimum Requirement _______ of the Suite Fee applicable at the time the Batch in question is delivered.              For the sake of illustration, assuming the Minimum Requirement were ________for a calendar year, and the Suite Fee were __________, if LB were to deliver to Abgenix ______ Batches during the calendar year in question, Abgenix would pay LB an additional ______________________ applicable to the period during which LB produced such Batches. 7.8        Abgenix acknowledges that, due to the unpredictable nature of biological processes, Product yield cannot be guaranteed and may vary.  Subject to LB's rights and obligations under Clause 16 however, in the event LB has performed Services in relation to a Batch of Products (whether such Batch of Product is to be assessed against a draft Specification or a Specification therefor) and, due solely to the negligent act or default or the wilful misconduct of LB, a significant deviation (as defined by LB standard operating procedures) arises during the Process such that the amount of Product actually delivered ex works (incoterms 2000) the Facility to Abgenix is less than _______ of the amount which would, but for the negligent or wilful act in question, have been so delivered to Abgenix, the Steering Committee shall agree upon a commercially reasonable mechanism by which to compensate Abgenix in respect of such loss.              For the avoidance of doubt any Batch to which this Clause 7.8 applies shall be disregarded for the purposes of Clauses 7.3, 7.4, 7.5, 7.6 and 8.5.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 7.9        LB shall comply with the regulatory requirements from time to time applicable to the Services as set out in Schedule 2 hereto and in accordance with the other applicable legal requirements of the jurisdiction in which the Facility is located.  If Abgenix requests LB to comply with any other regulatory or similar legislative requirements LB shall use all reasonable commercial endeavours to do so provided that: 7.9.1     Abgenix shall be responsible for informing LB in writing of the precise foreign requirements which Abgenix is requesting LB to observe; 7.9.2     such requirements do not conflict with any mandatory requirements under the laws local to the location of the manufacture of the Product concerned; and 7.9.3     all costs and expenses incurred by LB in complying with the requirements referred to in Clause 7.9.1 shall be charged to Abgenix in addition to the Price. 7.10      Delivery of Product shall be ex-works (Incoterms 2000) the Facility.  Risk in and title to Product shall pass on delivery ex works (Incoterms 2000).  Transportation of Product, whether or not under any arrangements made by LB on behalf of Abgenix, shall be made at the sole risk and expense of Abgenix. 7.11      Unless otherwise agreed, LB shall package and label Product for delivery ex-works (Incoterms 2000).  It shall be the responsibility of Abgenix to inform LB in writing in advance of any special packaging and labelling requirements for Product.  It is also the responsibility of Abgenix to obtain any necessary import or export permits from the relevant authorities and to maintain such permits during the lifetime of this Agreement.  All additional costs and expenses of whatever nature incurred by LB in complying with such special requirements shall be charged to Abgenix in addition to the Price. 7.12      The provisions of this Clause 7 shall be Abgenix sole and exclusive remedy for delays to the delivery of Product or lower than expected yields of Product. 8.          Transportation of Product and Abgenix Tests 8.1        Product shall be supplied and delivered ex works (Incoterms 2000) the Facility. At Abgenix request LB will (acting as agent for Abgenix) arrange the further transportation of Product from LB's premises to the single chosen destination indicated by Abgenix.  All additional costs and expenses of whatever nature incurred by LB in arranging such additional transportation and insurance shall be charged to Abgenix in addition to the Price otherwise payable hereunder. 8.2        Where LB has made arrangements for the transportation of Product, Abgenix shall diligently examine the Product as soon as practicable after receipt.  Notice of all claims (time being of the essence) arising out of: 8.2.1     readily ascertainable damage to or total or partial loss of Product in transit shall be given in writing to LB and the carrier within three (3) days of delivery; or 8.2.2     provided LB has supplied and Abgenix has received a notice confirming the shipment of Product, if Abgenix has not received the Product shipment within ______ after it was scheduled to arrive, Abgenix shall notify LB of the failure of the Product to arrive.  Such notice shall be received by LB within ten (10) days of the date notified to Abgenix as the date of despatch of the Product in question, time being of the essence.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 8.3        Abgenix shall make damaged Product available for inspection and shall comply with the requirements of any insurance policy covering the Product notified by LB to Abgenix.  LB shall offer Abgenix all reasonable assistance (at the cost and expense of Abgenix) in pursuing any claims arising out of the transportation of Product. 8.4        In cases where Abgenix has not requested LB to arrange for transportation of Product LB agrees to provide reasonable co-operation to Abgenix transportation agents identified as such by Abgenix in relation to co-ordinating the collection of Product by the relevant agent, from the Facility. 8.5        Promptly following receipt of a Batch of Product, or any sample intended to be representative thereof, Abgenix shall carry out the Abgenix Tests: 8.5.1     subject to Clause 8.5.2 if the Abgenix Tests show that the Product fails to meet the applicable Specification; or 8.5.2     in the case of Product which is being tested against a draft Specification if the Abgenix Tests show the Product fails to meet the relevant draft Specification and but for the negligent act or default or  wilful misconduct of LB such Product would have conformed to such draft Specification;              Abgenix shall give LB written notice thereof within __________ from the date of delivery of the Product ex-works and shall, unless otherwise directed by LB, return such Product including (if relevant) the remainder of the Batch from which the sample was taken, to LB's premises for further testing.  In the absence of such written notice Product shall be deemed to have been accepted by Abgenix as meeting Specification (or draft Specification as applicable).  If LB is satisfied or it is determined pursuant to Clause 8.6 below that Product returned to LB would , but for the negligent act or default or wilful misconduct by LB in performance of the Services, have met Specification (or draft Specification as applicable), the Batch in question shall be regarded as not having been delivered and may (subject always to the satisfaction of the provisions of Clause 7.3) constitute or contribute towards a Supply Deficiency and entitle Abgenix to the rights associated with a Supply Deficiency.  Abgenix shall in any event become entitled to a credit in respect of any Raw Materials Fee associated with such Batch, to the extent such Raw Materials Fee has fallen due and been paid to LB.              For the avoidance of doubt, during such time as the draft Specification is applicable to the Product, LB shall be obliged only to use its reasonable endeavours to produce Product that meets Specification. 8.6        If there is any dispute concerning whether Product returned to LB would , but for the negligent act or default or wilful misconduct of LB in the performance of the Services, have met the Specification (or, where applicable, the draft Specification) therefor, such dispute shall be referred for decision to an independent expert (acting as an expert and not as an arbitrator) to be appointed by agreement between LB and Abgenix or, in the absence of agreement by operation of the provisions of Clause 20 of this Schedule 4.  The costs of such independent expert shall be borne equally between LB and Abgenix.  The decision of such independent expert shall be in writing and, save for manifest error on the face of the decision, shall be binding on both LB and Abgenix. 8.7        The provisions of Clauses 8.5 and 8.6 shall be the sole remedy available to Abgenix in respect of Product that fails to meet Specification or draft Specification (as applicable) .   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 9.          Steering Committee 9.1        Promptly following the Effective Date the parties hereto shall establish a Steering Committee.  The Steering Committee shall comprise _______ numbers of representatives of each party (not to exceed ____________ representatives of each party) to consider issues arising from and oversee the progress of the Services. 9.2        Without limiting the functions of the Steering Committee set out elsewhere in this Agreement, the role of the Steering Committee shall be to: 9.2.1     assess the status of Process for introduction into the Facility in connection with the Services and monitor the status of the Facility; 9.2.2     determine appropriate modifications to the requested schedule for delivery of Product, as provided in Clause 5.4 of Schedule 4; 9.2.3     resolve disagreements regarding yield deficiencies, pursuant to Clause 7.8 above; 9.2.4     assess the impact of the new cell lines and products requested to be manufactured by LB, pursuant to Clause 10.1; 9.2.5     resolve disputes arising between the parties under this Agreement, as provided in Clause 20; 9.2.6     monitor the progress of the Services; 9.2.7     plan and assess needs for future supply of Product (subject to the provisions set out elsewhere in this Agreement); 9.2.8     discuss and recommend any changes to the Process(es); 9.2.9     acknowledge or agree to conversion of the draft Specification to a Specification, in accordance with Clauses 2.1 and 10.1; and 9.2.10   review and assess the capacity of the Facility, in accordance with Clause 5.1 above. 9.3        The Steering Committee shall meet at such times as the Steering Committee determines necessary to resolve issues arising under the Agreement and to perform its responsibilities under the Agreement, provided that in no event shall the Steering Committee meet less than ________ per calendar year (unless otherwise mutually agreed).  If any issue to be determined by the Steering Committee is not resolved within __________ after submission of the relevant issue to the Steering Committee, such issue shall be referred to the Presidents (or other equivalent) at the time in question, of each party hereto for dispute resolution pursuant to Clause 20 of this Schedule 4. 9.4        The Steering Committee meetings shall alternate between Abgenix designated facility and a facility designated by LB, provided that the Steering Committee may decide to meet at another location or by teleconference as appropriate.  Each party's members of the Steering Committee will alternate responsibility for the generation of minutes setting forth discussions made at each Steering Committee meeting within _________ of the meeting.  The LB representatives shall prepare minutes for the first Steering Committee meeting.  No Steering Committee minutes will become official until agreed upon by the Steering Committee.  If no issue is taken with any set of minutes within ten (10) days of their issue then shall be deemed to have been accepted.  Any dispute at to the accuracy of the minutes shall be addressed under Clause 20 of this Schedule 4.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 9.5        Decisions of the Steering Committee must be unanimous.  In default of agreement on any issue to be determined by the Steering Committee, such issue shall be referred to the Presidents (or other equivalent), at the time in question, of each party hereto for resolution pursuant to Clause 20 of this Schedule 4. 9.6        For the avoidance of doubt, the Steering Committee shall not be empowered to amend the terms of this Agreement. 10.        Process Changes, New Products and Cell Lines 10.1      The terms and conditions of the Agreement are established to provide for the supply of the Products in accordance with the Process(es) as established at the Effective Date.              LB shall not unreasonably refuse any written request from Abgenix to make changes to the Processes (for example changes to the Process(es) which are required by applicable regulatory authority or applicable laws), however no change to the Processes shall be made other than by agreement in writing between authorised signatories of the parties, which signatories shall be identified by the Steering Committee from time to time.              LB shall not unreasonably refuse any written request from Abgenix to make changes to the Specifications or draft Specifications (for example changes to the Specifications and or draft Specifications which are required by an applicable regulatory authority or applicable laws), however no change to the Specification or draft Specification shall be made other than by agreement in writing between the authorised signatories or appointed Regulatory representative of both parties.              In default of either party identifying its authorised representatives for the purpose of this Clause 10.1, changes to the Process, the draft Specification or the Specification must be approved in writing by an officer of the party in question.              Any changes to the Process or to the draft Specification or Specification shall be implemented on terms and conditions to be agreed, which terms and conditions shall inter alia have regard to LB's rights and obligations under Clause 1.7.1 of Schedule 3 hereto, and Clauses 7.9 and 12.1 of this Schedule 4 and may include, but not be limited to, additional programmes of development services (to be performed on terms to be agreed), reasonable alterations in the Price payable for Services (which Price increases shall have regard to LB's costs incurred in implementing such changes and shall ensure that LB's percentage profit margin on revenues receivable by LB under this Agreement shall be maintained and not increased or decreased), and alteration of the Minimum Requirement or the Optimum Capacity. 10.2      Abgenix shall be entitled to request LB to increase the number of or alter the combination of Products produced or Cell Lines utilised under this Agreement.  Any such increase or alteration will be subject to terms and conditions to be agreed and shall have regard to LB's ability to perform its obligations under any pre-existing commercial commitments of LB to Abgenix or any third party.              Introduction of new products or cell lines, or alteration of the combination of the types of products provided hereunder shall be undertaken on terms and conditions to be agreed, which terms and conditions may include, but not be limited to additional programmes of development services, alteration to the Price payable for the Services, and alteration of the Minimum Requirement or the Optimum Capacity.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 11.        Shared Manufacturing 11.1      The parties intend that any Product produced pursuant to this Agreement which is approved by appropriate regulatory body for marketing or sale shall be manufactured under a shared manufacturing arrangement as defined in "Guidance for Industry - Co-operative Manufacturing Arrangements for Licensed Biologicals, draft guidance.   US Department of Health and Human Services, Food & Drug Administration, CBER, August 1999".  A list of the responsibilities of each party (including but not limited to those for raw material procurement and maintenance) under such an arrangement is given in Appendix 2 to this Agreement. 11.2      During such time as LB is performing operations which relate directly to Product, Abgenix shall be entitled to maintain a presence at or adjacent to the Facility which presence shall consist of up to three (3) Abgenix representatives in a single group in attendance for up to three (3) days per calendar month.  Abgenix representatives shall be employees of Abgenix or a consultant of Abgenix which has received previous approval of LB in writing.  The role of the representatives shall be to observe and comment upon LB's performance of the relevant operations.              Any such attendance at the Facility shall be on the understanding that the Abgenix representatives in question shall at all times be required to adhere to the principles of LB Standard Operating Procedure Number 60753C the principles of which are attached hereto as Appendix 3 (or such procedure(s) as supersede(s) or replace(s) all or part of 60753C).              In the event the representatives of Abgenix make an observation on a matter which is a responsibility of Abgenix under Appendix 2 to this Agreement, LB shall be obliged to take note of such observation(s) to the extent the same is (are) reasonable.  Otherwise LB shall, act upon such observations of the employee or consultant in question as LB in its discretion deems appropriate having regard to its obligations hereunder. 12.        Regulatory Support 12.1      LB shall provide regulatory support to Abgenix pursuant to this Agreement to include annual updates to any Biologics Licence for a Product held by LB and the preparation for and hosting of inspections by FDA or Abgenix (in the case of Abgenix inspections, at mutually convenient times).  If regulatory support or ancillary development services is/are required by Abgenix over and above that provided for in Clause 1.7 of Schedule 3 hereto in order to ensure LB's compliance with its obligations under Clause 7.9, this Clause 12 or otherwise,  an additional charge shall be made to Abgenix at LB's standard rate for regulatory services and/or ancillary development services plus disbursements at the time the regulatory and/or ancillary development services are performed.              LB shall inform Abgenix of such charge and obtain Abgenix written consent to such charge before providing such additional support.   LB shall not be responsible for any failure to meet the requirements concerned which is caused by Abgenix unreasonably withholding or delaying its consent to proceed with such support.  In the event the additional regulatory services provided by LB also pertain to products of other LB customers, Abgenix shall not be obligated to pay for such services to the extent they are attributable to such third party products. 12.2      Abgenix shall advise LB of any regulatory submissions regarding Product, which may require responses from LB to questions from the regulatory authorities in a timely fashion having regard to the input which may be required from LB in relation to such regulatory submissions. 12.3      LB shall use all reasonable efforts in the event that it is required to amend the way it manufactures or tests Product, as a result of a change in any statutory or similar legislative requirement after the Effective Date, to give effect to such requirement. In this event the parties shall negotiate in good faith to reach agreement on any revision to the Price and timescales for providing Product. LB shall not be required to amend the Services in any way unless and until the parties have reached such agreement. 13.        Excess Capacity 13.1      Following confirmation of a Binding Order, Abgenix may inform LB in writing it wishes LB to initiate discussions with LB's third party customers regarding the opportunity for such third party customers to purchase services to be provided from any fermentation capacity of the Facility which has not been reserved by Abgenix pursuant to any Binding Order covering the time period in question.  In the event LB elects to proceed with such discussions, prior to LB entering into any commitment to a third party in respect of fermentation services utilising the Facility, LB shall disclose to Abgenix (subject always to its obligations of confidence to the third party in question) the nature of any product which LB intends to introduce to the Facility and Abgenix shall confirm the acceptability or otherwise of the product in question.  Abgenix shall not unreasonably delay its response to such disclosure by LB and, having given authority to LB to offer capacity to third parties, shall not unreasonably withhold its consent to allow LB to use the Facility for third party products.  For the avoidance of doubt Abgenix shall be entitled to withhold its consent to such third party products being produced in the Facility where the manufacture of third party product in question may reasonably be expected to compromise the yield, potency, specification or cGMP status of Abgenix Product produced in the Facility, or in the event LB fails to provide sufficient information to enable Abgenix to make a reasonable decision on such matters.              In the event LB is successful in selling such excess capacity, Abgenix shall be entitled to a refund of the Suite Fee paid by Abgenix for the month(s) or parts of months during which LB's third party customer occupies the Facility.  Such refund shall fall due upon completion of the Services purchased by the third party in question.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 14.        Increase of Optimum Capacity 14.1      In the event Abgenix requests LB to alter its method of operation of the Facility with a view to increasing the Optimum Capacity or the Minimum Requirement other than in the circumstances anticipated by Clauses 5 or 10 of this Schedule 4 above, LB shall give consideration to such request and shall make a written proposal to Abgenix within _______ days of receipt of such request as to how (if at all) it is able to accommodate such request and any alteration in the Price (taking account of, inter alia, LB's loss of Performance Payments which may result) which will arise as a result of such accommodation.  LB shall not unreasonably refuse to accommodate Abgenix requests pursuant to this Clause 14, nor shall LB insist upon unreasonable Price increases in response to such requests. 15.        Price and Terms of Payment 15.1      Abgenix shall pay the Price and any other sums due hereunder in accordance with the Terms of Payment referred to in Schedule 3 and in accordance with the applicable terms of this Schedule 4. 15.2      Unless otherwise indicated in writing by LB, all prices and charges are exclusive of Value Added Tax (which for the avoidance of doubt is not levied upon transactions such as this Agreement between UK and US entities at the Effective Date, but may become payable in the future) or of any other applicable taxes, levies, imposts, duties and fees of whatever nature imposed by or under the authority of any government or public authority, which shall be paid by Abgenix (other than taxes on LB's income).  All invoices are strictly net and payment must be made within _______ days of date of invoice.  Payment shall be made without deduction, deferment, set-off, lien or counterclaim of any nature. 15.3      In default of payment on due date interest shall accrue on any amount overdue at the rate of _________ above the base lending rate from time to time of HSBC bank, interest to accrue on a day to day basis both before and after judgement. 16.        Warranty and Limitation of Liability 16.1      LB warrants that the Services shall be performed in accordance with Clause 7.1 of this Schedule 4 and the Product delivered to Abgenix pursuant to Services performed under Stage 2 of Schedule 2 shall meet Specification when delivered ex works LB's premises (Incoterms 2000) , save in cases where the Specification is stated to be in draft form, when LB shall be obliged only to use its reasonable endeavours to produce Product that meets Specification.              LB has and shall maintain during the term of this Agreement all government permits, including but not limited to health, safety and environmental permits necessary for the conduct of the Services. 16.2      Clause 16.1 is in lieu of all conditions, warranties and statements in respect of the Services and/or the Product whether expressed or implied by statute, custom of the trade or otherwise (including but without limitation any such condition, warranty or statement relating to the description or quality of the Product, its fitness for a particular purpose or use under any conditions whether or not known to LB) and any such condition, warranty or statement is hereby excluded. 16.3      Without prejudice or modification to the terms of Clauses 7.3, 7.4, 7.5, 7.6, 7.8, 8.7, 16.1, 16.2, 16.4 and 16.6, the liability of LB to Abgenix, its permitted assigns and successors in interest, for any loss suffered by Abgenix or its permitted assigns or successors in interest arising as a direct result of a breach of this Agreement or of any other liability (including without limitation misrepresentation (other than fraudulent misrepresentation) and negligence) arising out of the Agreement and Services provided thereunder (including without limitation the production and/or supply of the Product) shall be limited to the payment of damages which shall not exceed _____________ per event directly connected series of events save in the event and to the extent such damages are caused by LB's fraudulent misrepresentation, wilful or intentional breach of this Agreement or wilful, intentional or grossly negligent misconduct in the performance of the Services   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 16.4      Subject to Clause 16.6, LB shall not be liable for the following loss or damage howsoever caused (even if foreseeable or in the contemplation of LB or Abgenix): 16.4.1   loss of profits, business or revenue whether suffered by Abgenix of any other person; 16.4.2   special, indirect or consequential loss, whether suffered by Abgenix or any other person; or 16.4.3   any loss arising from any claim made against Abgenix by any other person (other than to the extent arising directly from the negligent or wilful act or default and subject to the limitations of LB's liability set out elsewhere in this Agreement). 16.5      Abgenix shall indemnify and maintain LB promptly indemnified against all claims, actions, costs, expenses (including court costs and legal fees on a full indemnity basis) or other liabilities whatsoever in respect of: 16.5.1   any liability under the Consumer Protection Act 1987, unless such liability is caused by the negligent act or omission of LB in the production and/or supply of the Product; and 16.5.2   any product liability (other than that referred to in Clause 16.5.1) in respect of Product, unless such liability is caused by the negligent act or omission of LB in the production and/or supply of Product; and 16.5.3   Any negligent or wilful act or omission of Abgenix in relation to the use, processing, storage or sale of the Product. 16.6      Nothing contained in these Standard Terms shall purport to exclude or restrict any liability for death or personal injury resulting directly from negligence by LB in carrying out the Services or any liability for breach of the implied undertakings of LB as to title. 16.7      LB shall obtain and maintain insurance coverage which is customary and consistent with industry standard and is sufficient to cover risks and losses which occur in the course of operating its business.  Without limiting the foregoing, LB shall obtain and maintain insurance which covers business interruption, Abgenix shall obtain and maintain insurance coverage which is customary and consistent with pharmaceutical industry standards. 16.8      Subject to Clause 16.9, in the event Abgenix, in its discretion, recalls Product (voluntarily or by order of a regulatory body) or is required to respond to enquiries of regulatory bodies relating to the Services hereunder, LB agrees to provide reasonable co-operation to Abgenix at Abgenix sole expense, in effecting matters flowing from such recall or enquiries in so far as such recall relates to Product produced by LB hereunder.  Any assistance to be provided by LB in response to enquiries of regulatory authorities shall be provided on terms to be agreed at LB's standard financial rates for providing such assistance. 16.9      Subject always to the limitations of LB's liability to Abgenix set out in this Agreement, LB agrees to reimburse Abgenix for reasonable, direct, documented expenses incurred by Abgenix as a result of recall of Product, but only to the extent such recall is mandated by law or by an applicable regulatory body and only to the extent LB's negligence or wilful misconduct in performing the Services has caused such recall to be required. 16.10    The obligations of LB and Abgenix under this Clause 16 shall survive the termination for whatever reason of the Agreement.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 17.        Abgenix Information, LB Know-How and Patent Rights 17.1      Abgenix acknowledges that LB Know-How and LB acknowledges that Abgenix Information with which it is supplied by the other pursuant to the Agreement is supplied, subject to Clause 17.4, in circumstances imparting an obligation of confidence and each agrees to keep such LB Know-How or such Abgenix Information secret and confidential and to respect the other's proprietary rights therein and not without the other party's prior written consent at any time for any reason whatsoever to disclose or permit such LB Know-How or such Abgenix Information to be disclosed to any third party save as expressly provided herein. 17.2      Abgenix and LB shall each procure that all their respective employees, consultants and contractors who are granted access to confidential LB Know-How or confidential Abgenix Information by the proprietor party shall be subject to the same obligations of confidence as the principals pursuant to Clause 17.1 and shall enter into secrecy agreements in support of such obligations.  Insofar as this is not reasonably practicable, the principals shall take all reasonable steps to ensure that any such employees, consultants and contractors are made aware of such obligations. 17.3      LB and Abgenix each undertake not to disclose or permit to be disclosed to any third party, or otherwise make use of or permit to be made use of, any trade secrets or confidential information relating to the technology, business affairs or finances of the other, any subsidiary, holding company or subsidiary or any such holding company of the other, or of any suppliers, agents, distributors, licensees or other customers of the other which comes into its possession under this Agreement. 17.4      The obligations of confidence referred to in this Clause 17 shall not extend to any information which: 17.4.1   is or becomes generally available to the public otherwise than by reason of a breach by the recipient party of the provisions of this Clause 17; 17.4.2   is known to the recipient party and is at its free disposal prior to its receipt from the other; 17.4.3   is subsequently disclosed to the recipient party without being made subject to an obligation of confidence by a third party; 17.4.4   LB or Abgenix may be required to disclose under any statutory, regulatory, stock exchange or similar legislative requirement, subject to the imposition of obligations of secrecy wherever possible in that relation; or 17.4.5   the receiving party can demonstrate by competent evidence was independently discovered by the recipient party or its employee without reference to any information received from the other party hereto. 17.5      Abgenix acknowledges that: 17.5.1   LB represents that LB Know-How and the LB Patent Rights are owned by LB or LB is otherwise entitled thereto and that LB has the right to enter into this Agreement; and   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 17.5.2   Save as expressly provided herein or pursuant to a separate agreement between the parties existing now or entered into on the future Abgenix shall not by virtue of this Agreement at any time have any right, title, licence or interest in or to LB Know-How, the LB Patent Rights or any other intellectual property rights relating to the Process which are owned by LB or to which LB is otherwise entitled. 17.6      LB acknowledges that: 17.6.1   Abgenix has undertaken that Abgenix Information and the Abgenix Patent Rights are owned by Abgenix or Abgenix is otherwise entitled thereto and that Abgenix has the right to enter into this Agreement; and 17.6.2   save as expressly provided herein or pursuant to separate agreement or separate rights granted to LB existing now or in the future LB shall not at any time have any right, title, licence or interest in or to Abgenix Information, the Abgenix Patent Rights or any other intellectual property rights owned by Abgenix or to which Abgenix is otherwise entitled. 17.7      Without prejudice to any obligations of LB in existence at the Effective Date, LB agrees that during the term of this Agreement, it will not enter into any exclusive manufacturing arrangements relating to manufacture of antibodies with any third party which would prevent LB from giving full and fair consideration to requests from Abgenix under Clause 10.2 to introduce new antibody products to the Facility. 17.8      The obligations of LB and Abgenix under this Clause 17 shall survive the termination for whatever reason of the Agreement. 18.        Termination 18.1      Abgenix shall be entitled to terminate the Agreement by giving notice in writing for any reason, such notice to be for a period of not less than the balance remaining of the then agreed Term of this Agreement.  In the event Abgenix terminates this Agreement pursuant to this clause, Abgenix shall (subject to the operation of Clause 18.3 below) pay LB a termination fee as follows: 18.1.1   the Suite Fee, inflated or increased as set out in Clauses 1.5 and 1.6 of Schedule 3 hereto, during the period from date of issue of the notice to terminate this Agreement until expiry of the notice period; 18.1.2   the Raw Materials Fee in respect of Raw Materials irrecoverably committed to production of any Batches of Product in Process or scheduled to be in production at the date of receipt of notice of termination (to the extent the same has not been paid). 18.2      18.2.1   Payment in respect of Clause 18.1.1 above shall continue to fall due in accordance with the provisions of Clause 1.6.1 of Schedule 3. 18.2.2   Payment in respect of Clause 18.1.2 shall be payable forthwith upon issue of notice of termination hereunder.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 18.3      Upon service of notice to LB that Abgenix wishes to terminate the Agreement pursuant to Clause 18.1, Abgenix shall be entitled to request in writing that LB use reasonable endeavours to seek an alternative customer or customers to purchase capacity which is reserved for the Batches cancelled by Abgenix and in respect of which a termination fee will accrue hereunder.              LB shall use reasonable endeavours to mitigate Abgenix obligations under Clause 18.1 above, which endeavours shall comprise the following:              If, by contacting in writing such of its then current customer base or such other parties as LB believes might wish to purchase such capacity or such other third parties as are recommended by Abgenix, LB is able to sell such capacity at a price which is equivalent to that which would otherwise have been paid by Abgenix had the capacity been fully utilised by Abgenix requirements, and such capacity is acquired by the third party customer in question in addition to capacity previously contracted for by the customer in question (i.e. such capacity is not filled by rescheduling existing commitments by that or any other customer), Abgenix shall not be required to compensate LB in respect of capacity so purchased by such customer, calculated on the same basis as the credit for Suite Fee anticipated by Clause 13.1.  In the event LB is only able to sell such capacity to such third party(ies) at a price which is less than would otherwise be paid by Abgenix (as referred to above) Abgenix obligation to make payment to LB shall be reduced pro rata to account for the payments received from such third party(ies), but shall not otherwise be reduced.              LB shall not be obliged to undertake any further endeavours in respect of mitigation of payments due as a result of termination under Clause 18.1 above. 18.4      In addition to Abgenix rights under Clause 18.1 LB and Abgenix may each terminate the Agreement forthwith notice in writing to the other upon the occurrence of any of the following events: 18.4.1   if the other commits a breach of the Agreement which (in the case of a breach capable of remedy) is not remedied within thirty (30) days of the receipt by the other of notice identifying the breach and requiring its remedy; or 18.4.2   if the other ceases for any reason to carry on business or compounds with or convenes a meeting of its creditors or has a receiver or manager appointed in respect of all or any part of its assets or is the subject of an application for an administration order or of any proposal for a voluntary arrangement or enters into liquidation (whether compulsorily or voluntarily) or undergoes any analogous act or proceedings under foreign law. 18.5      Upon the termination of the Agreement for whatever reason: 18.5.1   LB shall promptly return all Abgenix Information to Abgenix (to the extent legal or regulatory requirements allow) and shall dispose of or return to Abgenix the Abgenix Materials and any materials therefrom, as directed by Abgenix; 18.5.2   Abgenix shall promptly return to LB (to the extent legal and regulatory requirements allow) all LB Know-How it has received from LB; 18.5.3   Subject to any rights granted to Abgenix as a result of Clauses 7.6 or 18.6 Abgenix shall not thereafter use or exploit the LB Patent Rights or the LB Know-How in any way whatsoever.  No licences shall arise or be deemed to have arisen hereunder either by default, estoppel or otherwise save for those expressly set out herein; 18.5.4   LB may thereafter use or exploit the LB Patent Rights or the LB Know-How in any way whatsoever without restriction; and   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 18.5.5   LB and Abgenix shall do all such acts and things and shall sign and execute all such deeds and documents as the other may reasonably require to evidence compliance with this Clause 18.5. 18.6      In the event that during the term of or upon expiry of this Agreement, Abgenix notifies LB of its wish to take a licence from LB to utilise the Process or any part thereof for any particular Product either at its own facility or that of a third party co-marketing partner of Abgenix which third party does not offer contract manufacturing services in the ordinary course of its business, the parties shall negotiate in good faith the terms upon which such a licence may be granted.  Such negotiations shall be based on LB's standard terms for the grant of such licences and the transfer of such technology applying at the time in question.              For the avoidance of doubt this provision shall not constitute the grant of any licence or the right to any licence.  This provision is a statement of intent to conduct good faith commercial negotiations at a date to be decided. 18.7      Termination of the Agreement for whatever reason shall not affect the accrued rights of either LB or Abgenix arising under or out of this Agreement and all provisions which are expressed to survive the Agreement shall remain in full force and effect. 19.        Force Majeure 19.1      If either party is prevented or delayed in the performance of any of its obligations under the Agreement by Force Majeure and shall give written notice thereof to the other specifying the matters constituting Force Majeure together with such evidence as can reasonably be given and specifying the period for which it is estimated that such prevention or delay will continue, that party shall be excused from the performance or the punctual performance of such obligations as the case may be from the date of such notice for so long as such cause of prevention or delay shall continue. 19.2      For the purposes of this Agreement, Force Majeure shall mean causes beyond the reasonable control of either party including without limitation, acts of God (including but not limited to earthquake), laws or regulations of any government or agency thereof, war, civil commotion, damage to or destruction of production facilities or materials, scientific or technical events, labour disturbances (whether or not any such labour disturbance is within the power of the affected party to settle), epidemic, and failure of suppliers, public utilities or common carriers. 20.        Governing Law, Jurisdiction and Enforceability 20.1      The construction, validity and performance of the Agreement shall be governed by the laws of England, to the jurisdiction of whose courts LB and Abgenix submit.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 20.2      In the event of the failure on the part of any required representative of the parties hereto or the Steering Committee to resolve any matter required by this Agreement to be agreed, or in the event of any other dispute or claim arising between the parties under this Agreement, the parties shall attempt by good faith negotiations to resolve such dispute or claim between them by reference to the President (or equivalent) of each party at the time in question who shall negotiate in good faith during a period of not less than sixty (60) days to resolve such matter, dispute or claim.  In the event the parties are unable to resolve such dispute or claim within the required time, such claim or dispute will be referred to Alternative Dispute Resolution by such recognised organisation for Alternative Dispute Resolution as the parties agree and the parties shall attempt in good faith to resolve such claim or dispute with the assistance of such organisation.  During the conduct of negotiations between the parties or Alternative Dispute Resolution, the rights and obligations (subject to Clause 19) of the parties in relation to all other matters hereunder shall continue.              Both parties reserve their rights in the event no agreed resolution can be reached in the Alternative Dispute Resolution procedure and neither party shall be precluded from taking such interim formal steps as may be considered necessary to protect such party's position while the dispute resolution procedure is pending or continuing. 20.3      No failure or delay on the part of either LB or Abgenix to exercise or enforce any rights conferred on it by the Agreement shall be construed or operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege or further exercise thereof operate so as to bar the exercise or enforcement thereof at any time or times thereafter. 20.4      The illegality or invalidity of any provision (or any part thereof) of the Agreement or these Standard Terms shall not affect the legality, validity or enforceability of the remainder of its provisions or the other parts of such provision as the case may be. 21.        Miscellaneous 21.1      Neither party shall be entitled to assign, transfer, charge or in any way make over the benefit and/or the burden of this Agreement without the prior written consent of the other which consent shall not be unreasonably withheld or delayed, save that both parties shall be entitled without the prior written consent of the other to assign, transfer, charge, sub-contract, deal with or in any other manner make over the benefit and/or burden of this Agreement to an Affiliate or to any 50/50 joint venture company of which that party is the beneficial owner or fifty per cent (50%) of the issued share capital thereof or to any company with which that party may merge or to any company to which that that party may transfer its assets and undertakings. 21.2      The text of any press release or other communication to be published by or in the media concerning the subject matter of the Agreement shall require the prior written approval of LB and Abgenix. 21.3      The Agreement embodies the entire understanding of LB and Abgenix relating to the Services and the subject matter connected therewith and there are no promises, terms, conditions or obligations, oral or written, expressed on implied, other than those contained in the Agreement.  The terms of the Agreement shall supersede all previous agreements (if any) which may exist or have existed between LB and Abgenix relating to the Services.   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission. 21.4      Each party to this Agreement acts as an independent contractor and nothing in this Agreement shall be construed to create a relationship of partnership, principal and agent, or joint venture between the parties. 21.5      It is expressly understood by Abgenix that Abgenix rights of assignment apply solely in relation to the Services set out in this Agreement and shall not apply in respect of any separate Services or to any agreement relating to LB Know-How, Patent Rights or other technology vested in or licensed to LB, unless otherwise agreed in writing. 21.6      This Agreement is personal to the parties hereto and has not been entered into on behalf of or created any rights in favour of any person pursuant to the Contracts (Rights of Third Parties) Act 1999. APPENDIX 1 TO SCHEDULE 4 ____________ APPENDIX 2 TO SCHEDULE 4 ____________   APPENDIX 3 TO SCHEDULE 4 ____________   The confidential portion represented by "____" has been omitted and filed separately with the Securities and Exchange Commission.

EXHIBIT 10.126   CONSULTING SERVICES AGREEMENT THIS CONSULTING SERVICES AGREEMENT is entered into effective as of the 1st day of October, 2001 (the "Effective Date"), by and between Vision Twenty-One, Inc. (the "Company") and Ellen Gordon (the "Consultant"). The Company and the Consultant agree to the following:  Retention as Consultant. The Company hereby retains Consultant, and the Consultant hereby agrees to render consulting services to the Company, upon the terms and conditions set forth herein. Duties. The Consultant agrees that she will, as an independent contractor, provide such services to the Company with respect to the information systems and related activities of the Company and its subsidiaries as are assigned to her by the Chief Executive Officer of the Company from time to time (collectively, the " Projects "). The Consultant shall be provided with written notice of each Project, including the nature and scope of the Project, within a reasonable period of time prior to the requested performance of each Project. Prior to commencement of a specific Project, the Consultant shall provide the Company with an estimate of the number of hours anticipated to complete such Project (the " Individual Project Time Estimate "). If, during the pendency of a particular Project, the Consultant determines that the actual number of hours needed to complete such Project are expected to exceed the Individual Project Time Estimate, the Consultant shall notify the Company of the anticipated increase in the Individual Project Time Estimate and obtain the Company's approval to provide services in excess of the Individual Project Time Estimate. Independent Contractor Status. The parties recognize that Consultant is an independent contractor and not an employee, agent or representative of the Company or its subsidiaries, and that the Company will not incur any liability as a result of the Consultant's actions. Consultant shall at all times disclose that she is an independent contractor of the Company and she shall not represent to any third party that she is an employee, agent or representative of the Company other than as expressly stated herein. The Company shall not withhold any funds from the Consultant for tax or other governmental purposes, and the Consultant shall be responsible for the payment of same. Consultant shall not be entitled to receive any employment benefits offered to employees of the Company, including workers' compensation coverage. The Company shall not exercise control over the Consultant. Compensation. In consideration for the services rendered by Consultant pursuant to paragraph 2 hereof, the Company hereby agrees to: (i) pay the Consultant the amount of $140.00 per hour; and (ii) waive the mitigation provision set forth in the last sentence of Section 5 (a)(1) of the Amended And Restated Employment Agreement dated May 30, 2001 among the Company, Consultant, MEC Health Care, Inc. and Block Vision, Inc. (the " Prior Employment Agreement ") with respect to any compensation paid to Consultant by the Company pursuant to this paragraph 4. Consultant will invoice the Company periodically, at Consultant's convenience. All invoices shall be subject to review and approval by the Company's Chief Financial Officer prior to payment, taking into account all applicable Individual Project Time Estimates. All approved invoices shall be paid within fifteen (15) days of the Company's receipt of same. If all or any part of an invoice is not approved by the Chief Financial Officer, the Chief Financial Officer shall notify Consultant within fifteen (15) days of the Company's receipt of such invoice and the parties shall use their best efforts to resolve the dispute. Term. The term of this Agreement shall commence on the Effective Date and shall continue until June 30, 2002, unless sooner terminated by either party pursuant to paragraph 6 hereof. Termination. (a) Either party shall have the right to terminate this Agreement upon at least thirty (30) days prior written notice to the other party, and such termination shall be effective as of the date set forth in such notice, or such other date as is mutually agreed to by the parties. (b) In the event of a material breach, the non-breaching party may terminate this Agreement upon ten (10) days prior written notice (the "Notice Period") to the breaching party. The party claiming the right to terminate thereunder shall set forth in the notice the facts underlying the claim that the other party is in breach of this Agreement. If the breach is remedied prior to the expiration of the Notice Period, the Agreement shall continue in effect until otherwise terminated pursuant to this paragraph 6. Material breach includes, but is not limited to, a failure by either party to perform, in whole or in part, any provision contained in this Agreement. (c) The Company shall have the right to terminate this Agreement at any time, if: (i) Consultant engages in fraudulent conduct which involves the property of the Company or its subsidiaries; (ii) Consultant is convicted of, or pleads nolo contendere with respect to any criminal offense or any activity involving moral turpitude; (iii) Consultant shall have engaged in any activity which would disrupt or hinder the Company's business or harm the integrity of the Company or its reputation in the industry. Upon termination of this Agreement pursuant to this paragraph 6 (c), the Company shall have no obligation to make any further payments to Consultant under paragraph 4. (d) This Agreement may be terminated at any time upon the mutual consent of the Company and Consultant. Company Property. Any document or other material prepared by the Consultant, alone or with others in the course of providing services hereunder specific to the Company or its affiliates, including, with out limitation, any source codes for the Projects, shall be the property of the Company. Upon the termination or expiration of this Agreement, Consultant shall promptly return to the Company all files, reports, documents or other records or materials of any kind pertaining to the Company or any of its affiliates. Confidentiality. The Consultant agrees that she shall keep all confidential and proprietary information of the Company or relating to the businesses of the Company and its subsidiaries (including, but not limited to, information regarding the Company's affiliates, clients, pricing policies, methods of operation, proprietary computer programs and trade secrets) confidential, and that she will not (except with the Company's prior written consent), during the term of this Agreement or thereafter, disclose such confidential information to any person, firm, corporation, association or other entity (except the Company) under any circumstances during or after the term of this Agreement. The foregoing shall not apply to any information which is already in the public domain, or is generally disclosed by the Company or is otherwise in the public domain at the time of disclosure. The provisions of this paragraph 8 are cumulative of and are not intended to replace or supersede the provisions regarding the protection of confidential information set forth in Section 9 of the Prior Employment Agreement. Adherence to Laws. Consultant agrees to comply with all federal, state and local laws and regulations applicable to any activities carried out while providing consulting services to the Company under the provisions of this Agreement. Conflict of Interest. Consultant shall exercise reasonable care and diligence to prevent any actions or conditions which could result in a conflict with the best interests of the Company. Entire Agreement. This Agreement contains all of the terms and conditions agreed upon by the parties and supersedes all other agreements, expressed or implied, regarding the subject matter hereof and supersedes any prior oral understandings of the parties. Any amendments to this Agreement must be in writing and executed by both parties to this Agreement. IN WITNESS WHEREOF, this Agreement has been duly executed effective as of the day and year indicated above. VISION TWENTY-ONE, INC. CONSULTANT     /s/ Mark Gordon By:____________________________ Name: Mark Gordon Title: Chief Executive Officer /s/ Ellen Gordon ___________________________ Ellen Gordon

SECOND AMENDMENT TO CREDIT AGREEMENT              THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into as of June 30, 2001, by and between DATALINK CORPORATION, a Minnesota Corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"). RECITALS              WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of June 30, 2000, as amended from time to time ("Credit Agreement").              WHEREAS, Bank and Borrower have agreed to certain changes in the terms and conditions set forth in the Credit Agreement and have agreed to amend the Credit Agreement to reflect said changes.              NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Credit Agreement shall be amended as follows:              1.          Section 1.2 is hereby amended by deleting "June 30, 2001" as the last day on which Bank will make advances under the Line of Credit A, and by substituting for said date "August 31, 2001," with such change to be effective upon the execution and delivery to Bank of a promissory note substantially in the form of Exhibit A attached hereto (which promissory note shall replace and be deemed the Revolving Line of Credit Note defined in and made pursuant to the Credit Agreement) and all other contracts, instruments and documents required by Bank to evidence such change.                    2.          Section 2.2 is hereby amended by deleting "June 30, 2001" as the last day on which Bank will make advances under the Line of Credit B, and by substituting for said date "August 31, 2001," with such change to be effective upon the execution and delivery to Bank of a promissory note substantially in the form of Exhibit B attached hereto (which promissory note shall replace and be deemed the Revolving Line of Credit Note defined in and made pursuant to the Credit Agreement) and all other contracts, instruments and documents required by Bank to evidence such change.                    3.          Sections 4.2, 4.3, 4.4, and 4.5 are each hereby deleted in their entirety, and the following substituted therefor:         4.2 Interest Rate Options For Revolving Notes A and B.  Revolving Line of Credit Note A and Revolving Line of Credit Note B permit the Borrower to fix an interest rate for a time period and principal amount agreeable to the Bank and the Borrower, based on (1) the Prime Rate (as defined in each note), floating, minus 1.0% (the “Prime Rate Option”), which shall apply at all times whenever the rate has not otherwise been fixed by the agreement of the Bank and the Borrower, or (2) an interest rate or rates described in each note that is derived from and available to the Bank on international money markets for a similar time period and principal amount, which rates are more fully described in each note, plus a margin that, with respect to Revolving Line of Credit Note A, will vary based upon the Borrower’s financial performance as provided in Section 4.3 of this Agreement, and, with respect to Revolving Line of Credit Note B, of 1.10% (the “LIBOR Interest Rate Option”).           4.3 Performance Based Rate Pricing For Line A.  Following its review of the Borrower’s interim financial statements and quarterly Compliance Certificate, the Bank shall adjust the LIBOR Interest Rate Option margin applicable to Revolving Note A to a margin that is based on the following performance criteria:           (a) Effective the first day of the calendar quarter in which the Borrower’s Funded Debt to EBITDA Ratio, as defined in Section 7.2(d), is determined by the Bank to be less than 0.55 to 1.0, the margin shall be 1.10%.             (b) Effective the first day of the calendar quarter in which the Borrower’s Funded Debt to EBITDA Ratio, as defined in Section 7.2(d), is determined by the Bank to be at least 0.55 to 1.0 but no more than 1.10 to 1.0, the margin shall be 1.30%.             (c) Effective the first day of the calendar quarter in which the Borrower’s Funded Debt to EBITDA Ratio, as defined in Section 7.2(d), is determined by the Bank to be more than 1.10 to 1.0, but not more than 1.65 to 1.0 the margin shall be 1.50%, unless the default rate of interest set forth in Section 4.5 of this Agreement is applicable.             4.4 Effective Date of Performance Based Pricing Changes.  Any margin change described above shall become effective on the first day of the calendar quarter following the Bank’s receipt of the Borrower’s interim financial statements and Compliance Certificate as provided in Sections 7.1(b) and 7.1(c) of this Agreement.  Following any event of default defined described in Section 8 of this Agreement, and regardless of whether or not it has been accelerated, Revolving Line of Credit Note A shall commence accruing interest at the rate described in Section 4.5 herein.           4.5 Default Rate of Interest. Following the occurrence of any event of default as defined in Section 8 of the Agreement, or following the maturity of each of Line A and Line B and the acceleration of Revolving Line of Credit Note A and Revolving Line of Credit Note B, the interest rate applicable to Revolving Line of Credit Note A and Revolving Line of Credit Note B shall be increased to annual rate equal to the Prime Rate plus 2.0%, floating.  This rate of interest shall commence as of the date that the Bank in its sole discretion determines that the last event constituting the event of default takes place, which period shall include any applicable grace period, if any, and shall continue through the last day of the fiscal quarter in which the event of default has been cured. The rate shall also apply in the event that Line A and Line B have matured and that Revolving Not Revolving Line of Credit Note A and Revolving Line of Credit Note B have been accelerated.             The Bank's assessment or acceptance of interest paid at an increased rate shall not constitute a waiver of any default under the terms of the Agreement and Revolving Line of Credit Note A and Revolving Line of Credit Note B, or a waiver of the Bank's right to terminate Line A and Line B and accelerate or demand payment of Revolving Line of Credit Note A or Revolving Line of Credit Note B.”                      4.          Except as specifically provided herein, all terms and conditions of the Credit Agreement remain in full force and effect, without waiver or modification.  All terms defined in the Credit Agreement shall have the same meaning when used in this Amendment.  This Amendment and the Credit Agreement shall be read together, as one document.                    5.          Borrower hereby remakes all representations and warranties contained in the Credit Agreement and reaffirms all covenants set forth therein.  Borrower further certifies that as of the date of this Amendment there exists no Event of Default as defined in the Credit Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute any such Event of Default.                    IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first written above.     WELLS FARGO BANK, DATALINK CORPORATION   NATIONAL ASSOCIATION       By: /s/ Daniel J. Kinsella --------------------------------------------------------------------------------   By: /s/ Jason Paulnock --------------------------------------------------------------------------------   Daniel J. Kinsella     Jason Paulnock   Chief Financial Officer     Vice President   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- THIS EXHIBIT "A" IS ATTACHED TO AND MADE A PART OF A SECOND AMENDMENT TO CREDIT AGREEMENT DATED JUNE 30, 2001, EXECUTED BY DATALINK CORPORATION, A MINNESOTA CORPORATION (BORROWER) AND WELLS FARGO BANK, NATIONAL ASSOCIATION (BANK).   INITIAL HERE -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   REVOLVING LINE OF CREDIT NOTE A $10,000,000.00 Minneapolis, Minnesota   June 30, 2001              FOR VALUE RECEIVED, the undersigned DATALINK CORPORATION ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at Minn RCBO-REG Coml Mpls Mid Mkt, Sixth & Marquette, Minneapolis, MN 55479, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Ten Million Dollars ($10,000,000.00), or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein. DEFINITIONS:              As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:              (a)         "Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in Minnesota are authorized or required by law to close.              (b)        "Fixed Rate Term" means a period commencing on a Business Day and continuing for 1, 2, 3 or 4 months, as designated by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to LIBOR; provided however, that no Fixed Rate Term may be selected for a principal amount less than One Hundred Thousand Dollars ($100,000.00); and provided further, that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof.  If any Fixed Rate Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day.              (c)         "LIBOR" means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the following formula:                             LIBOR = Base LIBOR     --------------------------------------------------------------------------------     100% - LIBOR Reserve Percentage                  (i)          "Base LIBOR" means the rate per annum for United States dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the number of days in such Fixed Rate Term and in an amount approximately equal to the principal amount to which such Fixed Rate Term applies.  Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.              (ii)         "LIBOR Reserve Percentage" means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for expected changes in such reserve percentage during the applicable Fixed Rate Term.              (d)        "Prime Rate" means at any time the rate of interest most recently announced within Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank's base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after its announcement in such internal publication or publications as Bank may designate. INTEREST:              (a)         Interest.  The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) either (i) at a fluctuating rate per annum one percent (1.00%) below the Prime Rate in effect from time to time, or (ii) at a fixed rate per annum determined by Bank to be equal to the margin described in Section 4.3 of the Agreement plus LIBOR in effect on the first day of the applicable Fixed Rate Term.  When interest is determined in relation to the Prime Rate, each change in the rate of interest hereunder shall become effective on the date each Prime Rate change is announced within Bank.  With respect to each LIBOR selection hereunder, Bank is hereby authorized to note the date, principal amount, interest rate and Fixed Rate Term applicable thereto and any payments made thereon on Bank's books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.  The initial margin applicable to LIBOR based borrowings as of the date of this Note shall be _______ %.              (b)        Selection of Interest Rate Options.  At any time any portion of this Note bears interest determined in relation to LIBOR, it may be continued by Borrower at the end of the Fixed Rate Term applicable thereto so that all or a portion thereof bears interest determined in relation to the Prime Rate or to LIBOR for a new Fixed Rate Term designated by Borrower.  At any time any portion of this Note bears interest determined in relation to the Prime Rate, Borrower may convert all or a portion thereof so that it bears interest determined in relation to LIBOR for a Fixed Rate Term designated by Borrower.  At such time as Borrower requests an advance hereunder or wishes to select a LIBOR option for all or a portion of the outstanding principal balance hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest rate option selected by Borrower; (ii) the principal amount subject thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed Rate Term.  Any such notice may be given by telephone (or such other electronic method as Bank may permit) so long as, with respect to each LIBOR selection, (A) if requested by Bank, Borrower provides to Bank written confirmation thereof not later than three (3) Business Days after such notice is given, and (B) such notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate Term, or at a later time during any Business Day if Bank, at it's sole option but without obligation to do so, accepts Borrower's notice and quotes a fixed rate to Borrower.  If Borrower does not immediately accept a fixed rate when quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a redetermination by Bank of the applicable fixed rate.  If no specific designation of interest is made at the time any advance is requested hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection for such advance or the principal amount to which such Fixed Rate Term applied.              (c)         Taxes and Regulatory Costs.  Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR to the extent they are not included in the calculation of LIBOR.  In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.              (d)        Payment of Interest.  Interest accrued on this Note shall be payable on the last day of each month, commencing July 31, 2001.              (e)         Default Interest.  At any time that the Borrower’s Funded Debt to EBITDA Ratio, as described in Section 4.3 of the Agreement, is in excess of 1.65 to 1.0, or at any time from and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to two percent (2.0%) above the rate of interest from time to time applicable to this Note. BORROWING AND REPAYMENT:              (a)         Borrowing and Repayment.  Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above.  The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for any Borrower, which balance may be endorsed hereon from time to time by the holder.  The outstanding principal balance of this Note shall be due and payable in full on August 31, 2001.              (b)        Advances.  Advances hereunder, to the total amount of the principal sum stated above, may be made by the holder at the oral or written request of (i) _____________________ or ________________________ or _______________________, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any deposit account of any Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of each Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account.  The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by any Borrower.              (c)         Application of Payments.  Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof.  All payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Prime Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to LIBOR, with such payments applied to the oldest Fixed Rate Term first. PREPAYMENT:              (a)         Prime Rate.  Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Prime Rate at any time, in any amount and without penalty.              (b)         LIBOR.  Borrower may prepay principal on any portion of this Note which bears interest determined in relation to LIBOR at any time and in the minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however, that if the outstanding principal balance of such portion of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof.  In consideration of Bank providing this prepayment option to Borrower, or if any such portion of this Note shall become due and payable at any time prior to the last day of the Fixed Rate Term applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such Fixed Rate Term matures, calculated as follows for each such month:   (i) Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the Fixed Rate Term applicable thereto.         (ii) Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.         (iii) If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above.       Each Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities.  Each Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank.  If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum two percent (2.00%) above the Prime Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed).  Each change in the rate of interest on any such past due prepayment fee shall become effective on the date each Prime Rate change is announced within Bank. EVENTS OF DEFAULT:             This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of June 30, 2000, as amended from time to time (the "Credit Agreement").  Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an "Event of Default" under this Note. MISCELLANEOUS:             (a)          Remedies.  Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by each Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate.  Each Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity.             (b)          Obligations Joint and Several.  Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.             (c)          Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of Minnesota. IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.   Datalink Corporation   By: /s/ Daniel J. Kinsella   --------------------------------------------------------------------------------     Daniel J. Kinsella   Chief Financial Officer   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- THIS EXHIBIT "B" IS ATTACHED TO AND MADE A PART OF A SECOND AMENDMENT TO CREDIT AGREEMENT DATED JUNE 30, 2001, EXECUTED BY DATALINK CORPORATION, A MINNESOTA CORPORATION (BORROWER) AND WELLS FARGO BANK, NATIONAL ASSOCIATION (BANK).   INITIAL HERE -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- REVOLVING LINE OF CREDIT NOTE B $5,000,000.00 Minneapolis, Minnesota   June 30, 2001              FOR VALUE RECEIVED, the undersigned DATALINK CORPORATION ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at Minn RCBO-REG Coml Mpls Mid Mkt, Sixth & Marquette, Minneapolis, MN 55479, Minnesota, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Five Million Dollars ($5,000,000.00), or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein. DEFINITIONS:              As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:              (a)         "Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in Minnesota are authorized or required by law to close.              (b)        "Fixed Rate Term" means a period commencing on a Business Day and continuing for 1, 2, 3 or 4 months as designated by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to LIBOR; provided however, that no Fixed Rate Term may be selected for a principal amount less than One Hundred Thousand Dollars ($100,000.00); and provided further, that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof.  If any Fixed Rate Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day.              (c)         "LIBOR" means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the following formula: LIBOR = Base LIBOR     --------------------------------------------------------------------------------     100% - LIBOR Reserve Percentage                (i)          "Base LIBOR" means the rate per annum for United States dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the number of days in such Fixed Rate Term and in an amount approximately equal to the principal amount to which such Fixed Rate Term applies.  Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.              (ii)         "LIBOR Reserve Percentage" means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for expected changes in such reserve percentage during the applicable Fixed Rate Term.              (d)        "Prime Rate" means at any time the rate of interest most recently announced within Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank's base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after its announcement in such internal publication or publications as Bank may designate. INTEREST:              (a)         Interest.  The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) either (i) at a fluctuating rate per annum one percent (1.00%) below the Prime Rate in effect from time to time, or (ii) at a fixed rate per annum determined by Bank to be one and one hundredths percent (1.10%) above LIBOR in effect on the first day of the applicable Fixed Rate Term.  When interest is determined in relation to the Prime Rate, each change in the rate of interest hereunder shall become effective on the date each Prime Rate change is announced within Bank.  With respect to each LIBOR selection hereunder, Bank is hereby authorized to note the date, principal amount, interest rate and Fixed Rate Term applicable thereto and any payments made thereon on Bank's books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.              (b)        Selection of Interest Rate Options.  At any time any portion of this Note bears interest determined in relation to LIBOR, it may be continued by Borrower at the end of the Fixed Rate Term applicable thereto so that all or a portion thereof bears interest determined in relation to the Prime Rate or to LIBOR for a new Fixed Rate Term designated by Borrower.  At any time any portion of this Note bears interest determined in relation to the Prime Rate, Borrower may convert all or a portion thereof so that it bears interest determined in relation to LIBOR for a Fixed Rate Term designated by Borrower.  At such time as Borrower requests an advance hereunder or wishes to select a LIBOR option for all or a portion of the outstanding principal balance hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest rate option selected by Borrower; (ii) the principal amount subject thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed Rate Term.  Any such notice may be given by telephone (or such other electronic method as Bank may permit) so long as, with respect to each LIBOR selection, (A) if requested by Bank, Borrower provides to Bank written confirmation thereof not later than three (3) Business Days after such notice is given, and (B) such notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate Term, or at a later time during any Business Day if Bank, at it's sole option but without obligation to do so, accepts Borrower's notice and quotes a fixed rate to Borrower.  If Borrower does not immediately accept a fixed rate when quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a redetermination by Bank of the applicable fixed rate.  If no specific designation of interest is made at the time any advance is requested hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection for such advance or the principal amount to which such Fixed Rate Term applied.              (c)         Taxes and Regulatory Costs.  Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR to the extent they are not included in the calculation of LIBOR.  In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.              (d)        Payment of Interest.  Interest accrued on this Note shall be payable on the last day of each month, commencing July 31, 2001.              (e)         Default Interest.  From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to two percent (2.0%) above the rate of interest from time to time applicable to this Note. BORROWING AND REPAYMENT:              (a)         Borrowing and Repayment.  Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above.  The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for any Borrower, which balance may be endorsed hereon from time to time by the holder.  The outstanding principal balance of this Note shall be due and payable in full on August 31, 2001.              (b)        Advances.  Advances hereunder, to the total amount of the principal sum stated above, may be made by the holder at the oral or written request of (i) _____________________ or ________________________, or_______________________ any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any deposit account of any Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of each Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account.  The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by any Borrower.              (c)         Application of Payments.  Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof.  All payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Prime Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to LIBOR, with such payments applied to the oldest Fixed Rate Term first. PREPAYMENT:              (a)         Prime Rate.  Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Prime Rate at any time, in any amount and without penalty.              (b)         LIBOR.  Borrower may prepay principal on any portion of this Note which bears interest determined in relation to LIBOR at any time and in the minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however, that if the outstanding principal balance of such portion of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof.  In consideration of Bank providing this prepayment option to Borrower, or if any such portion of this Note shall become due and payable at any time prior to the last day of the Fixed Rate Term applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such Fixed Rate Term matures, calculated as follows for each such month:   (i) Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the Fixed Rate Term applicable thereto.         (ii) Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.         (iii) If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above. Each Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities.  Each Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank.  If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum two percent (2.00%) above the Prime Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed).  Each change in the rate of interest on any such past due prepayment fee shall become effective on the date each Prime Rate change is announced within Bank. EVENTS OF DEFAULT:              This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of June 30, 2000, as amended from time to time (the "Credit Agreement").  Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an "Event of Default" under this Note. MISCELLANEOUS:             (a)          Remedies.  Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by each Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate.  Each Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity.             (b)          Obligations Joint and Several.  Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.             (c)          Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of Minnesota.             IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.   DATALINK CORPORATION   By: /s/ Daniel J. Kinsella   --------------------------------------------------------------------------------     Daniel J. Kinsella   Chief Financial Officer  

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10 AGREEMENT     AGREEMENT dated as of May 18, 2001 between L. White Matthews, III, herein referred to as "MATTHEWS," and Ecolab Inc., a Delaware corporation with its principal offices in St. Paul, Minnesota, herein referred to as "ECOLAB."     1.  Term of Employment/Resignation.  MATTHEWS shall continue to serve as an employee of ECOLAB through the period ending August 31, 2001, (hereinafter the period of employment shall be called "TERM OF EMPLOYMENT"), after which MATTHEWS' employment relationship with ECOLAB, its subsidiaries and affiliates shall cease. Upon or before the end of the TERM OF EMPLOYMENT, MATTHEWS shall execute and submit resignations of his position as Executive Vice President and Chief Financial Officer of ECOLAB and as Director on ECOLAB's Board of Directors in the form attached hereto as "Exhibit A". In addition, at ECOLAB's request, MATTHEWS shall execute and submit separate resignations for any position he has held during the TERM OF EMPLOYMENT as a director and/or officer of any subsidiary or affiliate of ECOLAB, in particular, MATTHEWS position on the Board of Henkel-Ecolab.     2.  Benefit Supplements.  At the end of the TERM OF EMPLOYMENT, or as otherwise specified below, MATTHEWS shall be entitled to the following benefits, and correspondingly participation in all other perquisites and employee benefit programs of ECOLAB shall cease except insofar as the terms and provisions of any benefit program then provided for post-employment continuation in such plan:     a.  Special Pay.  MATTHEWS shall receive, for special services, the lump sum of $333,333.00, reduced by required withholding and applicable taxes, payable on or within five (5) business days after January 2, 2002.     b.  Management Incentive Plan.  Notwithstanding the fact that MATTHEWS will not be an employee at the end of calendar year 2001, MATTHEWS shall receive any annual incentive which he earns under the Management Incentive Plan (MIP) for calendar year 2001, prorated to the number of days during such year that MATTHEWS is actually an employee (January 1, 2001 through August 31, 2001). MATTHEWS shall be provided notice of the method and details of the calculation of the MIP payment, contemporaneous with any payment or with notice provided to other participants in the MIP.     c.  Restricted Stock.  Subject to the expiration of MATTHEWS' right to rescind this Agreement, 1,500 shares of restricted stock which otherwise would have vested in 2003 will vest as of the end of the TERM OF EMPLOYMENT. All other restricted stock awards unvested as of the end of the TERM OF EMPLOYMENT shall be forfeited as of the end of the TERM OF EMPLOYMENT.     d.  Options.  Subject to the expiration of MATTHEWS' right to rescind this Agreement: (i) all currently unvested stock options awarded to MATTHEWS which would have otherwise vested in 2002 (44,708 shares) shall vest as of the end of the TERM OF EMPLOYMENT; (ii) such options, as well as unexercised options which are currently vested –1– -------------------------------------------------------------------------------- or will vest prior to the end of the TERM OF EMPLOYMENT (71,083 shares) shall remain exercisable until November 30, 2003; provided, however, that the premium-priced options granted on August 13, 1999 (215,000 shares) shall remain exercisable pursuant to the original terms of the grant through November 30, 2001; and (iii) all stock options which are not vested as of the end of the TERM OF EMPLOYMENT shall be forfeited and terminated pursuant to the terms of the 1997 Stock Incentive Plan.     e.  Lump Sum Payment.  Within ten (10) business days after the expiration of the rescission period of this Agreement, ECOLAB shall pay MATTHEWS a lump sum of Fourteen Thousand Four Hundred and No/100 Dollars ($14,400.00) for reimbursement of costs related to termination of his residential lease and other transitional expenses.     f.  Leased Automobile.  ECOLAB shall pay MATTHEWS a lump sum of Ten Thousand Five Hundred Forty-Five and No/100 Dollars ($10,545.00) within ten (10) business days after the expiration of the rescission period of this Agreement to cover the cost of the remaining lease payments for MATTHEWS' leased automobile (see copy of lease attached as "Exhibit B"). MATTHEWS shall be responsible for maintaining primary liability insurance coverage and all other terms of the automobile lease.     g.  Relocation.  MATTHEWS shall be reimbursed for expenses incurred by him to relocate within the United States in accordance with the Relocation Policy attached as "Exhibit C", with the exception of the terms within the following paragraphs which are specifically excluded from this Agreement: (i)Relocation Policy, page 4, paragraph entitled HOUSE HUNTING TRIPS; (ii)Relocation Policy, page 7, paragraph entitled STORAGE OF BELONGINGS; (iii)Relocation Policy, page 7, paragraph entitled TEMPORARY LIVING QUARTERS AND EXPENSES; (iv)Relocation Policy, page 8, paragraph entitled RELOCATION ALLOWANCE; and, (v)Relocation Policy, page 8, paragraph entitled ADVANCES.     h.  Death.  In the event of MATTHEWS' death the benefits covered by this Agreement shall inure to the benefit of and/or be exercisable, as the case may be, by his beneficiary or lawful representative. –2– --------------------------------------------------------------------------------     3.  Non-Competition/Non-Solicitation.  Except to the extent authorized in writing by the Chairman of the Board and Chief Executive Officer of ECOLAB, MATTHEWS shall not, for a period from the end of the TERM OF EMPLOYMENT through August 31, 2003, render services or provide advice, as an employee, consultant or in any other advisory capacity, directly or indirectly, to any Conflicting Organization.     For the period from the end of the TERM OF EMPLOYMENT through August 31, 2003, MATTHEWS will not hire or induce, attempt to induce or in any way assist or act in concert with any other person or organization in hiring, inducing or attempting to induce any employee or agent of ECOLAB to terminate such employee's or agent's relationship with ECOLAB. Notwithstanding the foregoing, MATTHEWS may provide a personal reference for an ECOLAB employee or agent but only in the event the employee or agent requests the reference at his or her sole initiative and that MATTHEWS is otherwise in compliance with his obligations under paragraphs 3 and 4 of this Agreement.     In the event MATTHEWS violates the terms of this Agreement, in addition to all other remedies available to ECOLAB, all special pay payable herein shall cease.     For purposes of this Agreement, a "Conflicting Organization" means: (i)Any organization, including subsidiaries or affiliates, about which MATTHEWS, within the scope and course of his responsibilities with ECOLAB including his management of the Corporate Development function, received business related data or information; and, (ii)All organizations including subsidiaries or affiliates, listed on "Exhibit D".     4.  Non-Disclosure/Non-Disparagement/Confidential Information.  Except to the extent authorized in writing by the Chairman of the Board and Chief Executive Officer of ECOLAB, MATTHEWS will not, at any time during or after the term of this Agreement, communicate or disclose to any person or corporation, or use for his own benefit, any Confidential Information acquired by him during the course of his employment with ECOLAB and its subsidiaries and affiliates. "Confidential Information" means information and trade secrets not generally known about ECOLAB's business, or the business of any of ECOLAB's subsidiaries or affiliates, such as, but not limited to, corporate business and financial strategies and plans. The foregoing obligations shall not apply to any information which shall have become a part of the public domain, by publication or otherwise, through no fault of MATTHEWS and which is not in violation of this Agreement.     MATTHEWS further agrees that he will not, at any time during or after the term of this Agreement, communicate, publish or release information or characterizations disparaging of ECOLAB, its directors, officers, employees, agents or affiliates. ECOLAB shall not, at any time –3– -------------------------------------------------------------------------------- during or after the term of this agreement, communicate, publish or release information or characterizations disparaging of MATTHEWS. The contents of any announcement referencing the departure of MATTHEWS from ECOLAB, including any press release, shall be mutually agreed upon.     It is agreed that MATTHEWS will not cause or participate in the publication of any information concerning the terms and conditions of this Agreement and Release to anyone. This provision shall not prevent MATTHEWS from disclosing such information to his family or to his legal counsel, financial advisors and accountants in order to obtain professional advice, provided they are advised as to the confidentiality of the information.     Nothing in this paragraph 4 Non-Disclosure/Non-Disparagement/Confidential Information, shall prohibit MATTHEWS from complying with a lawfully issued subpoena or an order issued by a court of competent jurisdiction. However, MATTHEWS shall not comply with any subpoena or court order which may elicit information or documentation otherwise prohibited from publication within this Paragraph 4 without first notifying ECOLAB, as per the notice provisions in Paragraph 10 herein, and providing ECOLAB a reasonable opportunity to oppose the disclosure of such information or documentation. Such notice shall be by overnight mail, facsimile transmission or other means designed to provide ECOLAB with a copy of the subpoena or court order with as much advance notice as possible.     At the end of the TERM OF EMPLOYMENT, or at any earlier time as may be requested by ECOLAB, MATTHEWS will return or certify in writing that he has destroyed, all records, reports, studies, letters, files or other documents in his possession or to which he has access concerning ECOLAB's business or affairs, or the business or affairs of any of ECOLAB's subsidiaries and affiliates, and MATTHEWS will retain only such personal records as he may have relating to non-ECOLAB activities.     5.  Mutual Release. MATTHEWS agrees to the provisions contained in the attached document entitled "Release" marked "Exhibit E," which is incorporated herein and forms a part of this Agreement. In consideration of the within agreement, and other good and valuable consideration, ECOLAB hereby fully and completely releases and waives any and all claims, complaints, causes of action or demands of whatever kind which ECOLAB has against MATTHEWS relating to matters within the scope and course of MATTHEWS responsibilities as an employee, officer or director of ECOLAB occurring to the date of his execution of this Agreement.     6.  Directors and Officers Liability Insurance. MATTHEWS shall remain an insured under the Directors and Officers Liability Insurance coverage, including indemnification, to the extent that said insurance coverage and indemnification is provided to other Officers and Directors of ECOLAB for any actions, or related events, undertaken by MATTHEWS prior to the end of the TERM OF EMPLOYMENT. –4– --------------------------------------------------------------------------------     7.  Entire Agreement. This Agreement sets forth the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior agreements understandings or practices not specifically set forth or ratified herein. Changes to this Agreement, whether by additions, waivers, deletions, amendments or modifications, may only be accomplished in a writing signed by both parties.     8.  Binding Effect. This Agreement shall inure to the benefit of and be binding upon the parties, their successors and assigns.     9.  Governing Law/Severability. This Agreement is made in the State of Minnesota, and shall be governed by the laws of that State. If any of the provisions of this Agreement are held to be invalid or unenforceable by a court of competent jurisdiction, such holding shall not invalidate any of the other provisions of this Agreement, it being intended that the provisions of this Agreement are severable.     10.  Notice. Any notice to be given to ECOLAB under the terms of this Agreement shall be in writing and addressed to the office of ECOLAB at Saint Paul, Minnesota, in care of its General Counsel, and any notice to be given to MATTHEWS shall be in writing and addressed to MATTHEWS at the address given beneath MATTHEWS' signature hereto, or at such other address as either party may hereafter designate in writing to the other. Notice shall be deemed to have been duly given if it contains specific reference to this Agreement, and when it is actually received or three days after it is enclosed in a properly sealed envelope addressed as aforesaid and deposited, postage prepaid, in a United States post office, via certified mail. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written. ECOLAB INC.     By:   /s/Allan L. Schuman   /s/ L. White Matthews, III     --------------------------------------------------------------------------------   --------------------------------------------------------------------------------     Chairman of the Board and Chief Executive Officer   L. White Matthews, III –5– -------------------------------------------------------------------------------- QuickLinks Exhibit 10

        EXHIBIT 10.35 Collective Bargaining Agreement, dated February 1, 2001, by and between Trencor, Inc. and the United States Steelworkers of America, AFL-CIO and CLC.                       EXHIBIT 10.35 Collective Bargaining Agreement, dated February 1, 2001, by and between Trencor, Inc. and the United States Steelworkers of America, AFL-CIO and CLO. LABOR AGREEMENT Between TRENCOR, INC. and UNITED STEELWORKERS OF AMERICA, AFL-CIO, CLC This AGREEMENT is entered into as of the 1st day of February, 2001, by and between Trencor, Inc. (the "Company" or "Employer"), located at 1400 East Highway 26, Grapevine, Texas 76051, and the United Steelworkers of America, AFL-CIO, CLC ("Union"). In consideration of the mutual covenants herein contained, it is agreed as follows: This Agreement covers only those matters specifically contained herein and supersedes all prior agreements between the Company and the Union, including, without limitation, any interim or contingent agreements, letters of interpretation, verbal understandings, arbitration awards, and/or past practices. SCOPE AND RECOGNITION The Company recognizes the Union as the sole and exclusive bargaining representative for all Employees covered herein as to wages, hours and working conditions. The term "Employees" as used in this Agreement, shall only include all designated production and maintenance employees employed by the Employer at its facility at 1400 East Highway 26, Grapevine, Texas 76051. Excluded are all office clerical employees, sales persons, field service technicians, professional employees, leadmen, supervisors and guards as defined in the National Labor Relations Act. TERM OF AGREEMENT This Agreement shall be effective as of 12:01 a.m., February 1, 2001, and shall continue in full force and effect through Midnight, January 31, 2004. This Agreement shall be automatically renewed from year to year after January 31, 2004 upon all the terms and conditions then in effect unless either party terminates this Agreement effective Midnight, January 31, 2004, or the Midnight of any ensuing anniversary, on not less than 60 days prior written notice to the other party. COMPLETE AGREEMENT AND SAVINGS CLAUSE The parties hereto acknowledge that, during the negotiations which resulted in this Agreement, each had the unlimited right and opportunity to make demands and proposals with respect to all proper subjects of collective bargaining, all such subjects have been discussed and negotiated upon, and the agreements contained in this Agreement were arrived at after the free exercise of such rights and opportunities. Therefore, the Company and Union, for the life of this Agreement, each voluntarily and unqualifiedly waive the right, and each agrees that the other shall not be obligated, to bargain collectively with respect to any subject matter not specifically referred to or covered in this Agreement, even though such subject or matter may not have been within the knowledge or contemplation of either or both of the parties at the time they negotiated or signed this Agreement. PROBATIONARY PERIOD Each new and re-hired Employee shall be considered a probationary Employee for the first ninety (90) calendar days of employment. During the probationary period, the Company shall have sole and exclusive right to discipline or terminate an Employee with or without cause and neither the probationary Employee nor the Union shall have the right to grieve, arbitrate or otherwise contest the action of the Company. CONFLICT OF INTEREST All Employees are prohibited from engaging in any activity, practice or act which conflicts with the interests of the Company or its customers. No Employee shall accept full-time, part-time or temporary employment for any competitor of Company without the consent of the Company, and no Employee shall do contract work in the heavy equipment manufacturing industry. Similar situations which create an actual conflict of loyalty or interest or the appearance of such a conflict, or which are disruptive of the stable work environment which the Company seeks to maintain, must be avoided. An Employee's failure to abide by this paragraph shall be subject to discipline up to and including discharge. NO DISCRIMINATION The Company and the Union, in their respective areas, agree there shall be no discrimination against any Employee, or applicant for employment or union membership, because of race, creed, color, age, sex, place of national origin, veteran status, disability (provided the disability does not impair the person's ability to perform the required work) or any other classification as defined in Presidential Executive Orders, Federal and State legislation. Wherever the masculine gender is used in this Agreement, it shall be construed to mean either sex. UNION WAIVER UNDER AMERICANS WITH DISABILITIES ACT Section 1 Both the Company and the Union agree to fully comply with the provisions and terms of the Americans with Disabilities Act. Section 2 Subject to the provisions in this Article, the Company shall have the right, in its sole discretion, to take whatever action it deems necessary to comply with the Americans with Disabilities Act, including but not limited to discussing reasonable accommodations directly with affected Employees. Section 3 The Company shall have no obligation to disclose to the Union and/or any employee any information concerning the disability of any applicant and/or Employee (within or outside the bargaining unit). The Company shall have no obligation to disclose to the Union and/or any Employee any information concerning any action taken pursuant to Section 2 of this Article which the Company deems necessary to comply with the Americans with Disabilities Act, except to the extent that a proposed or implemented accommodation adversely impacts the rights of another employee within the collective bargaining unit. In such a case, the Company will notify and consult with the Union concerning such proposed or implemented accommodation. Section 4 In reviewing a grievance by an employee other than the employee requesting any accommodation under the ADA challenging an accommodation decision, the arbitrator shall consider the needs of the disabled employee, and shall have no authority to reverse an accommodation made for purposes of complying with the ADA, except to the extent that another employee's rights under the contract are substantially adversely impacted. In such a case, the arbitrator may order prospective modification or reinstatement of the grievant's rights only. In recognition of the difficult issues raised by accommodation requests, no back pay or other retroactive relief against the company may be ordered. WORKING CONDITIONS Section 1 Forty (40) hours actually worked at straight time shall constitute a week's work. A scheduled work day may include as many as ten (10) hours. The provisions of this Article are intended merely to provide a basis for determining the number of hours of work for which an Employee shall be paid at overtime rates, and nothing herein shall be construed as a guarantee by the Company of a specified number of hours of work per day or per week or as a limitation on the hours of work per day or per week. Section 2 The Company shall have the sole and exclusive right to establish and, from time to time, change the hours for the commencement or cessation of work as well as the daily and weekly work schedules for all Employees, for different job classifications, or for individual Employees within each job classification. Consistent with production requirements, the Company will make a good faith effort to schedule an Employee's work week over five consecutive days. Section 3 A thirty (30) minute unpaid lunch period shall be provided on each shift. The Company shall designate the time of said break period, and the time shall be between 11 a.m. and 1 p.m. or at such other time as the parties may agree, except in cases of emergency. Section 4 Nothing contained herein shall limit the amount of work to be performed by an Employee during a normal work day/work week. The establishment of the amount of work to be performed is the sole and exclusive right of management. The Company will consider equipment and work flow limitations when setting and evaluating the amount of work to be performed. Section 5 Where an Employee is specifically directed by the Company to work in excess of forty (40) hours in any week, such Employee shall be paid for such work in excess of forty (40) hours, one and one-half (1-1/2) times the employee's normal rate of pay. Paid holiday time, vacation time, and jury duty time used by an Employee will count as hours worked (up to a maximum of eight (8) hours per day) for purposes of calculating overtime. Section 6 The Company shall schedule requirements for weekend overtime as soon as practical, but no later than two hours before the end of the normal work week, except in cases of emergency or customer service requirements. The Company shall schedule requirements for daily overtime as soon as practical, but no later than one hour before the end of the normal work shift, except in cases of emergency or customer service requirements. The Company reserves the right to post or otherwise inform Employees of requirements for overtime at a later time if the Management believes that circumstances warrant the late posting. Section 7 Except when overtime is required to complete an operation already underway or when an entire department is scheduled for overtime, overtime opportunities will be made available on the following basis: Qualified employees will first be asked to volunteer using the "low-man" concept, as outlined in Section 8 of this Article. This means that the qualified man currently within the job classification needed to work overtime who has the lowest amount of overtime hours will get the first opportunity to be scheduled for overtime. A Union representative within each designated department will maintain the overtime list (by department, classification, and shift) that will be used to allocate overtime using the "low-man" concept, and will provide the Company with an immediate response to a request for overtime made under the "low-man" concept. The Company will schedule qualified employees for overtime if the needed overtime cannot be filled by "low man" volunteers. Section 8 In using the "Low Man Concept" for voluntary overtime distribution the overtime list will be maintained by using the following principles. A Union representative within each designated department will maintain the overtime list by department, classification and shift. The supervisor within each designated department will tell the union representative the number of employees needed to accomplish the overtime task. The union representative will then make a determination of which individuals will be canvassed for the overtime and then accompany the supervisor who will make the overtime request to the designated employee(s). The employees acceptance or denial will then be recorded in order to maintain the future integrity of the overtime list. Any questions regarding the proper person(s) being asked will be the responsibility of the Local Union. All overtime opportunities will be charged on the overtime list when offered and not accepted or when the employee is not otherwise available. These are the basic guidelines to be used in determining voluntary overtime distribution for bargaining unit employees. There is no prohibition for improvements made by mutual consent by the parties vested with the responsibility of implementation. BULLETIN BOARDS The bulletin board located inside the break room for plant employees is designated as a Company bulletin board for posting official Company announcements and will contain official Company announcements, required postings, and other things. There are other bulletin boards in various areas of the facility where employees may, subject to approval by the Company's Personnel Department, post personal notices. The bulletin board located on the wall of the central shop office is designated as a Union bulletin board where Union members may, subject to approval by the Company's Personnel Department, post Union announcements and other things. All union-related postings will be posted at this location. PERSONAL LEAVE POLICY Requests for unpaid leaves of absence not to exceed five (5) working days for personal family reasons not covered under the Family and Medical Leave Act, Texas Government Code Ann. 431.005-006 (concerning military leaves of absence) and personal days off, including requests to attend Union conferences for educational or training purposes, will be considered on an individual basis for regular full-time employees and will be based on the employee's needs and Company's needs. Except for emergency situations, a request for personal leave must be submitted to the immediate supervisor in writing at least two/weeks prior to the proposed start date or as soon as practical. The request must explain the reason for the leave and indicate the expected date of return. Management will not arbitrarily withhold permission to take a leave of absence under this section. It is understood that when approved leaves begin on Monday and end on the following Friday, the individual will not be required to work the weekend before or the weekend after the leave except in cases of emergency or customer service requirements that arose during the employees leave. Employees must continue to pay their portion of any benefits that are normally payroll deducted during their leave. EMPLOYEE PRODUCTION AND CONDUCT Section 1 The Union recognizes and acknowledges that the Company has the duty of maintaining good discipline among its Employees because the Company is responsible for the efficient, safe and orderly operation of its business. Section 2 The Company shall have the right to discipline and/or discharge Employees for cause. Section 3 In the case of any offense for which an Employee may be discharged, the Company may, in its sole discretion, impose a lesser penalty. The imposition of a lesser penalty may not be used as evidence of discriminatory treatment in any arbitration proceeding under this Agreement. Section 4 The following shall constitute cause for immediate discharge not subject to the Grievance and Arbitration provisions of this Agreement: (a) Fighting on Company property, where it is undisputed that the Employee initiated physical contact with another Employee; (b) Possessing non-prescription intoxicants or illegal drugs on Company property; (c) Sale of drugs on Company property, while on duty, or to other Employees; (d) A positive laboratory test result establishing the presence in the Employee's bodily system of illegal drugs, controlled substances, alcohol or the presence of lawful over-the-counter or prescription drugs (at a level higher than the manufacturer's or doctor's recommended dosage); (e) Drinking intoxicants, using illegal drugs, or misusing legal drugs off Company property and then returning to work or working "under the influence"; (f) Being convicted of a felony, not including traffic violations, unless such traffic violations may result in a jail sentence; or (g) The possession of guns, knives (except for pocket knives), illegal weapons of any kind on Company property or while the Employee is on duty and/or representing the Company, whether on or off Company property. Section 5 The following shall constitute cause for discipline, up to and including immediate discharge, expressly subject to the Grievance and Arbitration provisions of this Agreement, and the enumeration here is by way of illustration and shall not be deemed to exclude or restrict the Company's right to discipline or discharge its Employees for any other cause: (a) Fighting on Company property, where it is disputed that the Employee initiated physical contact with another; (b) Incompetence or inefficiency; (c) Unexcused absence and/or tardiness; (d) Breach of this Agreement; (e) Refusal to execute any work received from or destined to another Company whose Employees are locked out or on strike; (f) Misconduct on Company property; (g) Violation of Company rules, including safety rules; (h) Disparagement of the Company or any Company official whether this occurs on or off Company property; (i) Disloyalty; (j) Dishonesty; (k) Working for any company that competes in any way with the Company, without the Company's written approval; (l) Working for any other employer or becoming self-employed if doing so interferes with the Employee's satisfactory performance for the Company; (m) Insubordination which shall be defined as a refusal of an Employee to follow orders, a refusal to perform work as assigned or the use of abusive, profane and/or inflammatory language (exclusive of "shop talk") when directed to any Company executive, manager or supervisor; (n) Substantial misstatement or omission in the Employee's application for employment or other document used or prepared during the course of employment; (o) Substantial false statement or willful misstatement regarding Company business; (p) Refusal to use the materials or equipment received from or delivered by another Company whose Employees are locked out or on strike; (q) Misuse of Company material, facilities or equipment; or (r) Willful neglect of duty. Section 6 To the fullest extent permitted by law, the Company shall have the right to require of any Employee at any time a physical examination by a physician of its choosing to determine said Employee's physical and mental ability to perform his job assignment efficiently and safely. To the fullest extent permitted by law, the Company shall have the right to evaluate the ability of the Employee to perform his job assignment efficiently and safely, and the Company may promote, demote, lay off, transfer or discharge said Employees as a result of such evaluation. It is understood that the Company may only act with just and proper cause and that its actions shall be subject to the Grievance and Arbitration provision of this Agreement. Section 7 The Company shall have the right to conduct job studies and to use that information to evaluate the work performance of the Employees covered by this Agreement. It is understood that the Company may only act with just and proper cause and that its actions shall be subject to the Grievance and Arbitration provision of this Agreement. Section 8 With respect to this Article, the Company's or Union's failure to exercise any right, prerogative, or function hereby reserved to it, or the Company's or Union's exercise of any such right, prerogative, or function in a particular way, shall not be considered a waiver of the Company's or Union's right to exercise such right, prerogative, or function or preclude it from exercising the same in some other way not to conflict with the express provisions of this Agreement. Section 9 There shall be no restriction placed upon the amount of work performed by any individual or group of individuals, nor shall production be limited in any manner. Section 10 Subject to the regular hours of work established hereunder, the Company retains the sole right to determine the extent to which its plant or any part thereof shall be operated or shutdown or production reduced or increased. No shutdown or reduction because of the lack of sales, shortage of material or other similar causes shall be deemed a lockout (within the meaning of this Agreement). The right to establish posting standards and the scheduling of operations and the choice of equipment for various jobs shall be vested exclusively in the Company. SUB-CONTRACTING Both parties recognize and agree that contracting out is an essential part of maintaining an efficient and competitive business. The Company will refrain from contracting out any work normally performed by the bargaining unit employees unless there is no other cost-effective alternative. It is understood that some tasks cannot be accomplished through any other method. The Company maintains the right to decide whether there is a cost-effective alternative to subcontracting, based on, but not limited to, business needs, customer demand, availability of product, equipment expectations, and manpower. RIGHTS OF PARTIES Section 1 The Union has the exclusive right and duty to bargain collectively and process grievances for and on behalf of all of the employees in the Bargaining Unit. Otherwise, the Union does not have or claim any right to participate in or interfere with the management or the operation of the business of the Company or the determination of the operating policies of the Company or the selection, supervision or direction of the Employees of the Company. Section 2 Except to the extent expressly abridged by a specific provision of this Agreement, the Employer reserves and retains solely and exclusively all of its normal, inherent, and common law rights to manage the business, as such rights existed prior to the execution of this Agreement, and it is agreed that the Employer alone shall have the authority to determine and correct policies, modes and methods of operating its business, without interference by the Union. The sole and exclusive rights of Management which are not specifically abridged by this Agreement include, without limitation, the following: To determine the methods, materials and processes to be employed; To introduce improved methods and equipment to reduce cost for the production and sale of its services; To change, discontinue or automate processes or operations; To determine the qualifications of new Employees; To hire, select and to determine the number and type of Employees required; To determine the size and composition of its work forces; To determine and select the equipment, machinery, products and supplies to be used, operated, manufactured, handled, processed, sold, or distributed; To hire, select and determine the number and type of Employees required; To promote, transfer, layoff, terminate, or otherwise relieve Employees from duty for lack of work or other reasons in accordance with the terms of this Agreement; To reprimand, suspend, discharge, or otherwise discipline employees for just cause or other reasons in accordance with this Agreement; To determine job content and the types of work needed; To establish work and quality standards; To assign work; To determine the hours and dates to be worked on each job and each shift; To establish shifts, to set the hours of work and the number of Employees for such shifts, and from time to time to change the shifts and the hours and Employees of the shifts; To set the standards of productivity, the products to be produced and/or the services to be rendered; To discontinue, transfer, assign, all or any part of its business operations; To determine the fact of lack of work; To expand, reduce, alter, combine, transfer, assign, establish or cease any job, job classification or operation; To control, regulate, change, or discontinue the use of supplies, machinery, tools and equipment, vehicles or other property owned, used, processed or leased by the Employer; To select new equipment for its operations, including equipment for new operations; To adopt and enforce safety rules and rules of conduct, policies and practices; and To introduce new, different or improved methods, means and processes of transportation, production, maintenance, service and operation and otherwise generally to manage the operations of the Employer and to direct the work forces. Section 3 As a condition of entering employment, or after a thirty (30) day absence for any reason, the Company reserves the right to require a medical examination and a certificate from a qualified and mutually acceptable medial doctor as to the Employee's fitness and physical ability. Section 4 The Company shall have the sole and exclusive right to require of any Employee at any time a physical examination by a physician of its choosing to determine said Employee's physical and mental ability to perform his job assignment efficiently and safely. To the fullest extent permitted by law, the Company shall have the sole and exclusive right to evaluate the ability of the Employee to perform his job assignment efficiently and safely, and the Company may promote, lay off, or discharge said Employees as a result of such evaluation. Section 5 The Company shall have the sole and exclusive right to administer a policy governing the use, possession and/or sale of drugs and/or alcohol; to require Employees to submit to testing for the presence of drugs and/or alcohol; to discipline Employees for violations of policies governing drugs and alcohol. Information concerning the nature of the random testing procedure used at the Company will be obtained by the Company from the independent third-party company responsible for directing the random testing procedure and disclosed to the Union. Section 6 With respect to this Article, the Company's failure to exercise any right, prerogative or function hereby reserved to it or the Company's exercise of any such right, prerogative, or function in a particular way, shall not be considered a waiver of the Company's right to exercise such right, prerogative, or function or preclude it from exercising the same in some other way not in conflict with the express provisions of this Agreement. TEMPORARY EMPLOYEES - TEMPORARY AGENCIES The Company has the right to, in its sole discretion, use employees of temporary agencies to perform Bargaining Unit work for periods of up to ninety (90) days per such employee. During this temporary period under which the employee is still employed by the temporary agency, the Company shall have the sole and exclusive right to discipline or terminate the employee's services with or without cause and neither the employee nor the Union shall have the right to grieve, arbitrate, or otherwise contest the action of the Company. If, at the conclusion of the ninety (90) day period or earlier, the Company hires the employee as a full-time employee of the Company to work in the Bargaining Unit, the Company will recognize the Union as the employee's sole and exclusive bargaining representative pursuant to the Scope and Recognition article of this Agreement and the employee will commence working as a new employee pursuant to the Probationary Period article of this Agreement.   BARGAINING UNIT WORK Other than leadmen and field service technicians, who may perform Bargaining Unit work, persons whose regular jobs are not in the Bargaining Unit will not work on any job for which rates are established by the Agreement, except for the following purposes: Bona fide training of employees; Protection of life and property under emergency conditions; Development of new equipment and techniques critical to the operation of the Plant; Training of management or supervisory personnel for managerial duties; De minimus activities that do not result in the loss of pay or work opportunities for bargaining unit employees; Occasional adjustments of machinery or materials or taking measurements necessary for evaluation of operations; or Other cases of emergency or customer service requirements requiring work of two hours or less per day. But for these exceptions, no Employee will be deprived of work or pay because of substitution by excluded personnel. If a management or supervisory employee performs Bargaining Unit work in violation of this Section and the Bargaining Unit employee who otherwise would have performed the work can be reasonably identified, the Company shall pay that employee the applicable standard hourly wage rate for the time involved. LAYOFFS, RECALL AND JOB BIDDING Section 1 The Company shall have the right to lay off and recall Employees. When making these determinations, the Company shall determine the affected job classification, specific job performed, and number of employees it needs and then select Employees for layoff or recall using the following criteria in the order noted: (a) The comparative skills and abilities of the Employees within the affected job classification(s); (b) The comparative plant seniority and comparative performance of the Employees within the affected job classification(s); (1) Plant seniority shall be calculated from each individual employee's date of employment in the Bargaining Unit of the Company. An Employee's continuous service shall be deemed to be broken and seniority lost if he or she is discharged for just cause, he or she voluntarily quits, he or she fails to return to work after a layoff within five (5) working days after notification is mailed by Certified Mail (unless extenuating circumstances as determined by the Company prevent the Employee from doing so), he or she has been laid off for six (6) months or absent due to a work related injury or illness for twelve (12) months or more, he or she is absent for more than three (3) consecutive working days without just cause or without notifying the Company, he or she is absent from work for any reason (other than a work related injury or illness for twelve (12) months or more, as discussed above) for six (6) months or more. (2) Comparative performance will be assessed by the Company's managers and supervisors using the criteria set out in the Company's performance appraisal forms, as they may exist from time to time and will be distributed to the bargaining unit, with the understanding that the Company will consult with the Union before making any material change to the performance appraisal form. (c) The comparative discipline, attendance, and tardiness records of the Employees. Section 2 The Company shall have the right to promote, transfer, or fill new or vacant positions within the Bargaining Unit. When making these determinations, the Company shall determine the needed job classification, specific job that will be performed, and number of employees it needs. The Company will then post information concerning the position on the plant bulletin boards for a period of five (5) workdays, and any Bargaining Unit employee may request in writing to be considered for the position by applying to the Company manager of the department posting such notice. The Company will then select Employees using the following criteria in the order noted: (a) Comparative skills and abilities to perform the new job, and performance in the current job; (b) Comparative plant seniority; and (c) Comparative discipline, attendance, and tardiness records. Where applicable, when making non-promotion determinations concerning filling vacant positions, preference will be given to employees who previously held the vacant classification but were laid off in the preceding six months and have applied for recall. No employee will be promoted, transferred, or asked to fill a position who does not possess the qualifications and ability to satisfactorily perform the job. If no bargaining unit employee has the qualifications and ability to satisfactorily perform the duties of any new position or vacancy, the Company will have the right to fill the position or vacancy from the outside. NO STRIKES/NO LOCKOUTS Section 1 It is the intent of the parties to this Agreement that the procedure herein shall serve as a means for peaceable settlement of all strike or lockout disputes that may arise between them. Section 2 The Company agrees that, during the life of this Agreement, it will not lock out its employees. Section 3 The Union agrees that, during the life of this Agreement, there shall be no strikes (including but not limited to sympathy, unfair labor practice, or wildcat strikes), sit-downs, slow-downs, work stoppages, boycotts, any acts honoring a picket line or any other acts that interfere with the Company's operations or the production or sale of its products or services during the term of this Agreement by the Union, its officers, agents and members. It is understood that the foregoing proscriptions are specifically intended to include, but are in no way limited to, the following: (a) The honoring of a picket line, or any other concerted activity, of either a sister or affiliate local of the Union, of any other organized unit at the Company, or of any other union, group or individual; and (b) The participation in or support or encouragement of any consumer boycott, advertising boycott, or information picketing, of either a sister or affiliate local of the Union; or of any other organized unit at the Company or of any other union, group or individual. Section 4 The Union agrees that it will not authorize, ratify, or condone any strike or any other activity described herein. In the event of any strike or any other proscribed activity not authorized, ratified, or condoned by the Union, the Union and its officers, agents, and representatives will make every good faith effort to end such activity. Such good faith efforts must include, but are in no way limited to, the following: (a) The Union will notify all Employees immediately in the event of a strike, or other proscribed activity, that the activity is unauthorized and in violation of the Agreement, and that they shall cease such unauthorized activities. The Union will send a copy of such notice to the Company; (b) The Union will inform all Employees who participate in the strike or other proscribed activity that it is their individual responsibility per (a) above. Section 5 Any or all Employees participating in any activity proscribed herein may be subject to disciplinary action, including discharge. Section 6 The Parties shall have direct recourse to the National Labor Relations Board or the courts for a violation of this Article. The Company and the Union do hereby expressly agree that for purposes solely of injunction by a court of competent jurisdiction any strike or other proscribed activity is and shall be deemed to be over a dispute with the Company by an Employee or group of Employees involving the interpretation or effect of this Article and shall be immediately enjoined by any court of competent jurisdiction. Should the National Labor Relations Board or the court find the Union has violated this Article, the Union agrees to be jointly and severally liable for compensatory damages, for punitive damages, and for all of the Company's costs, including attorney's fees, incurred in halting the strike and/or in collecting damages. Section 7 The obligations, rights, and provisions of this Article shall be completely independent of and shall not be affected or limited by the inclusion or absence of any other provision of this Agreement, including any grievance and/or arbitration provisions. The obligations, rights, and provisions of this Article are not subject to the grievance and/or arbitration provisions of this Agreement. Nothing in this Article, however, will limit the ability of an individual employee subjected to disciplinary action by the Company for participating in any activity proscribed herein to grieve and/or arbitrate such action on the basis of "mistaken identity." The arbitrator's rights when deciding such issues shall be limited to deciding the issue of mistaken identity and the arbitrator will not be permitted to otherwise modify the disciplinary action at issue. NOTICES Any notice that is required to be given or may appropriately be given by one party (Union or Company) to the other hereunder, shall be in writing and shall be given by personal delivery or sent by prepaid delivery service or certified or registered mail. Notices to the Company shall be addressed as Attention: (name) (address). Notices to the Union shall be addressed as Attention: (name) (address). Any mailed or wired notices shall be deemed given at the time of dispatch in the mail or by delivery. Notices personally delivered shall be delivered to the aforesaid persons. Either party may change its address for notices hereunder by giving written notice to the other party in accordance herewith. GRIEVANCE AND ARBITRATION Section 1 A "grievance" is a dispute, complaint or controversy of any kind arising between the Company and the Union concerning the interpretation, application, performance or alleged breach of any of the specific terms and conditions of this Agreement, unless such provision is specifically excluded from the grievance and arbitration provisions. A Grievance shall be processed only in accordance with the provisions of this Article. Section 2 Step 1: A grievance shall be first discussed by the Shop Steward designated by the Union and a Supervisor designated by the Company within five (5) working days of an occurrence, or knowledge thereof giving rise to the grievance. Step 2: If the grievance is not resolved within five (5) working days after the Step 1 meeting, the grievance shall be reduced to writing and presented to the Company by the Shop Steward. If the Union does not submit a written grievance to the Company within ten (10) working days after the Step 1 meeting, it is deemed waived. The Company shall then have five (5) working days to respond to the written grievance. The Company's failure to respond shall not be used against it in any way. Step 3: If the grievance cannot be resolved by Step 2, the matter may be appealed by either party, within five (5) working days after receipt of the Step 2 answer or, if the Company does not respond, within five (5) working days of the date the Company's response was due. The request for arbitration must be made in writing. The parties will make a good faith effort to select and mutually agree upon a single arbitrator within ten (10) days following receipt of the answer. If agreement cannot be reached, either patty may request a seven person panel list from the Federal Mediation and Conciliation Service ("FMCS") and then select the arbitrator pursuant to Section 3 of this clause. It is expressly understood that this Section 1 covers grievances which were processed and handled in accordance with the grievance procedure described within Steps 1 and 2 above. The provisions of the no-strike provision are specifically excluded from arbitration under the provisions of this Article, as are those Articles and/or Sections which specifically exclude arbitration. Section 3 The Arbitrator shall be selected from a seven person panel list supplied by the FMCS for the Midwest Region and shall be limited to arbitrators who are members in good standing of the National Academy of Arbitrators. The arbitrator will be selected by mutual agreement or by striking. The person striking first is to be decided by the flip of a coin and thereafter alternated between the parties. Section 4 Jurisdiction of the arbitrator selected shall be limited to: (a) Adjudication of the issues which, under the express terms of this Agreement and/or any Submission Agreement, is entered into between the parties hereto; and (b) Interpretation of the specific terms of this Agreement, which are applicable to the particular issue presented to the arbitrator; such jurisdiction shall not give the arbitrator authority to supplement or modify this Agreement by reference to any industry practice or custom or any so-called "common law of the shop"; and (c) The rendition of a decision or award which in no way modifies, adds to, subtracts from, changes, or amends any term or condition of this Agreement or conflicts with the provisions of this Agreement; and (d) The rendition of a decision or award which is not retroactive to a date preceding the date of the written grievance, upon which the decision or award is based, except for decisions or awards of back pay, which may be retroactive to the date of the incident giving rise to the back pay claim if the arbitrator determines that all applicable legal requirements for awarding back pay retroactively have been met; and (e) The rendition of a decision or award which does not grant relief extending beyond the termination date of this Agreement, except as otherwise mutually agreed upon by the parties hereto; and (f) The rendition of a decision or award in a discharge or disciplinary layoff case which adjudicates only the guilt or innocence of the Employee(s) involved and which in no way modifies or amends the penalty imposed, provided that if the arbitrator finds that the Employee(s) was not discharged or disciplined for cause, any award of back wages shall be limited to the amount of regular straight-time wages the Employee would otherwise have earned from his employment with the Company during the period limited by subparagraphs (d) and (e) above. The issue of whether any damage award will reflect an offset for unemployment compensation and/or compensation for personal services that he/she may have received or be entitled to from any source during such period or any compensation or assistance from any state or federal governmental agency will be decided by the arbitrator; and (g) The rendition of a decision or award in writing which shall include a statement of the reasons and grounds upon which such decision or award is based; and (h) The rendition of a decision or award based solely on the evidence the arguments presented to the arbitrator by the respective parties in the presence of each other and the arguments presented in the written briefs of the parties; and (i) The rendition of a decision or award within thirty (30) calendar days of the date of presentation of written briefs by the parties. Section 5 Any dispute which arises under the Agreement but which is based on events that occur before or after its termination is expressly excluded from the jurisdiction of the arbitrator. Section 6 No one arbitrator shall have more than one (1) grievance submitted to him and under consideration by him at any one time unless the parties hereto otherwise agree in writing. A grievance shall be deemed under consideration by an arbitrator until the arbitrator has rendered his decision and award in writing. Section 7 The decision of the arbitrator within the limits herein described shall be final and binding upon the Company, the Union, and the Employee(s) affected, subject to judicial review. Section 8 Only grievances, which involve an alleged violation by the Company of a specific section or provision in this Agreement and which are processed in the manner and within the time limits herein provided shall be subject to arbitration. Notwithstanding any other provision of this Agreement, no grievance shall be arbitrable and no right of action shall accrue to the Union or any Employee under this Agreement with respect to: (a) Any matter involving the administration, interpretation, or application of any insurance plans or any other fringe benefit mentioned or not mentioned in this Agreement in which Employees covered by this Agreement are eligible to participate; (b) The Supervisor's judgment of an Employee's competency; or (c) Those matters noted in Article 11 of the part of this Agreement entitled "Employee Production and Conduct." Section 9 In addition to the grounds provided by law for vacating and/or correcting an arbitration decision or award, upon petition by either party to a court of competent jurisdiction, any arbitration decision or award hereunder shall be vacated and/or corrected upon any of the following grounds: (a) That the arbitrator exceeded his jurisdiction or authority under this Agreement and/or under the Submission Agreement; (b) That the arbitrator's decision or award is not supported by substantial evidence; or (c) That the arbitrator's decision or award is based upon an error of law. Section 10 Arbitrator's fees and expenses and the costs incidental to the hearing shall be divided equally between the Union and the Company. The cost of a transcript will be paid by the party requesting the transcript. If both parties request a transcript, the cost of a transcript will be divided equally between the Union and the Company. Each party shall bear the expense of its own representation, witnesses and associated costs. Section 11 Any deadline in this Article may be extended by mutual agreement of the parties if in writing and signed by the parties. UNION DUES AND INITIATION FEES The Company agrees that it will implement and maintain a check-off procedure for the collection of Union dues and initiation fees. Section 1 The Union shall furnish the Company with voluntary authorization cards it has in its possession which will form the legal basis for deducting Union fees and dues from the wages of employees who have signed such cards. Section 2 The Company will perform the required deduction calculations and make the required deductions every other payday. Section 3 Once calculated, the aforesaid membership dues and fees shall be remitted by the Company within thirty (30) days to the International Secretary/Treasurer of the United Steelworkers of America (or its successor), 5 Gateway Center, Pittsburgh, PA 15222. Section 4 The Union will indemnify and hold the Company harmless from any liability, demand, cost, expense, loss, claim, or attorney's fee arising from or concerning the deduction of Union fees and dues from the wages of its employees. Section 5 The Union will conduct initial educational training for each employee who signs a voluntary authorization card to deduct Union fees and dues, and will thereafter use its best efforts to educate each such employee as to the following information, which efforts will include, without limitation, distributing in writing to each employee a written statement providing the following information: (1) that the voluntary authorization card is a legal and binding contract between the employee and the Union, (2) that by executing the voluntary authorization card, the employee is authorizing the deduction of Union fees and dues from the employee's paycheck, (3) that the Union, not the Company, has established the amount of Union fees and dues that will be deducted from the employee's paycheck, (4) that Union fees and dues will be deducted from the employee's paycheck for the duration of the contract whether the employee maintains membership in the Union or not, (5) that the Union, not the Company, has established the minimum one-year duration of the contract, (6) that the Union, not the Company, has prescribed the process by which the employee may discontinue the deduction process, and (7) that the Union has agreed to assume all responsibility for resolving employee complaints concerning the deduction of Union fees and dues. ECONOMICS Section 1 Shift Differential: The Company will pay to all hourly-rated employees of the bargaining unit on the second and third shifts their base salary rate plus 25 cents per hour. Section 2 Overtime: The Company will pay overtime in accordance with the proposal signed by the Union and the Company during noneconomic bargaining. Section 3 Vacations: All regular full-time employees of the bargaining unit will earn vacation time as follows: On a First Anniversary: 40 hours per year; On Second through Ninth Anniversaries: 80 hours per year; On Tenth Anniversary through Twentieth Anniversaries: 120 hours per year; On a Twenty-First Anniversary and thereafter: 160 hours per year. Vacation days cannot be used until they have accumulated on your anniversary date. Vacation days may not be sold back to the Company. No employee may accumulate more than 20 days of vacation. Once 20 days of vacation have accumulated, the employee will not receive any more vacation time. Vacation time may be taken in full day or half day increments. The bargaining unit may not have more than 10% of its work force off at any given time for vacations. Vacation must be approved by your supervisory and submitted to the Personnel Department allowing as much notice as possible. If there is a conflict with two or more employees requesting the same vacation date, supervisors will make the decision. To request vacation, submit a completed vacation request form (no copied forms, please) with your supervisor's approval to the Personnel Department prior to the requested vacation date. The Personnel Department will provide the necessary information and approvals and return your copy and your supervisor's copy. Paid time off for vacation will count as hours worked for the purpose of computing overtime. Paid time off for vacation will be reflected in the paycheck for which the time as taken. Vacation pay will not be advanced. Section 4 Sick Leave: All bargaining unit employees will receive four days of sick leave on the date on which this Agreement commences and thereafter on January 1 of each subsequent year under this Agreement. All bargaining unit employees using a sick day will receive 8 hours pay at the regular straight-time rate, excluding any shift differential. All bargaining unit employees must present the Company with a signed doctor's note to receive sick day compensation under this policy. Sick leave days will not count towards the calculation of overtime pay, may not be carried over to the next year, may not be sold back to the Company, and accrued unused sick leave days are not subject to reimbursement upon termination of employment . Section 5 Holidays: All bargaining unit employees will receive 8 hours pay at the regular straight-time rate, including any shift differential, for the following holidays: New Years Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Day after Thanksgiving Day, Christmas Eve, and Christmas Day. Additionally, the Company typically shuts down production for 3-5 days between Christmas and New Year's Day to do physical inventory. Employees who are not required to work during this week will receive the time off without pay unless vacation time is taken. To be eligible for holiday pay, employees must work their last scheduled workday before the holiday and their first scheduled day after the holiday, unless your absence on either of these days is due to a scheduled vacation. Should any of these holidays fall on a Saturday or Sunday, the Company will observe either the previous Friday or the following Monday as the holiday. You will be given advance notice so that you may make your holiday plans. If a recognized holiday occurs during an employee's vacation, an additional day may be added to the vacation period to compensate for the holiday. Employees who are required to work on a scheduled holiday will receive their eight hours holiday pay plus pay for the hours they actually worked. Holiday pay will be calculated for hourly employees based on the straight-time rate for eight hours. Salaried employees will receive their regular salary during the week in which the holiday occurs. Paid time off for holidays will count as hours worked for the purpose of computing overtime. Section 6 Trencor Group Insurance Options and Premiums: All bargaining unit employees will be provided with the same insurance options and insurance premium obligations as other nonmanagement Trencor employees under Trencor's group medical plan, as such options and obligations may exist and change from time to time. All language in the "Medical Insurance" and the "Life, Accidental Death and Dismemberment, Short and Long Term Disability Policies" sections of the Employee Handbook, as it may exist from time to time, are applicable. The bargaining unit will be represented on any committee of Company employees which may be formed to participate in Company efforts to reduce health care costs and/or raise awareness of insurance costs to all employees. Section 7 Work Boots and Prescription Glasses Allowances: All bargaining unit employees will be reimbursed $75 per year for the purchase of new workboots. All bargaining unit employees will be provided with up to one pair of prescription single vision eyeglasses per year from a Company-designated supplier. The additional cost of bifocal lenses or other employee-determined changes will be paid for by the bargaining unit employee. Section 8 Wage Raises and Wage Band Raises: All bargaining unit employees will be paid in accordance with the Company's most recent Pay Scale proposal (except employees whose pay exceeds their applicable pay ranges, who will be grandfathered in at their current rate of pay). Bargaining unit employees (other than employees grandfathered in at a rate of pay exceeding their applicable pay range) will receive a 4.0% across the board raise during the first year of this Agreement, a 3.0% across the board raise during the second year of this Agreement, and a 3.0% across the board raise during the third year of this Agreement. Additionally, the minimum and maximum per hour wage ranges in the Pay Scale will be raised 3.0% during each of the second and third years of this Agreement. Section 9 401K Plan Participation: All bargaining unit employees will be provided with the same 401K plan options as other nonmanagement employees under Trencor's 401K plan. Section 10 Jury and Witness Duty Leave: All bargaining unit employees will receive Jury/Witness duty leave in accordance with the "Jury/Witness Duty Leave" section of the current Employee Handbook, as it may exist from time to time. JOB DESCRIPTIONS, CLASSIFICATIONS, AND PAY SCALES Section 1 Any bargaining unit employee with a minimum of 2 1/2 years experience at his/her job description classification will be paid no less than the midpoint of the pay scale corresponding with their job description. Section 2 Each bargaining unit employee will have his/her job description classification reconfirmed by their supervisor at their appraisal interview. Section 3 The Company encourages all of its bargaining unit employees to explore their full potential. Section 4 Questions about job descriptions, classification or reclassification, or pay scales should be directed to the Company's Plant Manager, then to the Company's Vice President of Manufacturing. Section 5 Upon request, after the bargaining unit employee's appraisal interview, the Plant Manager and/or the Vice President of Manufacturing will meet with the employee to discuss objectives for the employee to identify and meet in order to be classified in an "advanced" job description. The Company will thereafter make reasonable efforts to give the employee work and training opportunities relating to the employee's objectives. Training opportunities will include providing the employee with internal training opportunities and programs and/or reimbursing the employee for successfully completing outside training and/or educational programs pursuant to the Company's Tuition Reimbursement Policy, as stated in the current Employee Handbook, as it may exist from time to time. Section 6 The Company reserves the right to determine, in its sole discretion, whether any bargaining unit employee has met any objectives and whether the bargaining unit employee should be classified or reclassified in an "advanced" job description. Section 7 The following Job Descriptions will be used during the duration of this Agreement. The Pay Scales corresponding with the Job Descriptions will be used during the first year of this Agreement and thereafter will be modified in accordance with this Agreement. Advanced Shipping/Receiving ($ 9.79 - $11.85) Assembles orders, stores received items and issues to production. Has working knowledge of computerized shipping, receiving and parts issuing system. Responsible for verifying all receipts against purchase orders and all shipments against shipment documentation. Responsible for all shipping documentation required to ship complete machines and spare parts. Performs any regular stockroom work assigned to insure proper storage, receipt, shipment and issuing of parts. Demonstrates continuous effort to improve operations. Demonstrates continuous effort to improve operations. Instructs less capable shipping and receiving personnel in safe and effective warehouse and shipping procedures. Works with little supervision. Shipping/Receiving ($ 8.24 - $9.79) Builds boxes and or crates as required. Packs parts for shipment. Loads, unloads and moves material within or near warehouse, plant or worksite. Able to read and understand computer documentation for the movement of materials. Loads and unloads materials onto or from trucks, pallets, trays, racks and shelves by hand or forklift. Moves materials to or from storage or worksite to designated area. Requires general supervision. Maintenance ($ 12.36 - $14.94) Performs a wide variety of plant, office and yard maintenance work. Work involves electrical installation and maintenance and some of the following: carpentry, painting, pipe fitting, masonry, plumbing, steam fitting and sheet metal work. May perform minor new construction. Works with minimum supervision and work may require the planning and installation of new wiring, rearrangement of equipment, etc. Advanced Burn Table Operator ($ 12.36 - $15.45) Capable of operating all three computer controlled burn tables on various thicknesses of steel. Able to download templates and nest for maximum use of material as well as utilize nests prepared by engineering. Ability to understand scheduling work orders for use in identifying and organizing burned pieces. Instructs less capable burn table operators in safe and effective set up and operation techniques. Demonstrates continuous effort to improve operations. Works with little or no supervision. Burn Table Operator ($ 10.82 - $12.88) Ability to operate at least one of the three computer controlled burn tables. Capable of using nests created by others. Ability to understand scheduling work orders for use in identifying and organizing burned pieces. Requires some supervision to set up and maintain burn table. Advanced Track Torch Operator ($ 12.36 - $15.45) Able to use blueprints to manually set up track torch to burn complex parts with various thicknesses and burn angles. Ability to understand scheduling work orders for identifying and organizing burned pieces. Instructs less capable track torch operators in safe and effective set up and operation techniques. Demonstrates continuous effort to improve operations. Works with little or no supervision. Track Torch Operator ($ 10.82 - $12.88) Able to use blueprints to manually set up track torch to burn simple parts of various thicknesses. Ability to understand scheduling work orders for identifying and organizing burned pieces. Requires some supervision. Advanced Fitter Welder ($ 13.39 - $16.48) Works from drawings to plan, layout, fit up and weld out large, complex weldments. Performs complex arc and acetylene welding. Able to weld and fabricate metals in vertical, horizontal and overhead positions for high strength requirements. Instructs less capable fitter welders in safe and effective fit up and welding techniques. Demonstrates continuous effort to improve operations. Able to complete projects with little or no supervision. Fitter Welder ($ 10.82 - $13.91) Works from drawings to layout, fit up and/or weld out weldments. Sometimes helps with complex weldments. Performs arc and acetylene welding. Able to weld in vertical and horizontal positions. Requires some supervision. Advanced Press Operator ($ 13.39 - $16.48) Ability to use engineering drawings to layout and bend complex metal parts to the required shapes. Can develop bend templates for use in bending of repetitive parts. Instructs less capable press operators in safe and effective set up and operation techniques. Demonstrates continuous effort to improve operations. Works with little or no supervision. Press Operator ($ 10.82 - $13.91) Ability to use engineering drawings to layout and bend simple metal parts to the required shapes. Uses bend template developed by others to bend and shape repetitive parts. Needs supervision. Advanced Layout Technician ($ 13.39 - $16.48) Ability to use engineering drawings to layout locations for further drilling, cutting, bending or machining parts. Must be detail oriented and accurate to close tolerances. Knowledgeable of all types of measuring equipment to layout parts. Capable of producing accurate templates for use in repetitive layout parts. Utilize shop work orders to collect, organize and direct parts to subsequent operations. Instructs less capable layout technicians in safe and effective layout techniques. Demonstrates continuous effort to improve operations. Works with little or no supervision. Layout Technician ($ 10.82 - $13.39) Ability to use engineering drawings to make simple layouts for further drilling, cutting, bending or machining. Uses layout templates for repetitive parts. Utilizes shop work orders to collect, organize and direct parts to subsequent operations. Needs supervision and help from colleagues.     Advanced Painter ($ 11.33 - $13.39) Sprays machines or a variety of parts with primer or finish paint and operates permatex-lining equipment under minimal supervision. Has ability and knowledge to perform spot repairs and blended repairs on previously painted equipment and parts. Uses brush to touch up any imperfections. Mixes paint and adds thinner for proper consistency. May do other work in department when necessary. Responsible for understanding and complying with all EPA and local policies and procedures. Demonstrates continuous effort to improve operations. Instructs less capable painters in safe and effective painting and priming techniques. Painter ($ 9.79 - $11.85) Sprays machines or a variety of parts with primer or finish paint, under supervision. Uses brush to touch up any imperfections. Mixes paint and adds thinner for proper consistency. May do other work in department when necessary. Responsible for understanding and complying with all EPA and local policies and procedures. Advanced Assembly Mechanic ($ 12.36 - $15.45) Ability to complete mechanical assembly on all trencher subassemblies and final assembly of the machine. Works with engineering drawings to assemble close tolerance machine parts into working mechanical components. Ability to adjust and align to close tolerances to maintain required fit of all mechanical components. Diversified to plan or help plan assembly procedure. Demonstrates continuous effort to improve operations. Familiar with all hydraulics and electrical components. Instructs less capable assembly mechanics in safe and effective assembly procedures. Works with little or no supervision. Assembly Mechanic ($ 10.30 - $12.88) Generally work with Advanced assembly Mechanics to complete mechanical assembly of subassemblies and final assembly of the machine. Utilizes drawings and/or verbal instruction to complete simple assemblies. Helps to install trencher components to complete assembly of the trencher. Assembly Welder ($ 12.36 - $15.45) Works with Advanced Assembly Mechanics to help erect and assemble machine. Utilizes welding skills to add to, modify or complete weldments for final assembly of the machine. Must be able to weld in vertical, horizontal and overhead positions. Helps with mechanical assembly when not using welding skills. Requires verbal direction and some supervision. Advanced Electrician ($ 12.36 - $15.45) Ability to use electrical schematics and specifications to completely wire up a machine. Must have full understanding of electrical and electronics circuitry and controls. Familiar with the electrical requirements of computerized components. Offers recommendations to engineering for improvements in electrical and electronic design. Must be able to check out, inspect and trouble shoot all electrical and electronic systems on the machine. Helps as an assembly mechanic when required. Instructs less capable electricians in safe and effective electrical techniques. Demonstrates continuous effort to improve operations. Works with little or no supervision. Electrician ($ 10.30 - $12.88) Generally works with Advanced Electrician to wire up machines. Must be able to read electrical schematics and have some idea of electrical circuitry. Helps to check out and inspect electrical systems. Helps as an assembly mechanic when required. Requires some supervision. Advanced Hydraulic Technician ($ 12.36 - $15.45) Full and complete understanding of both open and closed hydraulic schematics and circuits. Able to build good quality hoses as specified by the engineering drawings and bills of material. Responsible for installing hydraulics components and hoses as required. Has the ability to logically trouble shoot hydraulic systems to determine causes and solutions of problems. Responsible for setting and checking proper pressure in the system as specified by engineering. Aids field service personnel as required. Helps as an assembly mechanic when required. Instructs less capable hydraulic technicians in safe and effective hydraulic system techniques. Demonstrates continuous effort to improve operations. Works with little or no supervision. Hydraulic Technician ($ 10.30 - $12.88) Working knowledge of hydraulic schematics and circuits. Builds good quality hoses as specified by the engineering drawings and bills of material. Able to install hydraulic components and hoses. Helps as an assembly mechanic when required. Requires general supervision. Advanced CNC Machinist ( $ 14.42 - 16.48) Able to utilize engineering drawings to program CNC functions to produce complicated, close tolerance machine parts in the least amount of time. Knowledge of different programming languages required. Ability to set up and run complex parts on various CNC machines. Instructs less capable CNC machinists in safe and effective set up and CNC operation techniques. Demonstrates continuous effort to improve operations. Works with little or no supervision. CNC Machinist ($ 12.36 - $14.94) Working knowledge of at least one CNC programming language. Able to program CNC functions to produce parts efficiently. Ability to set up and run parts on at least one CNC machine. Requires general supervision. Advanced Machinist ($ 12.36 - $15.45) Ability to set up and operate a wide range of manual machines such as lathes, boring mills, mills, gear cutters, etc. unassisted. Adjust feeds and speeds to improve quality and achieve maximum efficiency with minimal tool wear. Ability to measure work carefully using precision measuring instruments to assure conformance to tolerances. Demonstrates continuous effort to improve operations. Instructs less capable machinists in safe and effective set up and operation techniques. Works with little or no supervision. Machinist ($ 10.30 - $12.36) Ability to set up and operate a wide range of manual machines such as lathes, boring mills, mills, gear cutters, etc. Knowledge of the required feed and speeds to produce the part. Ability to measure work carefully using precision measuring instruments to assure conformance to tolerances. Requires some supervision. Advanced Drill Press Operator ($ 11.33 - $14.94) Ability to make precise layouts of holes to be drilled. Able to set up and operate drill press to drill manually laid out holes or to use drill jig. Selects proper speeds and feed to achieve maximum efficiency with minimum drill wear. Demonstrates continuous effort to improve operations. Instructs less capable drill press operators in safe and effective set up and drilling techniques. Works with little or no supervision. Drill Press Operator ($ 9.27 - $11.85) Ability to set up and drill holes using drill jig or hole location laid out by others. Selects proper speeds and feed to produce required hole. Requires general supervision. Saw Operator ($ 9.27 - $11.85) Able to set up and operate metal cutting saw on various shapes of structural steel including angle, flat bar, round bar, beams, channels, etc. Ability to measure and cut to specified length as per the engineering drawing or work order requirements. Uses crane and other lifting devices to load and unload saw. Familiar with inventory procedures requiring remarking of remaining material to return to inventory. Must be able to mark cut pieces according to the work order requirements. Requires some supervision. Deburr Operator ($ 9.27 - $11.85) Ability to inspect and remove all burrs from machined parts as required. Must handle parts carefully to avoid any damage to close tolerance parts. Help out in other areas as required. Quality Inspector ($ 10.30 - $13.39) Ability to read and interpret all drawings. Works with all types of measuring instruments to check dimensions as shown on drawings. Detail oriented. Familiar with all types of welded and mechanical assemblies. Prepares inspection reports as required. Section 8 The Company reserves the right to give additional wage raises on the basis of merit to bargaining unit employees in such amounts as management in its sole discretion determines to be appropriate. Any increased wage will not exceed the maximum of the pay scale corresponding with the employee's job description.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY  WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   Exhibit 10.19   LICENSE AND RESEARCH AGREEMENT (Amended and Restated)     This License And Research Agreement (the “Agreement”) is made and entered into as of September 2, 1999, (the “Effective Date”), as first amended and restated on March 26, 2001 and again amended and restated on July 1, 2001 (the “Restatement Date”), by and between Rigel Pharmaceuticals, Inc., a corporation organized under the laws of Delaware and having a principal place of business at 240 East Grand Avenue, South San Francisco, CA 94080 (“Rigel”) and Cell Genesys, Inc., a corporation organized under the laws of Delaware and having a principal place of business at 342 Lakeside Drive, Foster City, CA 94404 (“CG”).  Rigel and CG may be referred to collectively as the “Parties,” or individually as a “Party.”   Recitals   Whereas, CG controls rights to certain patents relating to [ * ] cell lines [ * ] and [ * ] cell lines (Rockefeller), and related technology;   Whereas, Rigel has a license to the [ * ] cell lines, associated vectors and vector libraries under intellectual property rights owned by Stanford University;   Whereas, CG and Rigel desire to enter into an agreement granting each other licenses under such patents and other intellectual property rights as provided herein;   Whereas, Rigel is in the business of, among other things, providing services for identifying molecules which bind together in intracellular signaling pathways, and CG desires that Rigel perform such services for CG to identify peptides, proteins and/or Genetic Material (as defined below) that modulate angiogenesis in endothelial tissues;   Whereas, Rigel wishes to perform additional research in the Field of Research (as defined below) for CG and Novartis Pharma AG (“Novartis”) funded by Novartis, as a combined program of research expanding upon the research that Rigel has already as of the Restatement Date conducted, such that Rigel will be able to continue its research effort in the Field of Research and the overall resources that Rigel will be able to devote to identifying peptides, proteins and/or Screened Genetic Material (as defined below) that modulate angiogenesis in endothelial tissues will be increased; and   Whereas, The Parties wish to confirm CG rights to all Therapeutic Candidates (as defined below) that Rigel identifies in the combined research program, but Rigel needs, in order to make such arrangement acceptable to Novartis, the unambiguous right pursuant to this Agreement to grant Novartis certain rights with respect to all Targets (as defined below) for Novartis’s use as targets in Novartis’s drug discovery efforts, and CG is willing to waive certain of its rights and to amend and restate this Agreement to assure Rigel such unambiguous right;   Now THEREFORE, in consideration of the foregoing premises and the covenants and promises contained in this Agreement, the Parties agree as follows:   ARTICLE 1   DEFINITIONS   1.1          “Affiliate” shall mean, with respect to a Party to this Agreement, any other entity, whether de jure or de facto, which directly or indirectly controls, is controlled by, or is under common control with, such Party.  A business entity or Party shall be regarded as in control of another business entity if it owns, or directly or indirectly controls, at least fifty percent (50%) (or such lesser percentage which is the maximum allowed to be owned by a foreign entity in a particular jurisdiction) of the voting stock or other ownership interest of the other entity, or if it directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other entity by any lawful means whatsoever.   1.2          “CG Collaboration Partners” means those third parties which enter into a research or development agreement with CG under which CG conducts substantial research or development activities in collaboration with such third party and grants a license to such third party under patents and/or know-how owned or controlled by CG in addition to a sublicense under the Rigel Biological Materials or Rigel Know-How, which licenses and sublicense are for the further development and commercialization of the results of such collaborative research or development.   1.3          “CG [ * ] Field” means human Gene Therapy and animal Gene Therapy.   1.4          “CG Know-How” means all Information Controlled by CG as of the Effective Date that is necessary or useful for practicing the CG Patents.   1.5          “CG License” means the license agreement between CG and Rockefeller University as in effect as of the Effective Date and attached hereto as Appendix A.   1.6          “CG Patents” means the Patents and applications listed on Appendix B, to the extent the same are Controlled by CG.   1.7          “CG Program Field” means the research, development or commercialization of human or animal therapeutic products and services, which products and/or services are comprised of peptides, proteins or Gene Therapy.   1.8          “Control” or “Controlled” means ownership of, or a license to, a particular item, material or intellectual property right with the ability to grant to the other Party access to and/or a license or sublicense as provided for herein without violating the terms of any agreement with a Third Party under which such rights were acquired from such Third Party.   1.9          “Field of Research” means identification of peptides, proteins and/or Genetic Material that modulate angiogenesis in endothelial tissues.   1.10        “FTE” means a full-time employee or consultant of Rigel or the equivalent thereof.   1.11        “FTE Year” means the amount of time one FTE would spend working during one (1) calendar year.   1.12        “Gene Therapy” means a product or service for the treatment or prevention of a disease that utilizes ex vivo or in vivo delivery (via viral or nonviral gene transfer methods or systems) of Genetic Material, including any cell incorporating Genetic Material.   1.13        “Genetic Material” means a nucleotide sequence, including DNA, RNA and complementary and reverse complementary nucleotide sequences thereto, whether coding or noncoding and whether intact or a fragment.   1.14        “Information” means any and all information, including without limitation techniques, inventions, practices, methods, knowledge, know-how, skill, experience, test data, analytical and quality control data, compositions and assays, and any business, marketing, personnel or financial information or matters.   1.15        “Novartis Angiogenesis Collaboration” means Rigel’s Collaboration Agreement with Novartis dated May 29, 1999, as amended, but solely to the extent covering a program of research directed to the field of target identification and validation as they relate to the role of endothelial cell function in angiogenesis, together with such research program and results obtained therein, but specifically excluding Novartis’s research and research results using Targets identified by Rigel (or jointly by Rigel and Novartis) pursuant to such research program.   1.16        “Patent” means an issued, valid, unexpired patent, including any extension, registration, confirmation, reissue, re-examination or renewal thereof, or a pending application for a patent, in any country, region or jurisdiction.   1.17        “Program Know-How” shall mean any Information developed in the Research relating to the development of Therapeutic Candidates, excluding Information relating to Targets that are not Therapeutic Candidates.   1.18        “Program Patent” shall mean a Patent claiming inventions or discoveries in the Program Know-How.   1.19        “Program Technology” shall mean Program Know-How and Program Patents.   1.20        “Research” shall have the meaning provided in Section 3.1(a).  For purposes of this Agreement, Rigel’s activities in the Field of Research under the Novartis Angiogenesis Collaboration shall be included within “Research.”   1.21        “Research Plan” shall have the meaning provided in Section 3.1(a).   1.22        “Rigel Biological Materials” means the [ * ] cell lines, associated vectors and vector libraries set forth in Appendix C.   1.23        “Rigel Collaboration Partners” means those third parties which enter into a research or development agreement with Rigel under which Rigel conducts substantial research or development activities in collaboration with such third party and grants a license to such third party under patents and/or know-how owned or controlled by Rigel in addition to a sublicense under CG Patents and/or CG Know-How, which licenses and sublicense are for the further development and commercialization of the results of such collaborative research or development.   1.24        “Rigel Field” means the creation and use of virally produced peptide and protein libraries for the screening of transdominant effector peptides and RNA molecules as claimed in the patent applications set forth on Appendix D as well as any processes, techniques and applications disclosed in the foregoing patent applications; it is understood that the foregoing technology is to be used for (a) the discovery, validation and development of targets for human or animal therapeutics, including without limitation Targets, and (b) the discovery, testing, development and commercialization of therapeutic, diagnostic and drug delivery products other than Therapeutic Candidates.  For the purposes of this Section 1.23, “disclosed in” shall mean disclosed in the specifications of such patent applications as necessary to practice the invention claimed and not solely as part of the description of the prior art.   1.25        “Rigel Know-How” means all Information Controlled by Rigel as of the Effective Date necessary or useful for the use or modification of the Rigel Biological Materials.   1.26        “Rigel License” means the license agreements between Rigel and Stanford University as in effect as of the Effective Date and attached hereto as Appendix E.   1.27        “RMC” shall have the meaning provided in Section 3.2.   1.28        “Screened Genetic Material” shall mean Genetic Material identified via screening against a Target, but which Genetic Material is not a Therapeutic Candidate.   1.29        “Success Criteria” shall have the meaning provided in Section 3.1(b).   1.30        “Tail End Period” shall mean the period of six (6) months after the end of the Research Period, the purpose of which is to permit the RMC to identify Therapeutic Candidates; provided, however, that if this Agreement is terminated prior to or during the Tail End Period, the Tail End Period shall be deemed to end upon such termination date.   1.31        “Target” shall mean a molecule occurring naturally in the body that is shown in the Research (whether pursuant to this Agreement or the Novartis Angiogenesis Collaboration), to directly or indirectly cause or impede angiogenesis in endothelial tissue, to the extent such molecule (or its binding to another molecule) is agonized or antagonized by a Therapeutic Candidate.  It is understood that a particular protein, peptide or Genetic Material could be both a Therapeutic Candidate and a Target, and in such case such molecule shall be treated as a “Target” hereunder to the extent that such molecule is used as a drug discovery target, and shall at the same time be treated as a “Therapeutic Candidate” hereunder to the extent such molecule is used as a drug or therapy.  The rights of the Parties with respect to Targets that are also Therapeutic Candidates are as set forth in Section 2.4.  Rigel's rights to grant Novartis sublicense rights hereunder to use Targets are as set forth in Section 2.1(b).  The exclusion of Novartis' research and research results using Targets from the Novartis Angiogenesis Collaboration (and therefore the provisions of this Agreement) are as set forth in Section 1.15.   1.32        “Therapeutic Candidate” shall mean a peptide, protein or Genetic Material discovered, identified, produced or tested during the Research Period pursuant to the Research (whether pursuant to this Agreement or pursuant to the Novartis Angiogenesis Collaboration), or identified during the Tail End Period, by  either Party, which meets the Success Criteria, and any homologues or derivatives thereof.  For such purposes, it is understood that if a protein or peptide meets the Success Criteria, Genetic Material that codes for such protein or peptide (or homologues or derivatives of such Genetic Material) shall be within the definition of Therapeutic Candidate (and vice-versa). The rights of the Parties with respect to Therapeutic Candidates that are also Targets are as set forth in Section 2.4.   1.33        “[ * ] Patents” means the patents listed in Appendix F.   ARTICLE 2   LICENSES   2.1          CG License Grants.   (a)           Subject to the terms of the CG License, CG hereby grants to Rigel a royalty-free, non-exclusive, worldwide license, with the right to sublicense to Rigel Collaboration Partners, under and to CG’s right, title and interest in the CG Patents and CG Know-How, and under and to CG’s right, title and interest in any Program Technology owned solely by CG, all for purposes solely within the Rigel Field; and hereby waives any claims against Rigel for the practice and use of the CG Patents and CG Know-How within the Rigel Field prior to the Effective Date.  Any sublicense granted hereunder to Rigel Collaboration Partners shall be limited to the purposes of such collaboration (as such purposes are described in Section 1.22 above).   (b)           Subject to Section 2.4 below, CG hereby grants to Rigel:   (i)            a royalty-free, exclusive, worldwide license, with the right to grant and authorize sublicenses, under CG’s right, title and interest in the Program Technology that is owned jointly by the Parties under Section 4.1(d) below, and Targets that are similarly owned jointly with Rigel, all to make and use the Targets for purposes outside the CG Program Field; and   (ii)           a royalty-free, exclusive, worldwide license, under CG’s right, title and interest in the Program Technology that is owned jointly by the Parties under Section 4.1(d) below, and Targets that are similarly owned jointly with Rigel, all to make and use the Targets as targets for the purposes of elucidating protein pathways  and identifying, researching, developing and/or commercializing proteins, peptides, antibodies, Screened Genetic Material, other biological agents and synthetic organic molecules that are not themselves Therapeutic Candidates but that modulate angiogenesis in endothelial tissues solely in connection with the Novartis Angiogenesis Collaboration.  Such license does not extend to the making or use of Targets for the purposes of development and/or commercialization of Therapeutic Candidates in the CG Program Field.   It is understood and agreed that the licenses granted above in this Section 2.1(b) shall specifically exclude the right to make or use any Target or Therapeutic Candidate as a therapeutic agent or for purposes relating to delivery of a Target or Therapeutic Candidate via Gene Therapy.  The license set forth in Section 2.1(b)(ii) above shall include the right to grant a sublicense solely to Novartis under the Novartis Angiogenesis Collaboration and to authorize further sublicenses by Novartis solely in connection with Novartis’s research and development programs; provided that any sublicense from Rigel to Novartis under the rights licensed to Rigel pursuant to Section 2.1(b)(ii) (and any further sublicense by Novartis under such rights) shall not exceed the scope of the license granted Rigel pursuant to Section 2.1(b)(ii).  Rigel shall retain the right to grant to CG the licenses set forth in Section 2.2 of this Agreement.  If Rigel fails to retain such right under the Novartis Angiogenesis Collaboration, the license granted Rigel under Section 2.1(b)(ii) shall terminate.   (c)           CG has entered into a license agreement with the [ * ] concerning the [ * ] Patents which includes the right to sublicense (the “[ * ] Agreement”); as of the Effective Date, however, the terms under which CG may grant sublicenses under the [ * ] Agreement make impractical a sublicense to Rigel under the [ * ] Patents for purposes of the Rigel Field.  In the event that CG successfully renegotiates the terms of the [ * ] Agreement such that such sublicense would be practical, CG agrees to discuss in good faith the grant of a sublicense to Rigel under the [ * ] Patents.  The Parties understand and agree, however, that CG is not and shall not be obligated to enter into any agreement with Rigel concerning the [ * ] Patents, that failure to reach such an agreement for any reason shall not be deemed a breach of this Agreement and that this Section 2.1(c) shall not be deemed to preclude CG from entering into an agreement with a third party of any type or at any time concerning the [ * ] Patents.   2.2          Rigel License Grants.   (a)           Subject to the terms and prior to the termination or expiration of the Rigel License, the Parties agree that Rigel shall grant to CG, at CG’s sole option and upon CG’s request, a royalty-free, non-exclusive, worldwide license, without the right to sublicense, under Rigel’s right, title and interest in the Rigel Know-How and Rigel Biological Materials, to make, have made, use, sell, offer for sale and import products in the CG [ * ] Field.  It is understood that in no event will CG have any obligation to obtain such license from Rigel.  Rigel will give CG thirty (30) days prior written notice of the termination of the Rigel License by Rigel.   (b)           Rigel hereby grants to CG:   (i)            subject to Section 2.1(b) above, (y) a royalty-free, exclusive, worldwide license, with the right to grant and authorize sublicenses, under Rigel’s right, title and interest in the Program Technology (including without limitation the Therapeutic Candidates) owned solely by Rigel or jointly with CG, to make, have made, use, sell, offer for sale and import products, and otherwise exploit the Program Technology, in each case for purposes solely within the CG Program Field, and (z) a royalty-free, exclusive, worldwide license, with the right to grant and authorize sublicenses, under any Information and intellectual property created by Rigel (solely or jointly with Novartis) under the Novartis Angiogenesis Collaboration, to make, have made, use, sell, offer for sale and import Therapeutic Candidates within the CG Program Field; and   (ii)           subject to rights previously granted to third parties, a royalty-free, non-exclusive, worldwide license, with the right to grant sublicenses, under Rigel’s right, title and interest in and to all Patents with priority dates prior to the Effective Date that claim Therapeutic Candidates, or the manufacture or use thereof, to make, have made, use and sell products in Gene Therapy incorporating such Therapeutic Candidates.   (c)           In addition, Rigel hereby grants to CG (i) a royalty-free, non-exclusive license, with the right to sublicense to CG Collaboration Partners, under Rigel’s right, title and interest in the Targets to make and use the Targets solely for the research and development of the Therapeutic Candidates in the Field of Research, and (ii) a royalty-free, non-exclusive license, with the right to sublicense to CG Collaboration Partners, under any Information and intellectual property created by Rigel (solely or jointly with Novartis) under the Novartis Angiogenesis Collaboration, to make and use the Targets solely for the research and development of the Therapeutic Candidates in the Field of Research.  For clarity, it is understood and agreed that the licenses granted to CG under this Section 2.2 specifically exclude the performance by CG of research on or with a Target which is outside the Field of Research. Any sublicense granted hereunder to CG Collaboration Partners shall be limited to the purposes of such collaboration.   2.3          Rigel Covenant.  Rigel hereby covenants that neither Rigel nor its Affiliates will make any claims against CG, its permitted sublicensees, distributors and customers in the chain of title with CG or its permitted sublicensees for Patent infringement as a result of activities which are explicitly permitted under the terms of this Agreement, nor shall Rigel or its Affiliates authorize a third party to make such a claim, and Rigel agrees to cooperate with CG in the defense against any such claim by licensees of Rigel.   2.4          Molecules That Are Both Targets and Therapeutic Candidates.  With respect to each particular protein, peptide or Genetic Material that is both a Target and a Therapeutic Candidate (each a “Dual Molecule”), the parties agree that (i):  CG shall have (y) the exclusive right to research, develop, make, have made, use, sell, offer for sale and import such Dual Molecule (including homologues and derivatives of such Genetic Material) as a therapeutic agent or such Dual Molecule (including homologues and derivatives of such Genetic Material) for Gene Therapy, and (z) to make and use such Dual Molecule in accordance with Sections 2.2(b) and (c); and (ii) Rigel shall have the exclusive right to research, develop, make, have made and use such Dual Molecule for the purposes set forth in Section 2.1(b)(i); and (iii) Rigel shall have the exclusive right to research, develop, make, have made and use such Dual Molecule for the purposes set forth in Section 2.1(b)(ii).  For the sake of clarity, CG’s exclusive rights as described in this Section 2.4 shall not be construed to exclude Rigel or its permitted licensees from making and using such molecule as a target in research to elucidate protein or other signal transduction pathways in which such Dual Molecule is involved, or to discover, generate, develop and commercialize proteins, peptides, antibodies, Screened Genetic Material, other biological agents and synthetic organic molecules that may or may not modulate the activity of such Target or pathways but are not themselves Therapeutic Candidates.  All activities of Rigel with respect to the use of Targets shall remain subject to the provisions of Section 3.5.   2.5          No Other License.  No right or license is granted by either Party to the other under any other intellectual property other than those items expressly included in the licenses granted in this Article 2. Accordingly, no license shall be deemed granted by implication, estoppel or otherwise, if such license is not expressly and specifically granted in this Article 2.   ARTICLE 3   RESEARCH 3.1          Research.   (a)           Rigel agrees to (i) use diligent efforts to conduct research within the Field of Research (the “Research”), in accordance with the research plan (the “Research Plan”) incorporated hereby in, and appended to, this Agreement as Appendix G, as amended from time to time by written agreement of the Parties; and (ii) use diligent efforts to meet the goals of the Research Plan according to the timetables set forth therein.  Without limiting the foregoing, the Research shall commence on the Effective Date and terminate upon the earlier of three (3) years after the Effective Date or the termination of the Agreement (the “Research Period”).  Rigel will commit [ * ] during each year of the Research Period, or such other allocation as the RMC may decide, provided that in the event the RMC decides to reallocate FTEs between years, Rigel shall have no obligation to commit more than [ * ] in total over the entire Research Period.  It is understood and agreed that the scope of CG’s licenses under Section 2.2 shall not be limited by (x) the number of FTEs performing the Research, (y) whether such FTEs are performing research in accordance with the Research Plan or under the Novartis Angiogenesis Collaboration, or (z) whether such FTEs are funded by Rigel, Novartis, or some other entity.  The individual FTEs who will initially conduct the Research are listed in Appendix H and may be replaced by Rigel, as reasonably agreed by the Parties, with other FTEs of comparable skill and expertise.  Rigel agrees to test against the Success Criteria during the Research Period any proteins, peptides and Genetic Material produced or evaluated in connection with the Research as contemplated in the Research Plan.   (b)           The Parties shall reasonably establish criteria for determining whether a particular peptide, protein or Genetic Material modulates angiogenesis in endothelial tissue in assays performed at Rigel, as such criteria are contemplated in the Research Plan (the “Success Criteria”).   3.2          Research Management Committee.  The Parties shall form a research management committee (the “RMC”) comprised of four (4) individuals, two (2) being Rigel employees appointed and replaced by Rigel at its discretion, and two (2) being CG employees appointed and replaced by CG at its discretion.  The size and composition of the RMC may be modified by mutual agreement of the Parties.  The RMC shall evaluate the results of the Research set forth in the research reports pursuant to Section 3.4(a) to assess whether a peptide, protein or Genetic Material is a Therapeutic Candidate, and perform such other duties as specifically delegated to the RMC by mutual written agreement of the Parties.   3.3          RMC Meetings and Actions.  RMC meetings shall take place at such times and places as shall be determined by the RMC in order for the RMC to fulfill its obligations under Section 3.2.  It is expected that the meetings will alternate between appropriate offices of each Party, or at such other convenient locations as agreed.  If agreed by its members, the RMC may conduct meetings by telephone or video conference or other acceptable electronic means, provided that any decisions made during such meeting are recorded in writing and confirmed by signature of at least one (1) of the RMC members from each of the Parties.  All decisions of or actions taken by the RMC shall be by unanimous approval of all the members of the RMC, and voting on any matters shall be reflected in the minutes of the meeting at which the vote was taken. If the RMC is unable to reach unanimous decision on any particular matter or issue, such matter or issue shall be referred to the chief executive officer of each Party or their designees for resolution.  It is understood that, for purposes of determining the Parties’ rights and obligations under this Agreement, the authority of the RMC shall be limited to deciding those specific issues specifically delegated to the RMC in other Articles of this Agreement (i.e., other than the general matters described in this Article 3).   3.4          Reports; Disclosure.   (a)           Rigel shall keep CG fully informed of the progress and results of the Research (including the discovery of Targets and/or Therapeutic Candidates made through its Research under the Novartis Angiogenesis Collaboration) and shall provide written reports at or before each RMC meeting describing its activities, the level of effort applied to, and the results of, the Research, specifically including Rigel’s determination as to which peptides, proteins or Genetic Material as of the date of such report meet the Success Criteria.  Such RMC reports shall be in such form and contain such detail as the RMC shall determine.  Rigel agrees to fully disclose to CG the Program Technology and the Targets, and to provide CG with reasonable quantities of Targets and Therapeutic Candidates generated or utilized in connection with the Research.   (b)           Rigel agrees to maintain records of its activities in performing the Research, in good scientific manner, and to permit CG to have access to such records upon ten (10) days written notice to Rigel and during regular business hours, to the extent reasonably necessary to verify that Rigel has met its obligations under this Section 3.4.   3.5          Exclusivity of Efforts.  Except as explicitly set forth in this Section 3.5, Rigel agrees that neither Rigel nor any of its Affiliates shall directly or indirectly conduct or sponsor any research, develop or otherwise commercialize any products or technologies within the Field of Research, other than pursuant to the Research Plan, during the Research Period and for a period of one (1) year following the Research Period.  Without limiting the foregoing, Rigel shall not appoint or license any third party to develop, market, sell or otherwise distribute such products until after the expiration of one (1) year following the Research Period.  Notwithstanding the foregoing in this Section 3.5 and subject toSection 2.1(b), Rigel shall be entitled to enter into the Novartis Angiogenesis Collaboration.   ARTICLE 4   INTELLECTUAL PROPERTY MATTERS   4.1          Ownership and Prosecution.  Subject to the terms of this Agreement, as between the Parties hereto:   (a)           It is understood that CG retains its entire right, title and interest in the CG Patents and CG Know-How, subject only to the rights expressly granted to Rigel hereunder, and shall have the right, but not the obligation, to file, prosecute and maintain any Patents related thereto at its expense.   (b)           It is understood that Rigel retains its entire right, title and interest in the Rigel Biological Materials and Rigel Know-How, subject only to the rights expressly granted to CG hereunder, and shall have the right, but not the obligation, to file, prosecute and maintain any Patents related thereto at its expense.   (c)           It is understood that, subject only to the rights expressly granted to the other Party hereunder, each Party retains its entire right, title and interest in and to any inventions, discoveries, know-how, trade secrets, and other information made or developed solely by such Party and/or its consultants in the course of the performance of this Agreement (“Sole Inventions”), and, subject to subsection (e) below, shall have the right, but not the obligation, to file, prosecute and maintain any Patents claiming its Sole Inventions (“Sole Patents”) in all countries of the world.   (d)           Both Parties shall jointly own any inventions, discoveries, know-how, trade secrets, and other information, that are made jointly by the Parties in the course of the performance of this Agreement (“Joint Inventions”).  Subject to subsection (e) below, the RMC shall designate the Party which shall be responsible for filing, prosecuting and maintaining Patents claiming Joint Inventions (“Joint Patents”).  All costs and expenses of filing, prosecuting and maintaining such Joint Patents will be borne equally by the Parties.  The Party designated by the RMC to perform patenting activities shall seek the comments of the other Party and shall keep the other informed of the progress of such prosecution by providing quarterly status reports and copies of all correspondence between their patent counsel and the patent offices of the countries where such applications were filed.  Such other Party shall reasonably assist the Party designated by the RMC in the prosecution of Joint Patents, including, without limitation, by executing any necessary powers of attorney.  Subject to the rights and licenses granted to the other Party in Section 2.1(b) and 2.2(b), it is understood that neither Party shall have any obligation to account to the other, or obtain the consent of the owner, with respect to the commercialization, licensing or enforcement of any Joint Inventions or Joint Patents, and hereby waives any right it may have under the laws of any country to require such accounting or consent.   (e)           CG shall have the right but not the obligation (either itself or through its designee) to file, prosecute and maintain Patents claiming Therapeutic Candidates (“Candidate Patents”); provided, however, that for any molecule that is a Therapeutic Candidate and a Target: (i) CG shall have the right but not the obligation (either itself or through its designee) to file, prosecute and maintain Patents claiming uses of such molecule in the CG Program Field and such Patents also shall be Candidate Patents; and (ii) Rigel shall have the right, but not the obligation, to file, prosecute and maintain any Patents claiming the composition of matter of such molecule or claiming any use of the molecule outside the CG Program Field or in the Rigel Field.  All costs and expenses of filing, prosecuting and maintaining Candidate Patents will be borne by the Party that undertakes such prosecution.  The Party undertaking such prosecution shall seek the comments of the other Party and shall keep the other Party informed of the progress of such prosecution by providing quarterly status reports and copies of all correspondence between their patent counsel and the patent offices of the countries where such applications were filed.  Each Party shall reasonably assist the other Party in the prosecution of Candidate Patents, including, without limitation, by executing any necessary powers of attorney and other documents necessary for such prosecution.   (f)            Each Party agrees to keep the other Party fully informed as to prosecution and maintenance (including without limitation any interference, opposition or other prosecution or other proceedings) with respect to patents claiming and disclosing subject matter within the Program Technology.  In the event that a Party elects not to prosecute or maintain any patent rights in a Sole Invention comprising Program Technology, it shall promptly notify the other Party and authorize the other Party to seek or continue such prosecution and maintenance at such other Party’s expense.  In such case the owner of such Sole Invention shall cooperate fully with the other Party to facilitate such prosecution and maintenance.   4.2          Infringement and Similar Actions.  As between the Parties hereto:   (a)           CG shall have the sole and exclusive right, at its expense, to prosecute any and all infringement or wrongful use of the CG Patents and CG Know-How, and (subject to paragraph (c) below) Sole Patents owned by CG and/or to enter settlements, judgments or other arrangements respecting such infringement or wrongful use.  CG may retain all damages and other amounts recovered as a result of any such action, settlement, judgment or other arrangement.   (b)           Rigel shall have the sole and exclusive right, at its expense, to prosecute any and all infringement or wrongful use of the Rigel Know-How, the Rigel Biological Materials, and (subject to paragraph (c) below) Sole Patents owned by Rigel and/or to enter settlements, judgments or other arrangements respecting such infringement or wrongful use.  Rigel may retain all damages and other amounts recovered as a result of any such action, settlement, judgment or other arrangement.   (c)           With respect to infringement of any Program Patents in the CG Program Field, CG shall have the right, but not the obligation, (directly or through designees) to institute, prosecute and control at its own expense and for its own benefit, any action or proceeding with respect to such infringement.  With respect to other infringement of any Program Patents (i.e., outside the CG Program Field), Rigel shall have the right, but not the obligation, (directly or through designees) to institute, prosecute and control, at its own expense and for its own benefit, any action or proceeding with respect to such infringement.  If a Party with the right to do so fails to bring an action or proceeding against a suspected infringer within a reasonable period after receiving a written request by the other Party to do so, such other Party shall have the right to bring and control an action against such infringer by counsel of its own choice and retain for its own account any amounts recovered from third parties.  If one Party brings any such action or proceeding, the other Party agrees to be joined as a Party plaintiff if necessary to prosecute the action and to give the first Party reasonable assistance and authority to file and prosecute the suit.   (d)           Each Party shall promptly notify the other in writing of any alleged or threatened infringement of Joint Patents of which it becomes aware and which may adversely impact the rights of the Parties hereunder.  Promptly upon such notification, the Parties shall meet to discuss the strategy and appropriate steps to be taken to deal with such infringement. Any recovery obtained by settlement or otherwise shall be disbursed as follows: first, any reasonable expenses incurred in connection with such action (including counsel fees) by both Parties are reimbursed; thereafter, the net recovery shall be shared between the Parties according to the ratio of their respective contributions to the litigation costs.  This paragraph shall not be deemed to limit the Parties’ respective rights to enforce Joint Patents, or to limit the rights granted under paragraph (c) above.   4.3          Third Party Claims.   (a)           Except to the extent expressly warranted in Article 7, and subject to the indemnification obligation in Article 5, CG shall have no liability to Rigel with respect to any claim, suit or action alleging that the practice of the license rights granted by CG under Section 2.1 infringes any intellectual property or other right of a third party. Except to the extent expressly warranted in Article 7, and subject to the indemnification obligation in Article 5, Rigel shall have no liability to CG or its Affiliates with respect to any claim, suit or action alleging that the practice of the license rights granted under Section 2.2 infringes any intellectual property or other rights of a third party.   (b)           Rigel hereby agrees to provide reasonable assistance to CG, at its request, in defending any action or claim initiated by a third party against CG arising from any claim that the use or practice of the Rigel Know-How, Rigel Biological Materials or the Target by CG or its Affiliates infringes that third party’s proprietary rights.  CG hereby agrees to provide Rigel reasonable assistance, at its request and expense, in defending any action or claim initiated by a third party against Rigel or its Affiliates arising from any claim that the use or practice of the CG Patents or CG Know-How by Rigel or its Affiliates infringes that third party’s proprietary rights.   (c)           If a third party asserts against CG that a patent, trademark or other intangible right owned by it is infringed by any product in the CG Program Field derived or resulting from or incorporating Program Technology, CG will be solely responsible for defending against any such assertions at its cost and expense.  Each Party will give prompt written notice to the other of any such claim.  Rigel will assist in the defense of any such claim as reasonably requested by CG, at CG’s expense, and may retain separate counsel at its own expense at any time.   (d)           Neither Party shall enter into any settlement of any claim which would admit the invalidity of Patents within the Program Technology without the other Party’s prior written consent, which consent shall not be unreasonably withheld or delayed.   4.4          Pass-Through Royalties.  In consideration for the licenses granted herein:   (a)           Rigel agrees to pay any amounts which CG is required to pay to Rockefeller University under the CG License as a result of CG’s grant to Rigel of license rights to CG Patents or CG Know-How to Rigel or the exercise of the license rights granted by CG under the CG License.   (b)           Rigel agrees to pay CG (i) [ * ] for the license granted to Rigel hereunder to the CG Patents related to the [ * ] cell lines, and (ii) [ * ] for each sublicense granted by Rigel under this Agreement.   (c)           CG agrees that in the event CG exercises its option to obtain a license pursuant to Section 2.2(a) above, CG will pay any amounts which Rigel is required to pay to Stanford University under the Rigel License as a result of Rigel’s grant to CG of license rights to Rigel Biological Materials or Rigel Know-How to CG or the exercise of the license rights granted by Rigel under the Rigel License.  It is understood that unless and until CG obtains such license rights from Rigel, CG shall not be obligated to pay to Rigel or to Stanford University any amounts that Rigel is required to pay to Stanford University under the Rigel License.   ARTICLE 5   INDEMNIFICATION   5.1          CG Indemnity.  CG agrees to indemnify, hold harmless and defend Rigel, its Affiliates, agents and employees from and against any and all liabilities, losses, damages, costs, fees and expenses, including reasonable legal expenses and attorneys’ fees (collectively, “Losses”) arising out of suits, claims, actions, or demands,  brought or made by a third party (“Third Party Claim”) against Rigel, its Affiliates, agents and employees, based on (i) CG’s use and practice of the Rigel Know-How, Rigel Biological Materials, the Program Technology or the Targets, or (ii) breach of CG’s warranties under Article 7 below, or (iii) the manufacture, use, handling, storage, sale or other disposition of Rigel Biological Materials, Program Technology, the Targets or any products resulting or derived from the Rigel Biological Materials or the Program Technology by CG, its Affiliates, agents, employees or sublicensees, all except to the extent such Losses or Third Party Claims result from the negligence or willful misconduct of Rigel or a breach of Rigel’s warranties under Article 7 below.   5.2          Rigel Indemnity.  Rigel agrees to indemnify, hold harmless and defend CG, its Affiliates, agents and employees from and against any and all Losses arising out of any Third Party Claims against CG, its Affiliates, agents and employees based on (i) Rigel’s use or practice of the CG Patents the CG Know-How or the Program Technology, (ii) breach of Rigel’s warranties under Article 7 below, or (iii) the manufacture, use, handling, storage, sale or other disposition of Program Technology, the Targets or any products resulting or derived from the Program Technology by Rigel, its Affiliates, agents, employees or sublicensees, all except to the extent such Losses or Third Party Claims result from the negligence or willful misconduct of CG, or a breach of CG’s warranties under Article 7 below.   5.3          In the event that a Party is seeking indemnification under this Article 5, it shall inform the other Party of a claim or suit as soon as reasonably practicable after it receives notice of the claim or suit, shall permit the indemnifying Party to assume direction and control of the defense of the claim or suit (including the right to settle the claim or suit solely for monetary consideration), and shall cooperate as reasonably requested (at the expense of the indemnifying Party) in the defense of the claim or suit.  Neither Party will enter into any settlement or claim pursuant to this Section 5.3 which is materially adverse to the rights of the other Party herein, without the other Party’s prior written consent, which will not be unreasonably withheld or delayed.   ARTICLE 6   CONFIDENTIALITY   6.1          Confidentiality.  Except to the extent expressly authorized by this Agreement or otherwise agreed in writing, the Parties agree that, for the term of this Agreement and for five (5) years thereafter, the Party receiving any Information or materials furnished to it by the other Party pursuant to this Agreement (collectively, “Confidential Information”) shall keep confidential and shall not publish or otherwise disclose or use such Confidential Information for any purpose other than as provided for in this Agreement.   6.2          Exceptions.  The obligations in Section 6.1 shall not apply to any Information or materials to the extent that the receiving Party can establish by competent proof that such Information or materials:   (a)           was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the other Party;   (b)           was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party;   (c)           became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement; or   (d)           was disclosed to the receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the disclosing Party not to disclose such information to others.   6.3          Authorized Disclosure.  Each Party may disclose the other’s Confidential Information to the extent such disclosure is reasonably necessary (i) to exercise the rights granted to such Party hereunder (including the right to grant sublicenses as permitted by this Agreement provided that prior to any disclosure to a sublicensee, such sublicensee has executed a confidentiality agreement with terms corresponding to this Article 6); and (ii) to file or prosecute patent applications, to prosecute or defend litigation, to comply with applicable governmental regulations or to conduct preclinical or clinical trials; provided that if a Party is required by law or regulation to make any such disclosure of the other Party’s Confidential Information it will, except where impracticable for necessary disclosures, for example in the event of medical emergency, give reasonable advance notice to the other Party of such disclosure requirement and, except to the extent inappropriate in the case of patent applications, will use its best efforts to secure confidential treatment of such Confidential Information required to be disclosed.   6.4          Survival.  This Article 6 shall survive the termination or expiration of this Agreement for a period of five (5) years.   ARTICLE 7   WARRANTY MATTERS   7.1          Limited Warranties.  CG hereby represents and warrants to Rigel that CG has the full right and power to grant the licenses granted to Rigel under Section 2.1(a).  Rigel hereby represents and warrants to CG that Rigel has the full right and power to grant the licenses granted to CG under Section 2.2.   7.2          General Warranties.  Each of the Parties hereby represents and warrants to the other that (i) it is a corporation duly organized and validly existing in good standing under the laws of its state of incorporation, (ii) it is duly qualified and authorized to enter into and perform its obligations under this Agreement, (iii) it has full power, authority and legal right to enter into and perform this Agreement, and (iv) the execution, delivery, and performance of this Agreement has been duly authorized by all necessary corporate action on the part of each Party and does not contravene any law binding on it, its Articles of Incorporation or Bylaws, any indenture, mortgage, contract or other agreement to which it is a Party or by which it is bound or any laws, governmental rule, regulation or order.   7.3          Intellectual Property Warranties.   (a)           Each of the Parties hereby represents and warrants to the other that (i) it does not Control any Patents that would dominate the Patents licensed to the other Party hereunder, (ii) it is not aware of any claims of a third party which would call into question the rights of such Party in the licensed subject matter or its right to grant the licenses granted to the other Party hereunder, (iii) it has provided the other Party with all information concerning royalty obligations pertinent to the licenses granted to the other Party hereunder; and (iv) it will use commercially reasonable efforts to keep in force any license agreement from which the license or sublicense granted to the other Party under this Agreement is derived to the extent that such license agreement does not provide for a survival of any sublicenses granted by such Party.   (b)           Rigel further warrants to CG that as of the Effective Date (i) to the best of its knowledge, Rigel’s conduct of the Research, and the manufacture, sale and use of Therapeutic Candidates will not infringe any third party intellectual property rights, and without limiting the foregoing, Rigel warrants that Rigel’s conduct of the Research will not infringe any of the patents listed in Appendix I hereto; (ii) Rigel does not know of any third party other than Stanford University having a claim in the Rigel Biological Materials; and (iii) Rigel has the right to grant to CG a license under the Rigel Biological Materials and the Rigel Know-How to make, use and sell products in the CG [ * ] Field.   (c)           CG further warrants to Rigel that CG has the right to grant to Rigel a license under the CG Patents and CG Know-How to make, use and sell products within the Rigel Field.   (d)           Rigel warrants that it has not as of the Effective Date entered into an agreement with any third party licensing or granting rights to Rigel technology in the Field of Research.   7.4          Limitation on Warranties.  EXCEPT AS PROVIDED IN SECTIONS 7.1, 7.2, AND 7.3 ABOVE, NEITHER PARTY MAKES ANY WARRANTIES TO THE OTHER PARTY, WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO ANY PRODUCT OR PROCESS, OR AS TO THE VALIDITY OR SCOPE OF ANY PATENTS, OR THAT ANY LICENSED BIOLOGICAL MATERIALS, PATENTS OR KNOW-HOW WILL BE FREE FROM INFRINGEMENT OF PATENTS OF ANY THIRD PARTY, OR THAT NO THIRD PARTIES ARE INFRINGING SAME.   ARTICLE 8   TERM AND TERMINATION   8.1          Term of Agreement.  Unless earlier terminated as otherwise provided in this Article 8, this Agreement shall remain in effect until the expiration of the last to expire of the CG Patents or Program Patents.   8.2          Termination for Breach.  A Party may terminate this Agreement prior to the expiration of the Agreement in the event that the other Party is in breach of or default under a material term of the Agreement, and the breaching Party does not cure such breach or default within thirty (30) days of written notice thereof from the non-breaching Party.  Subject to Section 8.3 below, upon any such termination, all the licenses granted by and between the Parties herein shall terminate; provided that any sublicense granted by a Party hereunder to a third party prior to such termination shall survive such termination, so long as the sublicensee agrees to be bound by the applicable terms of this Agreement.   8.3          Survival.  Upon expiration or termination of this Agreement, the rights and obligations under Articles 5 and 6 and Sections 7.4, 8.3, 9.2, 9.3, 9.7 and 9.10 shall continue.  In addition, upon expiration or termination of this Agreement after the end of the Research Period, the licenses granted under Article 2 above and the rights and obligations under Article 4 shall survive.  Further, subject to Sections 2.1(b) and 2.2(b) if they survive the termination or expiration of this Agreement as provided above, neither Party shall have any obligation to account to the other, or obtain the consent of the owner, with respect to the commercialization, licensing or enforcement of any Joint Patents, and hereby waives any right it may have under the laws of any country to require such accounting or consent.   ARTICLE 9   MISCELLANEOUS   9.1          Relationship of the Parties.  This Agreement creates only licensor-licensee and sublicensor-sublicensee relationships between Rigel and CG.  No partnership or other legal relationship is created hereunder.  Neither Party is, or will be deemed to be, an agent or legal representative of the other Party for any purpose.  Neither Party will be entitled to enter into any contracts in the name of or on behalf of the other Party, and neither Party will be entitled to pledge the credit of the other Party in any way or hold itself out as having authority to do so.   9.2          Assignment.  This Agreement may not be assigned by either Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld; provided, however, that a Party may assign this Agreement without such consent to any Affiliate or to a successor in interest by way of merger, acquisition, sale or transfer of substantially all of its business or assets pertaining to the subject matter of this Agreement.  The Agreement will be binding upon and inure to the benefit of all permitted successors and assignees of the Parties hereunder, and the name of each Party appearing herein will be deemed to include the names of such Party’s successors and assignees.   9.3          Use of Names.  No Party hereto may use the name of the other Party in public announcements without the prior consent of the other Party as required by law or regulation.   9.4          Amendment.  No amendment, modification or supplement of any provision of the Agreement will be valid or effective unless made in writing and signed by a duly authorized officer of each Party.   9.5          Waiver.  No provision of the Agreement will be waived by any act, omission or knowledge of a Party or its agents or employees except by an instrument in writing expressly waiving such provision and signed by a duly authorized officer of the waiving Party.   9.6          Headings.  The headings for each article and section in this Agreement have been inserted for the convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular article or section.   9.7          Notices.  Any notice or other communication required or permitted to be given to either Party hereto shall be in writing unless otherwise specified and shall be deemed to have been properly given and to be effective on the date of delivery if delivered in person or by facsimile or three (3) days after mailing by registered or certified mail, postage paid, to the other Party at the following address:   If to Rigel: Rigel, Inc.   240 East Grant Avenue   South San Francisco, CA  94080   Attn:  Secretary   Fax:  650.624.1101     Copy to: Cooley Godward, LLP   Five Palo Alto Square, 4th Floor   3000 El Camino Real   Palo Alto, CA  94306   Attn: Robert L. Jones, Esq.   Fax: 650.849.7400     If to CG: Cell Genesys, Inc.   342 Lakeside Drive   Foster City, CA 94404   Attn:  Chief Executive Officer   Fax:  650.358.0803   9.8          Severability.  Whenever possible, each provision of the Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of the Agreement.   9.9          Entire Agreement of the Parties.  The Agreement will constitute and contain the complete, final and exclusive understanding and agreement of the Parties with respect to the subject matter hereof and cancels and supersedes any and all prior negotiations, correspondence, understandings and agreements, whether oral or written, between the Parties respecting the subject matter.  Each Party hereto was represented by counsel in drafting and negotiating this Agreement, and all Parties are deemed to have contributed to the drafting hereof.   9.10        Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of California excluding only laws and rules relating to “choice of law”.  All Parties to this Agreement hereby consent to the jurisdiction of the courts of the State of California and the Federal District Court for the Northern District of California for resolution of any disputes that arise hereunder.   9.11        Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.   In Witness Whereof, the Parties hereto have amended and restated this Agreement as of July 1, 2001.   Cell Genesys, Inc.   Rigel Pharmaceuticals, Inc.                 By: /s/ Robert Tidwell   By: /s/ Raul R. Rodriguez                 Name: Robert Tidwell   Name: Raul R. Rodriguez                   Title: VP Corporate Dev.   Title: VP Business Dev.     APPENDIX A EXCLUSIVE LICENSE AGREEMENT   Exclusive License Agreement made as of January 31, 1996 (the “Effective Date”), by and between Cell Genesys, Inc. (“Company”), a corporation organized and existing under the laws of the State of Delaware, having an office at 322 Lakeside Drive, Foster City, California 94404, and The Rockefeller University (“Rockefeller”), a nonprofit education corporation organized and existing under the laws of the State of New York, having an office at 1230 York Avenue, New York, New York 10021-6395.   Witnesseth:   Whereas, Rockefeller is the owner by assignment from Warren S. Pear, Martin L. Scott, Garry M. Nolan and David Baltimore (“Inventors”) of the entire right, title and interest in United States Patent Application Serial No. 08/023,909, filed February 22, 1993, entitled Production of High Titer Helper-Free Retroviruses by Transient Transfection, and in the inventions described and claimed therein (“Licensed Patent Rights”), and in the Biological Materials and related Know-How, as defined below;   Whereas, Rockefeller and the Company entered into a license agreement effective as of October 25, 1994 (the “Prior Agreement”), pursuant to which Rockefeller granted to the Company a non-exclusive license to use the Licensed Patent Rights, Know-How and Biological Materials for research and commercial purposes;   Whereas, the parties have agreed to expand the scope of the license and rights granted to the Company and therefore have agreed to terminate the Prior Agreement as of the Effective Date, and enter into this Agreement;   Whereas, Rockefeller wishes to offer and grant the Company an exclusive license with regard to the Licensed Patent Rights, Know-How and the Biological Materials for research and commercial purposes, and seeks to be compensated for the transfer and use of such rights; and   Whereas, the Company wishes to license from Rockefeller the Licensed Patent Rights, Biological Materials and Know-How for commercial development and application as herein defined.   Now, Therefore, in consideration of the mutual benefits to be derived hereunder, the parties hereto agrees as follows:   1.     Definitions.   The following terms will have the meanings assigned to them below when used in this Agreement.           1.1          “Affiliate” shall mean:   (a)           any entity owning or controlling, directly or indirectly, at least forty-nine percent (49%) of the stock normally entitled to vote for election of directors of a party; or   (b)           any entity at least forty-nine percent (49%) of whose stock normally entitled to vote for election of directors is owned or controlled, directly or indirectly, by a party.           1.2          “Biological Materials” shall mean (i) the ecotropic producer cell line named [ * ] which producer cell line was deposited with the American Type Culture Collection as of [ * ] and has been assigned Accession No. [ * ], and any viruses produced thereby; (ii) {Not disclosed by Cell Genesys} Biological Materials shall also include any direct progeny, mutant, or derivatives of the [ * ] {Not disclosed by Cell Genesys} cell lines and the viruses produced thereby.           1.3          “Improvement Technology” means all patent and other intellectual property rights, and materials relating to inventions, discoveries or improvements to the Licensed Technology licensed to Rockefeller by any academic institution, governmental and other not-for-profit entity to which Rockefeller grants a non-exclusive research license with regard to the Licensed Technology pursuant to Section 6.3 herein.           1.4          “Know-How” shall mean information and data not generally known which are owned and in the possession of or available to Rockefeller and which it is free to divulge as of the Effective Date regarding the preparation and use of Biological Materials, and pharmacological, biological and clinical properties of Biological Materials. It is understood that Know-How shall not include any information or data known by the Company prior to receipt of such information or data from Rockefeller, as shown by reasonable evidence.           1.5          “Licensed Patent Rights” shall mean:   (a)           the patent application(s) concerning the subject matter of this Agreement which are listed on Exhibit A attached hereto;   (b)           all patent applications which are divisions, substitutions, continuations, continuations-in-part, renewals, or additions of the patent applications described in (a) hereof,   (c)           all foreign counterparts of the applications listed in (a) and (b) hereof; and   (d)           all patents, including reissues, re-examinations and extensions, which may issue on any of the preceding.           1.6          “Licensed Products” shall mean any and all products the manufacture, use or sale of which but for the license granted herein would infringe a Valid Claim or are within the scope of a Pending Claim in the country in which such products are made or sold.           1.7          “Licensed Technology” shall mean the Licensed Patent Rights, Biological Materials and Know-How.           1.8          “Net Sales” shall mean [ * ], where [ * ] shall mean the amount invoiced by the Company or its sublicensees to customers for Licensed Products less: (i) all trade, cash and quantity credits, discounts, refunds or government rebates, (ii) amounts for claims, allowances or credits for returns; retroactive price reductions; chargebacks or the like; (iii) packaging, handling fees and prepaid freight, sales taxes, duties and other governmental charges (including value added tax), but excluding what is commonly known as income taxes; and (iv) provisions for uncollectible accounts determined in accordance with reasonable accounting practices, consistently applied to all products of the selling party. [ * ] shall not include sales by the Company to its Affiliates for resale, provided that if the Company sells a Licensed Product to an Affiliate for resale, [ * ] shall include the amounts invoiced by such Affiliate to third parties on the resale of such Licensed Product. Notwithstanding the foregoing.  [ * ] shall include charges for the separation, transduction and/or expansion of cells comprising Licensed Products, but notwithstanding any of the foregoing, shall not include charges for apheresis, reinfusion, surgical procedures, hospital stays or other charges not directly attributed to the Licensed Product or to the ex vivo preparation of the Licensed Product.           1.9          “Party” shall mean the Company or Rockefeller, and “Parties” shall mean both the Company and Rockefeller.           1.10        “Pending Claim” shall mean a claim of a pending patent application within the Licensed Patent Rights.           1.11        “Territory” shall mean the entire world.           1.12        “Valid Claim” shall mean a claim of an issued and unexpired patent included within the Licensed Patent Rights, which has not been held unenforceable or invalid by a court or other governmental agency of competent jurisdiction, and which has not been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise.   2.     Licensed Rights           2.1          Subject to Section 2.2 below, Rockefeller grants to the Company and its Affiliates the following licenses:   (a)           an exclusive, worldwide, royalty-bearing license under the Licensed Technology, with the right to grant and authorize sublicenses, to make, have made, import, have imported, use, sell, offer for sale and otherwise exploit the Licensed Products in any country of the Territory; and   (b)           a non-exclusive, worldwide, royalty-free, irrevocable license under the Improvement Technology, with the right to grant and authorize sublicenses, to make, have made, import, have imported, use, sell, offer for sale and otherwise commercialize products and services in any country of the Territory.           2.2          The licenses granted by Rockefeller in Section 2.1 (a) above are subject to any limitations on Rockefeller’s rights arising under the provisions of the following:   (a)           35 United States, Section 201 et seq., and regulations and rules promulgated thereunder and any agreements implementing the provisions thereof, or   (b)           other applicable laws or regulations to which Rockefeller may be subject; or   (c)           Rockefeller’s Institutional Patent Agreement with the United States Department of Health and Human Services, dated June 15, 1973, as amended, which is its formal agreement with the United States Government to implement the cited provisions of the U.S. Code.           2.3          Rockefeller shall promptly notify the Company of any Improvement Technology of which it acquires knowledge and provide the Company all available information relating thereto.           2.4          The licenses herein granted shall continue for the lives of any issued patents hereunder as the same or the effectiveness thereof may be extended by any governmental authority, rule or regulation applicable thereto.   3.     Transfer Of Biological Materials And Know-How           3.1          The parties acknowledge that pursuant to the Prior Agreement, Rockefeller transferred to the Company a quantity of Biological Materials and such Know-How to allow the Company to establish a viable cell culture of said Biological Materials for the Company’s purposes. The Company is permitted to cultivate and use said Biological Materials, subject to the terms and conditions of this Agreement. On the Effective Date, Rockefeller shall notify the American Type Culture Collection (“ATCC”) that the Company is authorized to receive samples of the Biological Materials deposited with the ATCC and to deliver such materials to the Company at the Company’s request, and that the Company has the right to authorize third parties to receive one or more samples of the Biological Materials, on such terms as the Company may indicate to the ATCC.           3.2          Should the Company exhaust the quantity of Biological Materials within six (6) months of the date of execution hereof, so that a viable cell culture of said Biological Materials no longer exists, Rockefeller shall authorize the ATCC to provide the Company with a quantity of Biological Materials sufficient to reestablish the Company’s viable colony thereof.           3.3          Within sixty (60) days of the Effective Date, Rockefeller shall deliver to the Company tangible copies of all existing Know-How which it did not previously provide to the Company pursuant to the Prior Agreement.   4.     Payments           4.1          In consideration of the rights and licenses granted hereunder, the Company shall pay or cause to be paid to Rockefeller amounts as follows:   (a)           {Not disclosed by Cell Genesys}   (b)           {Not disclosed by Cell Genesys}   (c)           {Not disclosed by Cell Genesys}   (d)           a royalty of [ * ] of Net Sales of Licensed Products sold by the Company within the scope of a Valid Claim within the Licensed Patent Rights in the country they are made or sold.   Notwithstanding the above, the royalty due Rockefeller on Net Sales of Licensed Products, the manufacture, use or sale of which would not infringe a Valid Claim in the country for which they are sold but which are within the scope of a Pending Claim in such country, shall be fifty percent (50%) of the royalty due under Section 4. l(d).           4.2          In the event that a Licensed Product is sold in combination as a single product with another product whose sale and use are not covered by the Licensed Patent Rights in the country for which the combination product is sold, Net Sales from such sales, for purposes of calculating the amounts due under Section 4.1 above, shall be calculated by multiplying the Net Sales of that combination by the fraction A/(A + B), where A is the gross selling price of the Licensed Product, as the case may be, sold separately, and B is the gross selling price of the other product sold separately. In the event that no such separate sales are made by the Company, Net Sales for royalty determination shall be as reasonably allocated by the Company between such Licensed Product and such other product, based upon their relative importance and proprietary protection.           4.3          Licensed Products sold, leased or otherwise distributed by the Company’s sublicensees shall be considered to be sales, leases or disposals of Licensed Products by the Company for purposes of royalty payments and reports under this Agreement. The obligation to pay royalties pursuant to this Agreement is imposed only once with respect to the sale of a particular Licensed Product regardless of the number of claims or patents that cover such Licensed Product. The Company shall have no obligation to pay royalties on Licensed Products used in research and development, in clinical trials or other noncommercial purposes, or distributed as samples.           4.4.         The Company’s obligation to pay royalties hereunder shall continue on a country-by-country basis until (i) the expiration of the last-to-expire issued patent within the Licensed Patent Rights in such country, or (ii) [ * ] following the first commercial sale of a Licensed Product in a country, if no patent covering such Licensed Product has been issued in such country. Thereafter, the Company shall have a fully paid up license under Licensed Patent Rights, Biological Materials and Know-How to make, have made, use, sell, lease, import, have imported, offer for sale or otherwise exploit the Licensed Product(s) for any use in that country.           4.5          {Not disclosed by Cell Genesys}           4.6          {Not disclosed by Cell Genesys}           4.7          Unless this Agreement is terminated earlier, within sixty (60) days following the first achievement by the Company or a sublicensee of the following milestones with respect to the first Licensed Product within the scope of a Valid Claim within the Licensed Patent Rights, the Company shall pay to Rockefeller [ * ] milestone payments as follows:     Event   Payment   Enrollment of first patient in a Company-sponsored [ * ] clinical trial of a Licensed Product   $ [ * ]   Enrollment of first patient in a Company-sponsored [ * ] clinical trial of a Licensed Product   $ [ * ]   Approval of NDA in U.S. of a Licensed Product   $ [ * ]             4.8          Upon commencement of commercial sales of any Licensed Products which generate a royalty to Rockefeller pursuant to this Agreement, the Company shall within ninety (90) days of the close of the fiscal semi-annual period, provide semi-annual reports to Rockefeller showing the total Net Sales of Licensed Products sold, leased or otherwise disposed of during such period and the calculation of royalties thereon. Any royalty then due and payable shall be included with such report.  All reports provided hereunder by the Company shall be the Confidential Information of the Company, subject to Section 7 herein. The Company’s records shall be open to inspection by an independent certified public accountant designated by Rockefeller for three (3) years from the submission of such reports and payments, subject to execution of a confidentiality agreement reasonably acceptable to the Company, once per calendar year at reasonable times, at Rockefeller’s expense, for the sole purpose of verifying the accuracy of the reports and royalty payments made by the Company. The accountant shall report to Rockefeller only whether there has been an underpayment and, if so, the amount thereof.   5.     Times And Currencies Of Payment           5.1          Royalty payments shall be made in United States dollars or if sales are made in the currency of other countries, royalties shall be calculated in the currency of such other country and be converted into United States dollars using the applicable exchange rate for sale of U.S. dollars listed by the foreign exchange desk of the Bank of America on the last day of the applicable reporting period.           5.2          If at any time legal restrictions prevent the prompt remittance of part or all royalties by the Company with respect to any country where a Licensed Product is sold, the Company shall have the right and option to make such payment by depositing the amount thereof in local currency to an account in the name of Rockefeller in a bank or other depository in such country.   6.     Sublicensees           6.1          The Company and its Affiliates shall have the right to grant and authorize sublicenses under the Licensed Technology and Improvement Technology to commercial entities for research purposes and for commercial purposes, including without limitation, to make, have made, import, have imported, use, lease, offer for sale and sell Licensed Products in the Territory.           6.2          The Company shall have the sole discretion to determine the financial and other terms on which any sublicenses shall be granted under the Licensed Technology, subject to the provisions herein. Any sublicense(s) granted by the Company under this Agreement shall be subject and subordinate to the terms and conditions of this Agreement, except the financial terms of the sublicense(s) may require greater payments than the financial terms in this Agreement.           6.3          Notwithstanding Section 2.1 above, Rockefeller, on behalf of the Company, may continue to grant limited, non-transferable, research sublicenses to academic institutions, governmental and other not-for-profit entities using the form sublicense agreement attached hereto as Exhibit B. Rockefeller shall not enter into or agree to enter into any agreement with such an entity which deviates in any way from the form agreement set forth in Exhibit B, without the prior written consent of the Company. Rockefeller shall provide the Company with a copy of each such research license entered by Rockefeller promptly following the execution of such agreement.           6.4          In the event of any termination of this Agreement, any sublicenses granted under or this Agreement shall also terminate unless such sublicensees provide Rockefeller written notice that they will abide by the applicable terms of this Agreement.           6.5          In no event shall a default or breach of a sublicensee of a sublicense granted by the Company pursuant to this Agreement constitute by a default or breach by the Company of this Agreement or be deemed a valid basis for the termination of this Agreement.   7.     Confidential Information           7.1          Each Party and its Affiliates and sublicensees shall treat as confidential all Confidential Information received from the other Party hereto, shall not use such Confidential Information except as expressly set forth herein or otherwise authorized in writing, shall implement reasonable procedures to prohibit the disclosure, unauthorized duplication, misuse or removal of such Confidential Information and shall not disclose such Confidential Information to any third party except as may be necessary and required in connection with the rights and obligations of such party under this Agreement, and subject to confidentiality obligations at least as protective as those set forth herein. Without limiting the foregoing, each of the parties shall use at least the same procedures and degree of care which it uses to prevent the disclosure of its own confidential information to prevent the disclosure of Confidential Information of the other Party. As used herein, the term “Confidential Information” shall mean any information expressly designated as Confidential Information in this Agreement and information disclosed by one Party to another pursuant to this Agreement which is in written, graphic, machine readable or other tangible form and is marked “Confidential” to indicate its confidential nature. Confidential Information may also include oral information disclosed by one Party to another pursuant to this Agreement, provided that such information is designated as confidential at the time of disclosure and within thirty (30) days after its oral disclosure is reduced to a written summary by the disclosing Party, which summary is marked in a manner to indicate its confidential nature and delivered to the receiving Party.           7.2          Notwithstanding the above, neither Party has any obligation of confidence under this Agreement with respect to any information which:   (i)            may be demonstrated to have been known to the receiving Party prior to the time of disclosure thereof by the disclosing Party; or   (ii)           without breach of this Agreement, has been published or is otherwise available to the public at any time whether before or after the time of disclosure to such Party; or   (iii)         is at any time lawfully received by such Party from a third party who has no obligation of confidence to a Party in respect hereof.           7.3          Each Party hereto may disclose another’s Confidential Information to the extent such disclosure is reasonably necessary in filing or prosecuting patent applications, prosecuting or defending litigation, complying with applicable governmental regulations or otherwise submitting information to tax or other government authorities, making a permitted sublicense or other exercise of its rights hereunder or conducting clinical trials, provided that if a Party is required to make any such disclosure of another Party’s secret or Confidential Information, other than pursuant to a confidentiality agreement, it will give reasonable advance notice to the latter Party of such disclosure requirement and, will use its best efforts to secure confidential treatment of such information prior to its disclosure (whether through protective orders or otherwise).   8.     Representations And Warranties           8.1          Rockefeller represents and warrants that: (i) it is a nonprofit corporation duly organized, validly existing and in good standing under the laws of New York; (ii) the execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of Rockefeller; (iii) it is the sole and exclusive owner of all right, title and interest in the Licensed Patent Rights; (iv) the Licensed Patent Rights are free and clear of any lien, security interest or restriction on transfer or license; (v) Rockefeller has not previously granted, and will not grant during the term of this Agreement, any right, license or interest in and to the Licensed Patent Rights, Biological Materials and Know-How, or any portion thereof, in conflict with the rights, exclusive license and interest granted to the Company herein; (vi) it has complied fully with all requirements of 35 U.S.C. § 201 et seq. and all implementing regulations with respect to perfecting its interest in the Licensed Patent Rights; (vii) Exhibit A contains a complete and accurate listing of all Licensed Patent Rights existing as of the Effective Date; and (viii) there are no actions, suits, investigations, claims or proceedings pending in any way relating to the Licensed Patent Rights, Biological Materials or Know-How.           8.2          The Company represents and warrants that: (i) it is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; and (ii) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of the Company.           8.3          ROCKEFELLER EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED OR EXPRESS WARRANTIES AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF BIOLOGICAL MATERIALS, LICENSED PROCESSES OR LICENSED PRODUCTS CONTEMPLATED BY THIS AGREEMENT. FURTHER, ROCKFELLER HAS MADE NO FORMAL INVESTIGATION AND THEREORE CAN MAKE NO REPRESENTATION THAT BIOLOGICAL MATERIALS SUPPLIED BY IT OR THE METHODS USED IN MAKING OR USING SUCH MATERIALS ARE NOW OR WILL REMAIN FREE FROM LIABILITY FOR PATENT INFRINGEMENT.   9.     {Not disclosed by Cell Genesys}           9.1          {Not disclosed by Cell Genesys}           9.2          {Not disclosed by Cell Genesys}   10.  Publicity   The Company will not use either directly or by implication the name of Rockefeller, or the name of any member of the faculty or staff thereof for any commercial or promotional purposes without prior notification and written agreement of Rockefeller. Except as expressly provided herein, the Parties agree not to disclose the terms of this Agreement to any third party without the prior written consent of the other Party to the fact and form of such disclosure, except as required by securities or other applicable laws, to prospective investors and to such party’s accountants, attorneys and other professional advisors. Notwithstanding the above, the Company may disclose the existence of this Agreement and issue a press release, reasonably acceptable to Rockefeller, describing this Agreement and the rights granted the Company by Rockefeller under this Agreement, and disclose to actual and potential sublicensees the rights granted the Company by Rockefeller under this Agreement.   11.  Patents           11.1        Except as set forth in Section 11.4, the Company shall have the sole right to control the preparation, filing, prosecution and maintenance of the Licensed Patent Rights, and any interference or opposition proceeding relating thereto, using patent counsel of its choice. The Company shall consult with Rockefeller regarding the prosecution of any such patent applications, by providing Rockefeller a reasonable opportunity to review and comment on all proposed submissions to any patent office before submittal, and provided further that the Company shall keep Rockefeller reasonably informed as to the status of such patent applications by promptly providing Rockefeller copies of all communications relating to such patent applications that are received from any patent office. If the Company informs Rockefeller in writing that the Company no longer wishes to conduct such activities with regard to any such patent applications or patents in any country, then Rockefeller will be free, at its discretion and expense to either abandon the subject patent applications or to continue such activities, and the Company shall have no further rights with respect to the applicable patent applications or patents in such countries.           11.2        During the term of the Agreement, the Company shall be responsible for one hundred percent (100%) of the expenses incurred in connection with the activities set forth in Section 11.1. above. {Not disclosed by Cell Genesys} With respect to patent-related costs incurred after the Effective Date, the Company shall reimburse Rockefeller within thirty (30) days following invoice for such costs, in a form reasonably acceptable to the Company.           11.3        If either Party hereto becomes aware that any Licensed Patent Rights are being or have been infringed by any third party, such Party shall promptly notify the other Party hereto in writing describing the facts relating thereto in reasonable detail. The Company shall have the initial right, but not the obligation, to institute, prosecute and control any action, suit or proceeding (an “Action”) with respect to such infringement, including any declaratory judgment action, at its expense, using counsel of its choice; provided, however, during the pendency of any such Action, the Company shall be entitled to place any royalties otherwise due Rockefeller hereunder in a separate account controlled by the Company. If the pertinent Licensed Patent Rights are found invalid or unenforceable in such an Action, or any appeal thereof, the Company may retain the amounts placed in such account without further obligation to Rockefeller with regard thereto. If the Licensed Patent Rights are not held invalid or unenforceable in such an Action, or any appeal thereof, the Company shall promptly pay the amounts deposited in such account to Rockefeller. Any amounts recovered from third parties in any such Action shall be retained by the Company. In the event the Company fails to initiate or defend any Action involving the Licensed Patent Rights within one (1) year of receiving notice of any commercially significant infringement, Rockefeller shall have the right, but not the obligation, to initiate and control such an Action, and the Company shall cooperate reasonably with Rockefeller, at Rockefeller’s request, in connection with any such Action. Any amounts recovered in such Action shall be used first to reimburse the Company and Rockefeller for the expenses incurred in connection with such Action, and any remainder retained by Rockefeller.           11.4        In the event the parties believe an interference may be declared or an interference is declared between any patent application or patent within the Licensed Patent Rights and any patent application or patent owned or controlled by the Company relating to the production of high titer retroviruses, the parties agree to amicably settle any such prospective or actual interference in accordance with the procedure set forth on Exhibit C. The Company shall have the exclusive right to initiate such settlement procedure after consultation with Rockefeller. In the event of any such prospective or actual interference and the settlement thereof, each Party shall pay its own costs associated therewith and the parties shall equally share the costs of any arbitration, including without limitation, administration and arbitrator fees. It is understood and agreed that in the event an interference is declared, neither Patty shall have an obligation to participate in such a proceeding, but each hereby acknowledges that it understands that a failure to participate may result in an adverse outcome which could have a material adverse impact on such Party. It is further understood and agreed that any patent applications and patents within the Licensed Patent Rights which are involved in any interference shall remain subject to the license granted the Company herein.   12.  Licensed Product Liability   The Company agrees to indemnify, defend and hold harmless Rockefeller and its trustees, officers, agents, faculty, employees, and students (the “Indemnitees”), from any and all liability arising from injury or damage to persons or property resulting directly or indirectly from the Company’s acquisition, use, manufacture, sublicense or sale of any Licensed Product covered by Licensed Patent Rights or Know-How licensed hereunder. Notwithstanding the foregoing, the Company expressly retains any and all claims it may have against Indemnitees arising from Indemnitees’ negligence or willful misconduct. The Company’s obligation to indemnify the Indemnitees under this Section 11 shall not apply unless the indemnified Party promptly notifies the Company of any claim or liability subject to this Section 12 and cooperates fully with the Company in the defense of any such claim or proceeding.  The Company further agrees to obtain, prior to the first commercial sale of a Licensed Product, and maintain in force for at least fifteen (15) years following the last sale of a Licensed Product, product liability insurance coverage of at least one million ($1,000,000) dollars or a lesser amount as appropriate to the risk as determined by reference to reliable standards in the industry, such insurance to specifically name Rockefeller as an additional insured.   13.  Notices   Any notice required to be given pursuant to this Agreement shall be in writing and may be made by personal delivery or by registered or certified mail, return receipt requested, by one Party to the other Party at the addresses noted below:   In the case of the Company, notice should be sent to:   Cell Genesys, Inc. 322 Lakeside Drive Foster City, California 94404 Attn: Senior Vice President, Corporate Development   In the case of Rockefeller, notice should be sent to:   The Rockefeller University 1230 York Avenue New York, New York 10021 Attn: Office of the General Counsel   14.  Law To Govern   This Agreement shall be interpreted and governed in accordance with the laws of the State of New York.   15.  Assignment   This Agreement may not be assigned by either Party without the prior written consent of the other; provided, however, the Company may assign this Agreement in connection with the transfer of all or substantially all of its business relating to the subject matter of this Agreement whether by sale, merger, operation of law or otherwise.   16.  Termination           16.1        The Company shall have the right to terminate this Agreement at any time with respect to any Licensed Patent Right or any country upon ninety (90) days prior written notice to Rockefeller. Such termination shall automatically terminate the license rights provided in Section 2 with respect to such Licensed Patent Rights hereof in such country but shall not relieve the Company of the obligation to pay royalties for any period prior to the effective date of termination.           16.2        Either Party may terminate this Agreement in the event of a material breach by the other Party which is not cured within a reasonable time, provided only that the offending Party is given notice of the breach and not less than ninety (90) days in which to cure such breach.           16.3        Sections 2.4, 6.4 and 24.3 and Articles 7, 8, 10, 12, 14, 17 and 25 shall survive expiration or termination of this Agreement for any reason.   17.  Resolution Of Disputes   The Parties agree that in the event of it dispute between them arising from, concerning, or in any way relating to this Agreement, the Parties shall undertake good faith efforts to resolve the same amicably between themselves.   18.  Force Majeure   The Parties shall not be liable in any manner for failure or delay in fulfillment of all or part of this Agreement, directly or indirectly caused by acts of God, governmental orders or restrictions, war, war-like conditions, revolution, riot, looting, strike, lockout, fire, earthquake, flood or other similar or dissimilar cause or circumstances beyond the nonperforming Party’s control. The nonperforming Party shall promptly notify the other Party of the cause or circumstance and shall recommence its performance of its obligations as soon as practicable after the cause or circumstance ceases.   19.  Binding Upon Successors And Assigns   Subject to the limitations on assignment herein, this Agreement shall be binding upon and inure to the benefit of successors in interest or assigns of Rockefeller and the Company. Any such successor or assignee of a Party’s interest shall expressly assume in writing the performance of all the terms and conditions of this Agreement to be performed by said Party.   20.  Independent Contractors   The relationship between Rockefeller and the Company is that of independent contractors. Rockefeller and the Company are not joint venturers, partners, principal and agent, master and servant, employer or employee, and have no other relationship other than independent contracting parties. Rockefeller shall have no power to bind or obligate the Company in any manner, other than as is expressly set forth in this Agreement. Likewise, the Company shall have no power to bind or obligate Rockefeller in any manner, other than as is expressly set forth in this Agreement.   21.  Severability   If any provision of this Agreement is ultimately held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.   22.  No Waiver   Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such Party’s rights to the future enforcement of its rights under this Agreement, excepting only as to an express written and signed waiver as to a particular matter for a particular period of time.   23.  No Implied Obligations   It is understood and agreed that nothing in this Agreement shall be deemed to prevent the Company from commercializing technology or products similar to or competitive with the Licensed Technology or the Licensed Products. Nor shall anything in this Agreement impair the right of the Company to independently acquire, license, develop or have others develop for it technology performing similar or equivalent functions as the Licensed Technology, or to develop, market or distribute products based on such technology in addition to or in lieu of the Licensed Products.   24.  Compliance With Laws. Regulations And Standards           24.1        The Company recognizes that the use of Biological Materials carries with it certain safety risks to both the environment and the population that are inherent in such materials, and shall exercise prudent scientific laboratory procedures in the use of said Biological Materials.           24.2        The inventors and Rockefeller recognize and have advised that the Biological Materials may be used to create infectious retroviruses with a broad host range, that the supplied materials may be used to create retroviruses that can infect human cells in both vitro and in vivo, that the Biological Materials and all materials derived thereof should be handled and used with all due care in accordance with generally acceptable scientific guidelines establishing appropriate precautions and approved by the Institutional Biosafety Committee or similar authority at the Company.           24.3        The Company shall bear all risk to the Company and/or to any others resulting from use, directly or indirectly, to which the Company puts the Biological Materials or any progeny or cells or cell lines derived from it.   25.  No Consequential Damages   IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY BREACH OF THIS AGREEMENT.   26.  ENTIRE UNDERSTANDING   This Agreement with its Exhibits represents the entire understanding between the Parties with respect to the subject matter hereof and supersedes any other agreement, expressed or implied, by the Parties with respect to the Licensed Patent Rights, Biological Materials, Know-How and Improvement Technology, and supersedes and merges all prior negotiations, discussions and agreements, including without limitation, the Prior Agreement between the parties. This Agreement may not be amended or modified except in a written document signed by authorized representatives of the Parties.   In Witness Whereof, the Parties have caused this Agreement to be duly executed as of the day and year first above written.     Cell Genesys, Inc.           By: /s/ R. Scott Greer         Title: Senior Vice President     Corporate Development         Date: February 2, 1996               The Rockefeller University               By: /s/ William H. Griesar         Title: Vice President and General Counsel         Date: January 31, 1996   EXHIBIT “A”   LICENSED PATENT RIGHTS   United States Serial No. 08/023,909   PCT Application No. PCT/US94/01983   AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT   This Amendment to Exclusive License Agreement (“Amendment”), effective as of November 3, 1998, by and between Cell Genesys, Inc.,(“Company”), a corporation organized and existing under the laws of the State of Delaware, having an office at 342 Lakeside Drive, Foster City, California 94404, and The Rockefeller University (“Rockefeller”), a nonprofit education corporation organized and existing under the laws of the State of New York, having an office at 1230 York Avenue, New York, New York 10021-6395 (Company and Rockefeller collectively, the “Parties”).   Background   The Parties desire to amend that certain Exclusive License Agreement by and between Company and Rockefeller effective as of January 31, 1996 (the “Agreement”) as set forth herein below.   Now, Therefore, the Parties agree as follows:   1.             Amendment. This Amendment hereby amends the Agreement to incorporate the terms and conditions set forth in this Amendment. The relationship of the Parties shall continue to be governed by the terms and conditions of the Agreement, as amended herein; and in the event that there is any conflict between the terms and conditions of the Agreement and this Amendment, the terms and conditions of this Amendment shall control. As used in this Amendment, all capitalized terms shall have the meanings defined for such terms in this Amendment or, if not defined in the Amendment, the meanings defined in the Agreement.   Modification To The Agreement.   Section 4.6 of the Agreement is hereby amended to read in its entirety as follows:   “4.6        Commercial Sublicenses. It is understood and agreed that Company shall have the right, at its sole discretion, to grant Commercial Sublicenses to third parties {Not disclosed by Cell Genesys}.  As used herein, “Commercial Sublicense” shall mean Commercial Target Sublicenses and any other sublicense right granted under the Licensed Technology; provided, however, Commercial Sublicenses shall exclude rights granted by Company to a third party pursuant to an agreement substantially in the form of Exhibit D to this Agreement (i.e., research sublicenses).”   The Agreement is hereby amended to add the following new Section 4.9:   “4.9        Commercial Target Sublicenses. Subject to the terms and conditions set forth in this Section 4.9 below and without limiting the provisions of Section 4.6 above or Article 6 below, Company shall have the right to grant and authorize Commercial Target Sublicenses to third parties (each such third party, a “Commercial Target Sublicensee”) on terms and conditions as Company deems appropriate in its sole discretion.   (a)           Milestone and Maintenance Fees. In addition to amounts payable pursuant to Section 4.3 above and in consideration of Company’s right to grant and authorize Commercial Target Sublicenses pursuant to this Section 4.9 {Not disclosed by Cell Genesys}.  Payments due under this Section 4.9(a) shall be due and payable within sixty (60) days after the calendar quarter in which the Milestone Fee or Maintenance Fee, as applicable, is received by Company {Not disclosed by Cell Genesys}.   (b)           Terms. For purposes of this Section 4.9 the following capitalized terms shall have the following meanings. “Commercial Target Sublicense” shall mean a sublicense under the Licensed Technology that includes the right to conduct Target Validation using the Licensed Technology.  “Target Validation” shall mean the process by which the function of nucleotide sequences are identified, determined and/or confirmed; and/or the function of nucleotide sequences are identified, determined and/or confirmed as being significant in a disease or other biological pathway in which pharmacological or other intervention is sought to affect the function of that pathway. {Not disclosed by Cell Genesys}.   (c)           Survival.  Subject to Section 6.4 below, Commercial Sublicenses, including Commercial Target Sublicenses, shall survive the termination of this Agreement, provided that the Commercial Sublicensee or Commercial Target Sublicensee, as the case may be, agrees to be bound by the applicable terms and conditions of this Agreement.”   Entire Agreement. Together the Agreement (including the Exhibits thereto) and this Amendment constitute the entire agreement between the Parties in connection with the subject matter thereof and supersede all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the Parties.   In Witness Whereof, the Parties have executed this Amendment.     Cell Genesys, Inc.               By:   /s/ Bruce A. Hironaka                       Title: Vice President, Corp. Devel.                       Date: November 16, 1998                                                           By:   /s/ William A. Griesar                       Title:   Vice President and General Counsel                       Date:   11/3/98   APPENDIX B   BOSC 23 CELL LINE   CGI Docket Number   Application, Patent Number or Publication Number   Filing Data, Grant date, or Publication Date   Title/Inventors               The Rockefeller University   PCTWO94/19478 (US application corresponding to the PCT)       Production of High Titer Helper-Free Retroviruses by Transient Transfection Pear et al.               The Rockefeller University   US 08/693,160   6/12/96   Production of High Titer, Helper-Free Retroviruses by Transient Transfection Pear, et al.   KATÔ   CGI Docket Number   Application, Patent Number or Publication Number   Filing Data, Grant date, or Publication Date   Title/Inventors               CELL 13.0   US 5,834,256 (Patent)   November 10, 1998   Method for Production of High Titer Virus & High Efficiency of Retroviral Mediated Transduction of Mammalian Cells Finer et al.               CELL 13.1   US 5,686,279 (Patent)   November 11, 1997   Method for Production of High Titer Virus & High Efficiency of Retroviral Mediated Transduction of Mammalian Cells Finer et al.               CELL 13.1 PCT   WO 94/29438   December 22, 1994   Method for Production of High Titer Virus & High Efficiency of Retroviral Mediated Transduction of Mammalian Cells Finer et al.               CELL 13.2   US 5,858,740 (Patent)   January 12, 1999   Method of Production of High Titer Virus & High Efficiency of Retroviral Mediated Transduction of Mammalian Cells Finer et al.               CELL 13.3   US 08/517,488   August 21, 1995   Method for Production of High Titer Virus & High Efficency of Retroviral Mediated Transduction of Mammalian Cells Finer et al.               CELL 13.3 PCT   WO 97/07225   February 21, 1997   Method for Production of High Titer Virus & High Efficiency of Retroviral Mediated Transduction of Mammalian Cells Finer et al.               CELL 13.5 (will be dropped if 13.3 is allowed)   US 09/266,956   March 11, 1999   Method for Production of High Titer Virus & High Efficiency of Retroviral Mediated Transduction of Mammalian Cells Finer et al.                   US 08/914,893   8/20/97   Method of Production of High Titer Virus & High Efficiency of Retroviral Mediated Transduction of  Mammalian Cells. Finer, et al.   APPENDIX C   RIGEL BIOLOGICAL MATERIALS [ * ] Vectors:     [ * ]   APPENDIX D   NOLAN AND NOLAN/ROTHENBERG PATENTS   U.S. Patent Application No. 08/589,109, entitled “Methods for Screening for Transdominant Effector Peptides and RNA Molecules”  (the Nolan/Rothenberg Patent Application).     U.S. Patent Applications Nos. 08/789,333, 08/589,911 and 08/963,368, entitled, “Methods for Screening for Transdominant Intracellular Effector Peptides and RNA Molecules”  (the Nolan Patent Application).     APPENDIX E     LICENSE AGREEMENT   BY AND BETWEEN   THE BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY   AND   RIGEL PHARMACEUTICALS, INC.     Table of Contents   1 Definitions 2. Grant; Transfer Of Licensed Biological Materials 3. License Royalties 4. Patents; New Inventions 5. Warranties 6. Indemnity 7. STANFORD Names And Marks 8. Sublicense(S) 9. Term And Termination 10. Assignment 11. Arbitration 12. Notices 13. Waiver 14. Applicable Law 15. Disclaimer Of Agency 16. Severability 17. Entire Agreement 18. Counterparts     APPENDIX E   LICENSE AGREEMENT   Effective as of June 1, 1999 (the “Effective Date”), The Board of Trustees of the Leland Stanford Junior University, a body having corporate powers under the laws of the State of California (“STANFORD”) and Rigel Pharmaceuticals, Inc., a Delaware corporation having a principle place of business at 240 East Grand Avenue, South San Francisco, CA 94080 (“RIGEL”), agree as follows:   Recitals   A.            STANFORD owns certain [ * ] cell lines and derivatives thereof and biological components related thereto.   B.            RIGEL desires to obtain a non-exclusive license to such materials for use in the Field, with the right to grant one non-exclusive sublicense to Cell Genesys, Inc.   1.             Definitions.   1.1          “Cell Genesys” means Cell Genesys, Inc., a Delaware corporation, having a principal place of business at 342 Lakeside Drive, Foster City, CA 94404.   1.2          “Field” means any and all fields of use, including, without limitation, any research or commercial field of use.   1.3          “Licensed Biological Materials” means the materials listed on Exhibit A.   1.4          “Licensed Know-How” means:   (a)           any and all tangible or intangible know-how, trade secrets, inventions (whether or not patentable), processes, data, and other information owned by STANFORD as of the Effective Date that are necessary or useful for the use of the Licensed Biological Materials; and   (b)           any modifications or progeny of the information and materials in subsection (a) above that STANFORD may elect to provide to RIGEL at STANFORD’s sole and exclusive discretion.   1.5          “Patent” shall mean all foreign and domestic patents (including, without limitation, extensions, reexaminations, reissues, renewals and inventors certificates) and patents issuing from patent applications (including substitutions, provisionals, divisionals, continuations and continuations-in-part).   2.             Grant; Transfer Of Licensed Biological Materials.   2.1          STANFORD hereby grants, and RIGEL hereby accepts, a worldwide, non-exclusive license (without the right to sublicense except to Cell Genesys in the field of human and/or animal gene therapy as provided in Article 8) under STANFORD’s right, title and interest in the Licensed Biological Materials to conduct research and development and to use the Licensed Biological Materials to make, have made, use, import, offer for sale and sell products in the Field.   2.2          STANFORD hereby grants, and RIGEL hereby accepts, a worldwide, non-exclusive license (without the right to sublicense except to Cell Genesys in the field of human and/or animal gene therapy as provided in Article 8) under STANFORD’s right, title and interest in the Licensed Know-How to use the Licensed Know-How in the Field.   2.3          STANFORD shall have the right to use the Licensed Know-How and the Licensed Biological Materials for its own bona fide research, including sponsored research and collaborations.  In addition, STANFORD shall have the right to distribute the Licensed Biological Materials.   2.4          Promptly after the Effective Date, STANFORD shall transfer to RIGEL such quantities of the Licensed Biological Materials as RIGEL shall reasonably request.  Thereafter, STANFORD shall transfer to RIGEL such additional quantities of Licensed Biological Materials as RIGEL shall reasonably request in the event that RIGEL’s stock of the Licensed Biological Materials is destroyed or contaminated.   3.             License Royalties.   3.1          In partial consideration for the license granted by STANFORD to RIGEL under Section 2.1, RIGEL agrees to pay to STANFORD the following:   (a)           An initial, nonrefundable license issue royalty of [ * ], which amount shall be paid within thirty (30) days after the Effective Date.   (b)           A royalty payment equal to [ * ] on each of the first three (3) anniversaries of the Effective Date.   After the third (3rd) anniversary of the Effective Date, the sublicense shall be considered perpetual and fully paid-up.   3.2          If RIGEL grants to Cell Genesys a sublicense under the Licensed Biological Materials to use and sell products in the field of human and/or animal gene therapy, RIGEL shall pay to STANFORD during the term of such sublicense a sublicense fee as follows:     Upon signing of the sublicense   $ [ * ]   On each of the first three (3) anniversaries of the effective date of such sublicense   $ [ * ]   On the 4th, 5th and 6th anniversaries of the effective date of such sublicense   $ [ * ]     After the sixth (6th) anniversary of the effective date of such sublicense, the sublicense shall be considered perpetual and fully paid-up.   4.             Patents; New Inventions.   Subject to the terms and conditions of this Agreement, any patentable inventions or discoveries conceived or reduced to practice by the employees, agents or consultants of one party during the course of the Agreement (“Sole Inventions”) shall be the property of such party.  Any patentable inventions or discoveries conceived or reduced to practice jointly by employees, agents or consultants of STANFORD and RIGEL as determined in accordance with United States rules of inventorship (“Joint Inventions”) during the course of and pursuant to this Agreement shall be owned jointly by STANFORD and RIGEL, each to own an undivided one-half (1/2) interest in such Joint Invention.  Each party shall cooperate with the other in completing any patent applications relating to Joint Inventions, and in executing and delivering any instrument required to assign, convey or transfer to such other party its undivided one-half (1/2) interest.   5.             Warranties.   5.1          STANFORD’s Office of Technology Licensing represents and warrants that to the best of its knowledge as of the Effective Date, STANFORD has not sought or obtained patent protection of the Licensed Biological Materials or any use thereof in the Field.   5.2          STANFORD’s Office of Technology Licensing represents and warrants that as of the Effective Date, it has no knowledge of claims by third parties that the use of the Licensed Biological Materials infringes any patents, copyrights or other rights of third parties.   5.3          STANFORD represents and warrants that it has all right, power and authority necessary to grant the licenses set forth in Article 2 to RIGEL.   5.4          RIGEL agrees that nothing in this Agreement grants RIGEL any express or implied license or right under or to:   (a)           U.S. Patent 4,656,134, entitled “Amplification of Eucaryotic Genes” or any patent application corresponding thereto; or   (b)           U.S. Patent 5,070,012, entitled “Monitoring of Cells and Trans-Activating Transcription Elements” or any patent application corresponding thereto; or   (c)           U.S. Patent 5,804,387, entitled “FACS-Optimized Mutants of the Green Fluorescent Protein (GFP) or any patent application corresponding thereto.   5.5          STANFORD agrees that nothing in this Agreement grants STANFORD any express or implied license or right under or to U.S. Patent Application Nos. 08/789,333, 08/589,911, or 08/963,368, entitled “Method for Screening for Transdominant Intracellular Effector Peptides and RNA Molecules,” or any continuations, divisionals or continuation-in-parts thereof or any patents which may issue therefrom.   5.6          Except as provided in Sections 5.1, 5.2 and 5.3 and as otherwise expressly set forth in this Agreement, nothing in this Agreement will be construed as a warranty or representation that anything made, used, sold, or otherwise disposed of under any license granted in this Agreement is or will be free from infringement of patents, copyrights, and trademarks of third parties; conferring rights to use in advertising, publicity, or otherwise any trademark or the name of “STANFORD”; or granting by implication, estoppel, or otherwise any licenses or rights under patents of STANFORD.   5.7          EXCEPT AS EXPRESSLY SET FORTH IN THE AGREEMENT, STANFORD MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED.  THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OF THE LICENSED BIOLOGICAL MATERIALS OR LICENSED KNOW-HOW WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER RIGHTS, OR ANY OTHER EXPRESS OR IMPLIED WARRANTIES.   6.             Indemnity.   6.1          RIGEL agrees to indemnify, hold harmless, and defend STANFORD, UCSF-Stanford Health Care and Stanford Health Services and their respective trustees, officers, employees, students, and agents against any and all claims by third parties for death, illness, personal injury, property damage, and improper business practices arising out of the manufacture, use, sale, or other disposition of the Licensed Biological Materials or any products arising or derived from Licensed Biological Materials, by RIGEL or RIGEL’s sublicensee(s) or customers.   6.2          STANFORD shall not be liable for any indirect, special, consequential or other damages whatsoever, whether grounded in tort (including negligence), strict liability, contract or otherwise. STANFORD shall not have any responsibilities or liabilities whatsoever with respect to products arising or derived from Licensed Biological Materials by RIGEL.   6.3          RIGEL shall at all times comply, through insurance or self-insurance, with all statutory workers’ compensation and employers’ liability requirements covering any and all employees with respect to activities performed under this Agreement.   6.4          In addition to the foregoing, RIGEL shall maintain Comprehensive General Liability Insurance, including Products Liability Insurance, with reputable and financially secure insurance carrier(s) to cover the activities of RIGEL and its sublicensee(s) in the amounts and during the periods specified herein.  Such insurance shall provide minimum limits of liability of One Million Dollars ($1,000,000) as of the first anniversary of the date upon which RIGEL first leases a facility in which it will conduct research and development activities, and of Five Million Dollars ($5,000,000) as of the commencement of human clinical trials.  Such insurance shall include STANFORD, UCSF-Stanford Health Care and Stanford Health Services, their trustees, directors, officers, employees, students, and agents as additional insureds. Such insurance shall be written to cover claims incurred, discovered, manifested or made during or after the expiration of this Agreement.  At STANFORD’s request, RIGEL shall furnish a Certificate of Insurance evidencing primary coverage and requiring thirty (30) days prior written notice of cancellation or material change to STANFORD. RIGEL shall advise STANFORD, in writing, that it maintains excess liability coverage (following form) over primary insurance for at least the minimum limits set forth above. All such insurance of RIGEL shall be primary coverage; insurance of STANFORD, UCSF-Stanford Health Care or Stanford Health Services shall be excess and noncontributory.   7.             STANFORD Names And Marks.   RIGEL agrees not to identify STANFORD in any promotional advertising or other promotional materials to be disseminated to the pubic or any portion thereof or to use the name of any STANFORD faculty member, employee, or student or any trademark, service mark, trade name, or symbol of STANFORD, UCSF-Stanford Health Care or Stanford Health Services, or that is associated with any of them, without STANFORD’s prior written consent, except as required by law.  STANFORD shall not unreasonably withhold consent under this Section 7.   8.             Sublicense(S).   8.1          Subject to the provisions of this Article 8, RIGEL may grant a sublicense to the license rights granted to RIGEL by STANFORD in Sections 2.1 and 2.2 to Cell Genesys solely in the field of human and/or animal gene therapy.   8.2          Any sublicense granted by RIGEL to Cell Genesys under this Agreement shall be subject and subordinate to terms and conditions of this Agreement, except:   (a)           Sublicense terms and conditions shall reflect that any sublicensee(s) shall not grant a sublicense to a third party; and   (b)           The financial obligations of any sublicensee to RIGEL specified in the sublicense(s) may be different from those obligations set forth in this Agreement.   Any such sublicense(s) also shall expressly include the provisions of Articles 5 and 6 for the benefit of STANFORD and shall survive any termination of this Agreement. 8.3          RIGEL agrees to provide STANFORD with a copy (with financial terms redacted) of any sublicense granted to Cell Genesys pursuant to this Article 8 and written notice of the effective date of any termination of such sublicense prior to the expiration of the Term (as defined in Section 9.1).   9.             Term And Termination.   9.1          The term of this Agreement shall commence upon the Effective Date and shall expire upon the later of: (a) the expiration of the last to expire of any Patents owned by STANFORD at any time which claim inventions in the Licensed Biological Materials or the Licensed Know-How; or (b) twenty (20) years from the Effective Date (the “Term”).  In addition, RIGEL may terminate this Agreement prior to the expiration of the Term by giving STANFORD notice in writing at least thirty (30) days in advance of the effective termination date selected by RIGEL.   9.2          Either party may terminate this Agreement prior to the expiration of the Term if the other party is in material breach of any provision hereof and fails to remedy any such default or breach within thirty (30) days after written notice thereof to the breaching party.   9.3          Surviving the expiration of the Term are:   (a)           Any cause of action or claim of RIGEL or STANFORD, accrued or to accrue, because of any breach or default by the other party prior to the expiration of the Term; and   (b)           Articles 4, 5, 6, 7 and 11; and   (c)           Article 8 and Sections 2.1 and 2.2; and the licenses granted thereunder shall be deemed perpetual and fully paid-up.   9.4          Surviving any termination of this Agreement are:   (a)           Any cause of action or claim of RIGEL or STANFORD, accrued or to accrue, because of any breach or default by the other party prior to the termination of this Agreement; and   (b)           Articles 4, 5, 6, 7, 8 and 11 and Section 3.2; and   (c)           Sections 2.1 and 2.2 if RIGEL has fulfilled all of its payment obligations to STANFORD under Section 3.1 prior to such termination; and the licenses granted thereunder shall be deemed perpetual and fully paid-up.   10.          Assignment.   This Agreement may not be assigned by either party without the express written consent of the other party, except that RIGEL may assign the Agreement in connection with a merger, consolidation or sale of all or substantially all of RIGEL’s assets.   11.          ArbitrationError! Bookmark not defined..   11.1        Any controversy arising under or related to this Agreement, and any disputed claim by either party against the other under this Agreement excluding any dispute relating to patent validity or infringement arising under this Agreement, shall be settled by arbitration in accordance with the Licensing Agreement Arbitration Rules of the American Arbitration Association.   11.2        Upon request by either party, arbitration will be by a third party arbitrator mutually agreed upon in writing by RIGEL and STANFORD within thirty (30) days of such arbitration request.  Judgment upon the award rendered by the arbitrator shall be final and nonappealable and may be entered in any court having jurisdiction thereof.   11.3        The parties shall be entitled to discovery in like manner as if the arbitration were a civil suit in the California Superior Court.   11.4        Any arbitration shall be held at Stanford, California, unless the parties hereto mutually agree in writing to another place.   12.          Notices.   All notices under this Agreement shall be deemed to have been fully given when done in writing and deposited in the United States mail registered or certified, and addressed as follows:   To STANFORD: Office of Technology Licensing   Stanford University   900 Welch Road, Suite 350   Palo Alto, CA 94304-1850   Attention:  Director     To RIGEL: Rigel Pharmaceuticals, Inc.   240 East Grand Ave.   South San Francisco, CA 94080   Attention:  President   Either party may change its address upon written notice to the other party.   13.          Waiver.   None of the terms of this Agreement can be waived except by the written consent of the party waiving compliance. 14.          Applicable Law.   This Agreement shall be governed by the laws of the State of California applicable to agreements negotiated, executed and performed wholly within California.  Any claim or controversy arising out of or related to this Agreement or any breach hereof shall be submitted to a court of applicable jurisdiction in the State of California, and each party hereby consents to the jurisdiction and venue of such court.   15.          Disclaimer Of Agency.   Neither party is, or will be deemed to be, the legal representative or agent of the other, nor shall either party have the right or authority to assume, create, or incur any third party liability or obligation of any kind, express or implied, against or in the name of or on behalf of another except as expressly set forth in this Agreement.   16.          Severability.   If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be in any way affected or impaired thereby.   17.          Entire Agreement.   This Agreement, together with the Exhibit attached hereto, embodies the entire understanding of the parties and shall supersede all previous communications, representations or understandings, either oral or written, between the parties relating to the subject matter hereof.  No amendment or modification hereof shall be valid or binding upon the parties unless made in writing and signed by duly authorized representatives of both parties.   18.          Counterparts.   This Agreement may be executed in counterparts, with the same force and effect as if the parties had executed the same instrument.   In Witness Whereof, the parties hereto have executed this Agreement in duplicate originals by their duly authorized officers or representatives.   The Board of Trustees of the Rigel Pharmaceuticals, Inc. Leland Stanford Junior University     By: /s/ Katherine Ku   By:   /s/ Donald W. Perryman Name: Katherine Ku   Name: Donald W. Perryman Title: Director, Technology Licensing   Title: VP, Business Development               June 9,1999   Exhibit A   LICENSED BIOLOGICAL MATERIALS [ * ] Vectors:     [ * ]   APPENDIX F   Application, Patent Number or Publication Number   Filing Date, Grant Date, or Publication Date   Title/Inventors [ * ]   [ * ]   [ * ] [ * ]   [ * ]   [ * ] [ * ]   [ * ]   [ * ] [ * ]   [ * ]   [ * ] [ * ]   [ * ]   [ * ] [ * ]   [ * ]   [ * ] [ * ]   [ * ]   [ * ] [ * ]   [ * ]   [ * ]   APPENDIX G   RESEARCH PLAN   [ * ]     (6 pages of text omitted here)     APPENDIX H   LIST OF FTEs   [ * ] [ * ] [ * ]   APPENDIX I   THIRD PARTY PATENTS   [ * ]   [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY  WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.  

EXHIBIT 10.(iii)J EMPLOYMENT AGREEMENT THIS AGREEMENT is made between Farmland Industries, Inc. ("Farmland"), with its principal place of business at 3315 North Oak Trafficway, Kansas City, Missouri 64116, and Robert B. Terry, ("Executive"). WHEREAS, Executive and Farmland desire and agree to govern their employment relationship by means of this Employment Agreement. NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, it is mutually covenanted and agreed by and between the parties as follows: 1. Position and Term. Farmland hereby employs Executive to serve as Executive Vice President, Law ----------------- and Administration and in such other senior management positions as may be assigned from time to time. The period of employment under this Agreement shall commence on September 1, 2000 and continue for a rolling two (2) year period and shall be referred to as the "Employment Period." In no event, will such Employment Period be automatically extended beyond Executive's 62nd birthday. Executive's employment may be earlier terminated by either party subject to the rights and obligations of the parties set forth herein. While employed hereunder, Executive will devote his best efforts to Farmland and shall perform the duties of the position outlined herein and such other duties as may be reasonably assigned by Farmland. While it is understood and agreed that Executive's job capacities may change at Farmland's discretion, Executive's level of responsibility shall not be substantially reduced at any time. Executive shall not, without the prior written consent of Farmland, render services of a business, professional, or commercial nature to any other person or firm, whether for compensation or otherwise during the Employment Period. 2. Employment at Will. The parties acknowledge this Employment Agreement does not create any ------------------- obligation on Executive's part to work for Farmland nor on Farmland's part to employ Executive for any fixed period of time and that this Employment Agreement may be terminated at any time with or without cause, subject only to the rights and obligations set forth herein. 3. Termination of Employment. ------------------------- (a) Death. Executive's employment shall terminate upon his death. ------ (b) Termination by the Company --------------------------- (i) Without Cause. Farmland may terminate Executive's --------------- employment, at any time and for any reason whatsoever, without cause, effective upon delivery of written notice of termination to Executive. (ii) For Cause. Farmland may terminate Executive's employment at any time for Cause, effective upon delivery --------- of written notice of termination to Executive. If such termination by Farmland is asserted to be for Cause, such termination notice shall state the grounds constituting Cause. As used herein, "Cause" shall mean: (a) willful misconduct by Executive which is damaging or detrimental to the business and affairs of Farmland, monetarily or otherwise, as determined by the Chief Executive Officer in the exercise of good faith business judgment; (b) a material breach of this Employment Agreement by Executive which is not "cured" by Executive following at least thirty (30) days' written notice of such breach; (c)gross negligence in the execution of his material assigned duties; (d) the commission by Executive of any act involving fraud, dishonesty or moral turpitude; (e) the indictment for, being bound over for trial following preliminary hearing, or the conviction of Executive of any felony in either a state or federal court proceeding; or (f) failure to reasonably perform his duties and obligations or to implement policies and directions promulgated by Farmland following at least thirty (30) days' written notice of such failure. (iii) Disability. Farmland may terminate Executive's employment if Executive sustains a disability which is ---------- serious enough that Executive is not able to perform the essential functions of his position, with or without reasonable accommodations, as defined and if required by applicable state and federal disability laws. Executive shall be presumed to have such a disability if he qualifies to begin receiving disability income insurance payments under any applicable Long Term Disability Income plan. Further, Executive shall be presumed to have such a disability if he is substantially incapable of performing his duties for a period of more than twelve (12) weeks. (c) Termination by Executive --------------------------------- (i) Voluntary Resignation. Executive may terminate his employment at any time and for any reason ---------------------- whatsoever, effective upon delivery of written notice of termination to Farmland. (ii) "Good Reason" Resignation. Executive may terminate this contract and his employment for "Good Reason" -------------------------- following at least thirty (30) days' written notice of the asserted "Good Reason" to Farmland, if such "Good Reason" is not then "cured" by Farmland. If such termination by Executive is asserted to be for "Good Reason", such termination shall state the grounds that Executive claims constitutes Good Reason. As used herein, "Good Reason" shall mean a material breach of this Employment Agreement by Farmland, or a demotion such that Executive does not serve in substantially the capacity described herein or a position of comparable responsibility. 4. Compensation. ------------ (a) Base Salary. During his employment, Farmland shall pay Executive an initial "Base Salary" at the rate ----------- of Two Hundred Seventeen Thousand Eight Hundred and Sixty-Two Dollars ($217,862) per year, commencing on the effective date of this Employment Agreement, payable in accordance with Farmland's regular payroll practices and policies. Farmland shall annually review the amount of Base Salary with the first such review to occur in April, 2001. Any upward adjustment shall not require a written amendment to this Employment Agreement. (b) Other Compensation and Employee Benefits. During the Employment Period, Executive shall be eligible to ----------------------------------------- participate in the Company's variable pay and long-term incentive compensation programs. Executive shall be entitled to participate in any additional executive compensation programs and employee benefit plans generally applicable to senior management employees of the Company pursuant to the terms and conditions of such programs and plans. Nothing contained herein shall preclude Farmland from terminating or amending any such plan or program in its sole discretion. 5. Post-Termination Payments by Farmland. --------------------------------------- (a) Terminations without Cause or Resignation for Good Reason. In the event that Executive's employment is ---------------------------------------------------------- terminated by Farmland without Cause or by Executive for Good Reason, and Executive signs (and does not rescind, as allowed by law) a Release of Claims in a form satisfactory to Farmland which assures, among other things, that Executive will not commence any litigation or other claims as a result of his employment or termination, and agrees to honor all of Executive's other obligations as required by this Agreement, Farmland will provide Executive a severance payment equal to two years Base Salary and Executive will be entitled to a pro-rata payment under any then existing annual or long-term variable pay or incentive plans or other bonus arrangements then in effect, if applicable objectives are achieved. (b) Termination for Cause, or Voluntary Resignation. If Executive's employment is terminated by Farmland -------------------------------------------------- for Cause or by Executive as a Voluntary Resignation, Executive shall be entitled only to his rights (a) to receive the unpaid portion of his Base Salary, prorated to the date of termination, (b) to receive reimbursement for any ordinary and reasonable business expenses for which he had not yet been reimbursed, (c) to receive payment for accrued and unused vacation days, (d) to receive payments under Farmland's pension, deferred compensation or other benefit plans in accordance with the terms of such plans, and (e) to continue certain health insurance at his expense pursuant to COBRA. 6. Other Executive Obligations. Executive agrees that the following provisions will apply ----------------------------- throughout Executive's Employment Period and for the specified post-employment period, regardless of the reason for termination or resignation; (a) Nondisclosure of Confidential Information. Except to the extent required in ----------------------------------------------- furtherance of Farmland's business in connection with matters as to which Executive is involved as an employee, Executive will not, during the term of his employment and for an unlimited period thereafter, directly or indirectly: (1) disclose or furnish to, or discuss with, any other person or entity any confidential information concerning Farmland or its business or employees, acquired during the period of his employment by Farmland; (2) individually or in conjunction with any other person or entity, employ or cause to be employed, any such confidential information in any way whatsoever or (3) without the written consent of Farmland, publish or deliver any copies, abstracts or summaries of any papers, documents, lists, plans, specifications or drawings containing any such confidential information. (b) Non-Interference. Executive will not, during the Employment Period and for an ---------------- unlimited period thereafter, directly or indirectly attempt to encourage, induce or otherwise solicit any employee or other person or entity to breach any agreement with the Company or otherwise interfere with the advantageous business relationship of the Company with any person or entity. Executive specifically agrees not to solicit, on Executive's own behalf or on behalf of another, any of the Company's employees to resign from their employment with the Company in order to go to work elsewhere. Executive further specifically agrees not to make any disparaging remarks of any sort or otherwise communicate any disparaging remarks about the Company or any of its members, equity holders, directors, officers or employees, directly or indirectly, to any of the Company's employees, members, equity holders, directors, customers, vendors, competitors, or other people or entities with whom the Company has a business or employment relationship. (c) Non-Competition. Executive agrees that during the term of his employment and --------------- thereafter for a period of one (1) year, Executive will not directly or indirectly engage in or carry on a business that is in direct competition with any significant business unit of Farmland as conclusively determined by the President and Chief Executive Officer. Further, Executive agrees that during this same period of time he will not act as an agent, representative, consultant, officer, director, independent contractor or employee of any entity or enterprise that is in direct competition with any significant business unit of Farmland as conclusively determined by the President and Chief Executive Officer. (d) Cooperation in Claims. For an unlimited period following his period of employment, at --------------------- the request of Farmland, Executive will cooperate with Farmland with respect to any claims or lawsuits by or against Farmland where Executive has knowledge of the facts involved in such claims or lawsuits. Executive shall be entitled to reasonable compensation for Executive's time and expense in rendering such cooperation. Further, Executive will decline to voluntarily aid, assist or cooperate with any party who has claims or lawsuits against Farmland, or with their attorneys or agents. Farmland and Executive both acknowledge, however, that nothing in this paragraph shall prevent Executive from honestly testifying at an administrative hearing, arbitration, deposition or in court, in response to a lawful and properly served subpoena in a proceeding involving Farmland. (e) Remedies. The parties recognize and agree that, because any breach by Executive of -------- the provisions of this Paragraph 6 would result in damages difficult to ascertain, Farmland shall be entitled to injunctive and other equitable relief to prevent a breach or threatened breach of the provisions of this Paragraph 6. Accordingly, the parties specifically agree that Farmland shall be entitled to temporary and permanent injunctive relief to enforce the provisions of this Paragraph 6 and that such relief may be granted without the necessity of proving actual damages or irreparable harm. (f) Enforceability. Executive agrees that considering Executive's relationship with -------------- Farmland, and given the terms of this Agreement, the restrictions and remedies set forth in Paragraph 6 are reasonable. Notwithstanding the foregoing, if any of the covenants set forth above shall be held to be invalid or unenforceable, the remaining parts thereof shall nevertheless continue to be valid and enforceable as though the invalid or unenforceable parts have not been included therein. In the event the provisions relating to time periods and/or areas of restriction shall be declared by a court of competent jurisdiction to exceed the maximum time periods or areas of restriction permitted by law, then such time periods and areas of restriction shall be amended to become and shall thereafter be the maximum periods and/or areas of restriction which said court deems reasonable and enforceable. Executive also agrees that Farmland's action in not enforcing a particular breach of any part of Paragraph 6 will not prevent Farmland from enforcing any other breaches that Farmland discovers, and shall not operate as a waiver by Farmland against any future enforcement of a breach. 7. Notices. Notices hereunder shall be in writing and shall be delivered personally or sent ------- return receipt requested and postage prepaid, addressed as follows: If to Executive: Robert B. Terry c/o Farmland Industries, Inc. 3315 North Oak Trafficway Kansas City, MO 64116 If to Farmland: Robert W. Honse President and Chief Executive Officer Farmland Industries, Inc. 3315 North Oak Trafficway Kansas City, MO 64116 with a copy to: Vice President and General Counsel Farmland Industries, Inc. 3315 North Oak Trafficway Kansas City, MO 64116 8. Binding Agreement. The provisions of this Agreement shall be binding upon, and shall inure to ------------------ the benefit of, the respective heirs, legal representatives and successors of the parties hereto. 9. Missouri Law. This Agreement shall be governed by and construed in accordance with the laws of ------------ the State of Missouri, unless otherwise pre-empted by federal law. 10. Captions and Section Headings. Captions and paragraph headings used herein are for convenience ------------------------------ only and are not a part of this Agreement and shall not be used in construing it. 11. Invalid Provisions. If any provision of this Agreement shall be unlawful, void, or for any ------------------- reason unenforceable, it shall be deemed severable from, and shall in no way affect the validity or enforceability of, the remaining provisions of this Agreement. 12. Waiver of Breach. The failure to enforce at any time any of the provisions of this Agreement, ---------------- or to require at any time performance by the other party of any of the provisions hereof, shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement or any part hereof or the right of either party thereafter to enforce each and every provision in accordance with the terms of this Agreement. 13. Entire Agreement. This Agreement contains the entire agreement between the parties with ----------------- respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, representations and understandings of the parties with respect thereto. No modification or amendment of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto and signed by Executive and the Chief Executive Officer. IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date set forth above. EXECUTIVE FARMLAND INDUSTRIES, INC. By: /s/ ROBERT B. TERRY By: /s/ ROBERT W. HONSE ____________________________ ________________________________ Robert B. Terry Robert W. Honse Executive Vice President, President and Chief Executive Officer Law and Administration

EXHIBIT 10.37   AMENDMENT NO. 3 TO MANAGEMENT AGREEMENT OF ROBERT P. COLLINS                  THIS AMENDMENT NO. 3 is made this 15 day of November, 2000, by and between SCOTT TECHNOLOGIES, INC., a Delaware corporation (hereinafter referred to as the "Company") and Robert P. Collins, an executive officer of the Company (hereinafter referred to as the "Executive"):   W I T N E S S E T H:                                     WHEREAS, on December 18, 1998 the Company and the Executive entered into a Management Agreement (hereinafter referred to as the "Agreement"); and                                     WHEREAS, the Company and the Executive agree that it is desirable to provide for a special extension of the Agreement to March 16, 2001;                                     NOW, THEREFORE, pursuant to Section 6.3 of the Agreement and effective as of December 16, 2000, the Company and the Executive hereby amend the second paragraph of Section 1 of the Agreement by the deletion of said paragraph and the substitution in lieu thereof of a new paragraph to read as follows:                          "The initial period will be extended to March 16, 2001 ('Special Extended Period') at the end of the initial period, and then will be automatically extended for one (1) year commencing at the end of the Special Extended Period and each successive year thereafter. However, either party may terminate this Agreement at the end of the Special Extended Period, or at the end of any successive one (1) year period, by giving the other party written notice of intent not to renew, delivered at least thirty (30) days prior to the   end of such Special Extended Period or successive one (1) year period."                                        IN WITNESS WHEREOF, the Company, by its duly authorized officers, and the Executive have executed this Amendment No. 3 as of the day and year first above written.   SCOTT TECHNOLOGIES, INC.           ("Company")       By                                                                                                                                  Robert P. Collins ("Executive")

Exhibit 10.18 of Form 10-K 1997 EDITION AIA DOCUMENT A111-1997 Standard Form of Agreement Between Owner and Contractor where the basis for payment is the COST OF THE WORK PLUS A FEE with a negotiated Guaranteed Maximum Price A G R E E M E N T made as of the Twenty-Third day of October in the year Two Thousand (In words, indicate day, month and year ) This document has important legal consequences. Consultation with an attorney is encouraged with respect to its completion or modification. B E T W E E N the Owner: (Name, address and other information) Synthetech Inc . 1290 Industrial Way SW Albany, OR 97321 This document is not intended for use in competitive bidding.   and the Contractor: (Name, address and other information) R . L . Reimers Company 3939 Old Salem Road Suite 200 Albany, OR 97321 AlA Document A201 1997, General Conditions of the Contract for Construction, is adopted in this document by reference. The Project is: (Name and address) Synthetech Laboratory Remodel 1290 Industrial Way SW Albany, OR 97321 This document has been approved and endorsed by The Associated General Contractors of America.   The Architect is: (Name, address and other information) Industrial Design Corporation 2020 SW 4th Avenue Portland, OR 97201 The Owner and Contractor agree as follows. Ó 1997 AIAâ The American Insitiute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 Copyright 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974, 1978, 1987, Ó 1997 by The American Institute of Architects. Reproduction of the material herein or substantial quotation of its provisions without written permission of the AlA violates the copyright laws of the United States and will subject the violator to legal prosecution. WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution.   ARTICLE 1 THE CONTRACT DOCUMENTS The Contract Documents consist of this Agreement, Conditions of the Contract (General, Supplementary and other Conditions), Drawings, Specifications, Addenda issued prior to execution of this Agreement, other documents listed in this Agreement and Modifications issued after execution of this Agreement; these form the Contract, and are as fully a part of the Contract as if attached to this Agreement or repeated herein. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. An enumeration of the Contract Documents, other than Modifications, appears in Article 15. If anything in the other Contract Documents is inconsistent with this Agreement, this Agreement shall govern. ARTICLE 2 THE WORK OF THIS CONTRACT The Contractor shall fully execute the Work described in the Contract Documents, except to the extent specifically indicated in the Contract Documents to be the responsibility of others. ARTICLE 3 RELATIONSHIP OF THE PARTIES The Contractor accepts the relationship of trust and confidence established by this Agreement and covenants with the Owner to cooperate with the Architect and exercise the Contractor's skill and judgment in furthering the interests of the Owner; to furnish efficient business administration and supervision; to furnish at all times an adequate supply of workers and materials; and to perform the Work in an expeditious and economical manner consistent with the Owner's interests. The Owner agrees to furnish and approve, in a timely manner, information required by the Contractor and to make payments to the Contractor in accordance with the requirements of the Contract Documents. ARTICLE 4 DATE OF COMMENCEMENT AND SU.STANTIAL COMPLETION 4.1 The date of commencement of the Work shall be the date of this Agreement unless a different date is stated below or provision is made for the date to be fixed in a notice to proceed issued by the Owner. (Insert the date of commencement, if it differs from the date of this Agreement or, if applicable, state that the date will be fixed in a notice to proceed.) October 23, 2000. If, prior to commencement of the Work, the Owner requires time to file mortgages, mechanic's liens and other security interests, the Owner's time requirement shall be as follows: N/A 2. The Contract Time shall be measured from the date of commencement. Ó 1997 AIAâ The American Insitiute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution.   4.3 The Contractor shall achieve Substantial Completion of the entire Work not later than 180 days from the date of commencement, or as follows: (Insert number of calendar days. Alternatively, a calendar date may be used when coordinated with the date of commencement. Unless stated elsewhere in the Contract Documents, insert any requirements for earlier Substantial Completion of certain portions of the Work.) ,subject to adjustments of this Contract Time as provided in the Contract Documents. (Insert provisions, if any, for liquidated damages relating to failure to complete on time, or for bonus payments for early completion of the Work.)   ARTICLE S BASIS FOR PAYMENT 5.1 CONTRACT SUM 5.1.1 The Owner shall pay the Contractor the Contract Sum in current funds for the Contractor's performance o[the Contract. The Contract Sum is the Cost of the Work as defined in Article 7 plus the Contractor's Fee. 5.1.2 The Contractor's Fee is: (State a jump sum, percentage of Cost of the Work or other provision for determining the Contractors Fee, and describe the method of adjustment of the Contractors Fee for changes in the Work.) See attached Rate Sheet, Exhibit "A" 5.2 GUARANTEED MAXIMUM PRICE 5.2.1 The sum of the Cost of the Work and the Contractor's Fee is guaranteed by the Contractor not to exceed Seven hundred ninety-one thousand one hundred twenty-five dollars($791,125), subject to additions and deductions by Change Order as provided in the Contract Documents. Such maximum sum is referred to in the Contract Documents as the Guaranteed Maximum Price. Costs which would cause the Guaranteed Maximum Price to be exceeded shall be paid by the Contractor without reimbursement by the Owner. (Insert specific provisions if the Contractor is to participate in any savings.) 5.2.2 The Guaranteed Maximum Price is based on the following alternates, if any, which are described in the Contract Documents and are hereby accepted by the Owner: (State the numbers or other identification of accepted alternates. If decisions on other alternates are to be made by the Owner subsequent to the execution of this Agreement, attach a schedule of such other alternates showing the amount for each and the date when the amount expires.) N/A Ó 1997 AIAâ The American Insitiute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution.       5.2.3 Unit prices, if any, are as follows: N/A 5.2.4 Allowances, if any, are as follows: N/A (Identify and state the amounts of any allowances, and state whether they include labor, materials, or both.) 5.2.5 Assumptions, if any, on which the Guaranteed Maximum Price is based are as follows: HVAC system to be designed by Salem Heating & Sheet Metal, Inc. 5.2.6 To the extent that the Drawings and Specifications are anticipated to require further development by the Architect, the Contractor has provided in the Guaranteed Maximum Price for such further development consistent with the Contract Documents and reasonably inferable therefrom. Such further development does not include such things as changes in scope, systems, kinds and quality of materials, finishes or equipment, all of which, if required, shall be incorporated by Change Order. ARTICLE 6 CHANGES IN THE WORK 6.1 Adjustments to the Guaranteed Maximum Price on account of changes in the Work may be determined by any of the methods listed in Subparagraph 7.3.3 of AlA Document A2O1-1997. 6.2 In calculating adjustments to subcontracts (except those awarded with the Owner's prior consent on the basis of cost plus a fee), the terms "cost" and "fee" as used in Clause 7.3.3.3 of AlA Document A2O1-1997 and the terms "costs" and "a reasonable allowance for overhead and profit" as used in Subparagraph 7.3.6 of AlA Document A201-1997 shall have the meanings assigned to them in AlA Document A2O1-1997 and shall not be modified by Articles 5, 7 and 8 of this Agreement. Adjustments to subcontracts awarded with the Owner's prior consent on the basis of cost plus a fee shall be calculated in accordance with the terms of those subcontracts. 6.3 In calculating adjustments to the Guaranteed Maximum Price, the terms "cost" and "costs" as used in the above-referenced provisions of AlA Document A201-1997 shall mean the Cost of the Work as defined in Article 7 of this Agreement and the terms "fee" and "a reasonable allowance for overhead and profit" shall mean the Contractor's Fee as defined in Subparagraph 5.1.2 of this Agreement.   Ó 1997 AIAâ The American Insitiute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution. 6.4 If no specific provision is made in Paragraph 5.1 for adjustment of the Contractor's Fee in the case of changes in the Work, or if the extent of such changes is such, in the aggregate, that application of the adjustment provisions of Paragraph 5.1 will cause substantial inequity to the Owner or Contractor, the Contractor's Fee shall be equitably adjusted on the basis of the Fee established for the original Work, and the Guaranteed Maximum Price shall be ad justed accordingly. ARTICLE 7 COSTS TO BE REIMBURSED 7.1 COST OF THE WORK The term Cost of the Work shall mean costs necessarily incurred by the Contractor in the proper performance of the Work. Such costs shall be at rates not higher than the standard paid at the place of the Project except with prior consent of the Owner. The Cost of the Work shall include only the items set forth in this Article 7. 7.2 LABOR COSTS 7.2.1 Wages of construction workers directly employed by the Contractor to perform the construction of the Work at the site or, with the Owner's approval, at off-site workshops. 7.2.2 Wages or salaries of the Contractor's supervisory and administrative personnel when stationed at the site with the Owner's approval. (If it is intended that the wages or salaries of certain personnel stationed at the Contractors principal or other offices shall be included in the Cost of the Work, identify in Article 14 the personnel to be included and whether for all or only part of their time, and the rates at which their time will be charged to the Work.) 7.2.3 Wages and salaries of the Contractor's supervisory or administrative personnel engaged, at factories, workshops or on the road, in expediting the production or transportation of materials or equipment required for the Work, but only for that portion of their time required for the Work. 7.2.4 Costs paid or incurred by the Contractor for taxes, insurance, contributions, assessments and benefits required by law or collective bargaining agreements and, for personnel not covered by such agreements, customary benefits such as sick leave, medical and health benefits, holidays, vacations and pensions, provided such costs ~rebased on wages and salaries included in the Cost of the Work under Subparagraphs 7.2.1 through 7.2.3. 7.3 SUBCONTRACT COSTS 7.3.1 Payments made by the Contractor to Subcontractors in accordance with the requirements of the subcontracts. 7.4 COSTS OF MATERIALS AND EOUIPMENT INCORPORATED IN THE COMPLETED CONSTRUCTION 7.4.1 Costs, inquding transportation and storage, of materials and equipment incorporated or tobe incorporated in the completed construction. 7.4.2 Costs of materials described in the preceding Subparagraph 7.4.1 in excess of those actually installed to allowIor reasonable waste and spoilage. Unused excess materials, if any, shall become the Owner's property at the completion of the Work or, at the Owner's option, shall be sold by the Contractor. Any amounts realized from such sales shall be credited to the Owner as a deduction from the Cost of the Work. 7.5 COSTS OF OTHER MATERIALS AND EOUIPMENT, TEMPORARY FACILITIES AND RELATED ITEMS 7.5.1 Costs, including transportation and storage, installation, maintenance, dismantling and removal of materials, supplies, temporary facilities, machinery, equipment, and hand tools not customarily owned by construction workers, that are provided by the Contractor at the site and Ó 1997 AIAâ The American Insitiute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution.   fully consumed in the performance of the Work; and cost (less salvage value) of such items if not fully consumed, whether sold to others or retained by the Contractor. Cost for items previously used by the Contractor shall mean fair market value. 7.5.2 Rental charges for temporary facilities, machinery, equipment, and hand tools not customarily owned by construction workers that are provided by the Contractor at the site, whether rented from the Contractor or others, and costs of transportation, installation, minor repairs and replacements, dismantling and removal thereof. Rates and quantities of equipment rented shall be subject to the Owner's prior approval. 7.5.3 Costs of removal of debris from the site. 7.5.4 Costs of document reproductions, facsimile transmissions and long-distance telephone calls, postage and parcel delivery charges, telephone service at the site and reasonable petty cash expenses of the site office. 7.5.5 That portion of the reasonable expenses of the Contractor's personnel incurred while traveling in discharge of duties connected with the Work. 7.5.6 Costs of materials and equipment suitably stored off the site at amutual1yacceptable location, if approved in advance by the Owner. 7.6 MISCELLANEOUS COSTS 7.6.1 That portion of insurance and bond premiums that can be directly attributed to this Contract 7.6.2 Sales, use or similar taxes imposed by a governmental authority thar are related to the Work. 7.6.3 Fees and assessments for the building permit and for other permits, licenses and inspections for which the Contractor is required by the Contract Documents to pay. 7.6.4 Fees of laboratories for tests required by the Contract Documents, except those related to defective or nonconforming Work for which reimbursement is excluded by Subparagraph 13.5.3 of AIA Document A201-1997 or other provisions of the Contract Documents, and which do not fall within the scope of Subparagraph 7.7.3. 7.6.5 Royalties and license fees paid for the use of a particular design, process or product required by the Contract Documents; the cost of defending suits or claims for infringement of patent rights arising from such requirement of the Contract Documents; and payments made in accordance with legal judgments against the Contractor resulting from such suits or claims and payments of settlements made with the Owner's consent. However, such costs of legal defenses, judgments and settlements shall not be included in the calculation of the Contractor's Fee or subject to the Guaranteed Maximum Price. If such royalties, fees and costs are excluded by the last sentence of Subparagraph 3.17.1 of AIA Document A201-1997 or other provisions of the Contract Documents, then they shall not be included in the Cost of the Work. 7.6.6 Data processing costs related to the Work. 7.6.7 Deposits lost for causes other than the Contractor's negligence or specific responsibility to the Owner as set forth in the Contract Documents. Ó 1997 AIAâ The American Insitiute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution.   7.6.8 Legal, mediation and arbitration costs, including attorneys' fees, other than those arising from disputes between the Owner and Contractor, reasonably incurred by the Contractor in the performance of the Work and with the Owner's prior written approval; which approval shall not be unreasonably withheld. 7.6.9 Expenses incurred in accordance with the Contractor's standard personnel policy for relocation and temporary living allowances of personnel required for the Work, if approved by the Owner. 7.7 OTHER COSTS AND EMERGENCIES 7.7.1 Other costs incurred in the performance of the Work if and to the extent approved in advance in writing by the Owner. 7.7.2 Costs due to emergencies incurred in taking action to prevent threatened damage, injury or loss incase of an emergency affecting the safety of persons and property, as provided in Paragraph 10.6of AIA Document A2O1-1997. 7.7.3 Costs of repairing or correcting damaged or nonconforming Work executed by the Contractor, Subcontractors or suppliers, provided that such damaged or nonconforming Work was not caused by negligence or failure to fulfill a specific responsibility of the Contractor and only to the extent that the cost of repair or correction is not recoverable by the Contractor from insurance, sureties, Subcontractors or suppliers. ARTICLE 8 COSTS NOT TO BE REIMBURSED 8.1 The Cost of the Work shall not include: 8.1.1 Salaries and other compensation of the Contractor's personnel stationed at the Contractor's principal office or offices other than the site office, except as specifically provided in Subparagraphs 7.2.2 and 7.2.3 or as may be provided in Article 14. 8.1.2. Expenses of the Contractor's principal office and offices other than the site office. 8.1.3 Overhead and general expenses, except as may be expressly included in Article 7. 8.1.4 The Contractor's capital expenses, including interest on the Contractor's capital employed for the Work. 8.1.5 Rental costs of machinery and equipment, except as specifically provided in Subparagraph 7.5.2. 8.1.6 Except as provided in Subparagraph 7.7.3 of this Agreement, costs due to the negligence or failure to fulfill a specific responsibility of the Contractor, Subcontractors and suppliers or anyone directly or indirectly employed by any of them or for whose acts any of them may be liable. 8.1.7 Any cost not specifically and expressly described in Article 7. 8.1.8 Costs, other than costs included in Change Orders approved by the Owner, that would cause the Guaranteed Maximum Price to be exceeded. ARTICLE 9 DISCOUNTS, REBATES AND REFUNDS 9.1 Cash discounts obtained on payments made by the Contractor shall accrue to the Owner if (1) before making the payment, the Contractor included them in an Application for Payment Ó 1997 AIAâ The American Insitiute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution.   and received payment therefor from the Owner, or (2) the Owner has deposited funds with the Contractor with which to make payments; otherwise, cash discounts shall accrue to the Contractor. Trade discounts, rebates, refunds and amounts received from sales of surplus materials and equipment shall accrue to the Owner, and the Contractor shall make provisions so that they can be secured. 9.2 Amounts that accrue to the Owner in accordance with the provisions of Paragraph 9.1 shall be credited to the Owner as a deduction from the Cost of the Work. ARTICLE 1O SUBCONTRACTS AND OTHER AGREEMENTS 1O.1 Those portions of the Work that the Contractor does not customarily perform with the Contractor's own personnel shall be performed under subcontracts or by other appropriate agreements with the Contractor. The Owner may designate specific persons or entities from whom the Contractor shall obtain bids. The Contractor shall obtain bids from Subcontractors and from suppliers of materials or equipment fabricated especially for the Work and shall deliver such bids to the Architect. The Owner shall then determine, with the advice of the Contractor and the Architect, which bids will be accepted. The Contractor shall not be required to contract with anyone to whom the Contractor has reasonable objection. 10.2 If a specific bidder among those whose bids are delivered by the Contractor to the Architect (1) is recommended to the Owner by the Contractor; (2) is qualified to perform that portion of the Work; and (3) has submitted a bid that conforms to the requirements of the Contract Documents without reservations o( exceptions, but the Owner requires that another bid be accepted, then the Contractor may require that a Change Order be issued to ad just the Guaranteed Maximum Price by the difference between the bid of the person or entity recommended to the Owner by the Contractor and the amount of the subcontract or other agreement actually signed with the person or entity designated by the Owner. 1O.3 Subcontracts or other agreements shall conform to the applicable payment provisions of this Agreement, and shall not be awarded on the basis of cost plus a fee without the prior consent of the Owner. ARTICLE 11 ACCOUNTING RECORDS The Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Contract, and the accounting and control systems shall be satisfactory to the Owner. The Owner and the Owner's accountants shall be afforded access to, and shall be permitted to audit and copy, the Contractor's records, books, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Contract, and the Contractor shall preserve these for a period of three years after final payment, or for such longer period as may be required by law. ARTICLE 12 PAYMENTS 12.1 PROGRESS PAYMENTS 12.1.1 Based upon Applications for Payment submitted to the Owner by the Contractor, the Owner shall make progress payments on account of the Contract Sum to the Contractor as provided below and elsewhere in the Contract Documents. 12.1.2 The period covered by each Application for Payment shall be one calendar month ending on the last day of the month, or as follows: Terms are net 10 days. Ó 1997 AIAâ The American Insitiute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution.   12.1.3 Provided that an Application for Payment is received by the Owner not later than the 1st day of a month, the Owner shall make payment to the Contractor not later than the 1Oth day of the same month. If an Application for Payment is received by the Owner after the application date fixed above, payment shall be made by the Owner not later than 10 days after the Owner receives the Application for Payment. 12.1.4 With each Application for Payment, the Contractor shall submit payrolls, petty cash accounts, receipted invoices or invoices with check vouchers attached, and any other evidence required by the Owner or Architect to demonstrate that cash disbursements already made by the Contractor on account of the Cost of the Work equal or exceed (1) progress payments already received by the Contractor; less (2) that portion of those payments attributable to the Contractor's Fee; plus (3) payrolls for the period covered by the present Application for Payment. 12.1.5 Each Application for Payment shall be based on the most recent schedule of values submitted by the Contractor in accordance with the Contract Documents. The schedule of values shall allocate the entire Guaranteed Maximum Price among the various portions of the Work, except that the Contractor's Fee shall be shown as a single separate item. The schedule of values shall be prepared in such form and supported by such data to substantiate its accuracy as the Owner may require. This schedule, unless objected to by the Owner, shall be used as a basis for reviewing the Contractor's Applications for Payment. 12.1.6 Applications for Payment shall show the percentage of completion of each portion of the Work as of the end of the period covered by the Application for Payment. The percentage of completion shall be the lesser of (1) the percentage of that portion of the Work which has actually been completed; or (2) the percentage obtained by dividing (a) the expense that has actually been incurred by the Contractor on account of that portion of the Work for which the Contractor has made or intends to make actual payment prior to the next Application for Payment by (b) the share of the Guaranteed Maximum Price allocated to that portion of the Work in the schedule of values. 12.1.7 Subject to other provisions of the Contract Documents, the amount of each progress payment shall be computed as follows: .1 take that portion of the Guaranteed Maximum Price properly allocable to completed Work as determined by multiplying the percentage of completion of each portion of the Work by the share of the Guaranteed Maximum Price allocated to that portion of the Work in the schedule of values. Pending final determination of cost to the Owner of changes in the Work, amounts not in dispute shall be included as provided in Subparagraph 7.3.8 of AIA Document A201-1997; .2 add that portion of the Guaranteed Maximum Price properly allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the Work, or if approved in advance by the Owner, suitably stored off the site at a location agreed upon in writing; .3 add the Contractor's Fee, less retainage of zero percent (0%). The Contractor's Fee shall be computed upon the Cost of the Work described in the two preceding Clauses at the rate stated in Subparagraph 5.1.2 or, if the Contractor's Fee is stated as a fixed sum in that Subparagraph, shall be an amount that bears the same ratio to that fixed-sum fee as the Cost of the Work in the two preceding Clauses bears to a reasonable estimate of the probable Cost of the Work upon its completion; .4 subtract the aggregate of previous payments made by the Owner; .5 subtract the shortfall, if any, indicated by the Contractor in the documentation required by Paragraph 12.14 to substantiate prior Applications for Payment, or resulting from errors subsequently discovered by the Owner's accountants in such documentation; and .6 subtract amounts, if any, for which the Architect has withheld or nullified a Certificate for Payment as provided in Paragraph 9.5 of AIA Document A2O1-1997. Ó 1997 AIAâ The American Insitiute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution.     12.1.8 Except with the Owner's prior approval, payments to Subcontractors shall be subject to retain age of not less than five percent (5%). The Owner and the Contractor shall agree upon a mutually acceptable procedure for review and approval of payments and retention for Subcontractors. 12.1.9 In taking action on the Contractor's Applications for Payment, the Architect shall be entitled to rely on the accuracy and completeness of the information furnished by the Contractor and shall not be deemed to represent that the Architect has made a detailed examination, audit or arithmetic verification of the documentation submitted in accordance with Subparagraph 12.1.4 or other supporting data; that the Architect has made exhaustive or continuous on-site inspections or lhat the Architect has made examinations to ascertain how or for what purposes the Contractor has used amounts previously paid on account of the Contract. Such examinations, audits and verifications, if required by the Owner, will be performed by the Owner's accountants acting in the sole interest of the Owner. 12.2 FINAL PAYMENT 12.2.1 Final payment, constituting the entire unpaid balance of the Contract Sum, shall be made by the Owner to the Contractor when: .1 the Contractor has fully performed the Contract except for the Contractor's responsibility to correct Work as provided in Subparagraph 12.2.2 of AlA Document A201-1997, and to satisfy other requirements, if any, which extend beyond final payment; and .2 a final Certificate for Payment has been issued by the Architect. 12.2.2 The Owner's final payment to the Contractor shall be made no later than 3O days after the issuance of the Architect's final Certificate for Payment, or as follows: Terms are net 10 days. 12.2.3 The Owner's accountants will review and report in writing on the Contractor's final accounting within 3O days after delivery of the final accounting to the Architect by the Contractor. Based upon such Cost of the Work as the Owner's accountants report to be substantiated by the Contractor's final accounting, and provided the other conditions of Subparagraph 12.2.1 have been met, the Architect win, within seven days after receipt of the written report of the Owner's accountants, either issue to the Owner a final Certificate for Payment with a copy to the Contractor, or notify the Contractor and Owner in writing of the Architect's reasons for withholding a certificate as provided in Subparagraph 9.5.1 of the AIA Document A201-1997. The time periods stated in this Subparagraph 12.2.3 supersede those stated in Subparagraph 9.4.1 of the AIA Document A201-1997. 12.2.4 If the Owner's accountants report the Cost of the Work as substantiated by the Contractor's final accounting to be less than claimed by the Contractor, the Contractor shall be entitled to demand arbitration of the disputed amount without a further decision of the Architect. Such demand for arbitration shall be made by the Contractor within 30 days after the Contractor's receipt of a copy of the Architect's final Certificate for Payment; failure to demand arbitration within this 30~day period shall result in the substantiated amount reported by the Owner's accountants becoming binding on the Contractor. Pending a final resolution by arbitration, the Owner shall pay the Contractor the amount certified in the Architect's final Certificate for Payment. 12.2.5 If, subsequent to final payment and at the Owner's request, the Contractor incurs costs described in Article 7 and not excluded by Article 8 to correct defective or nonconforming Work, Ó 1997 AIAâ The American Insitiute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution.     the Owner shall reimburse the Contractor such costs and the Contractor's Fee applicable thereto on the same basis as if such costs had been incurred prior to final payment, but not in excess of the Guaranteed Maximum Price. If the Contractor has participated in savings as provided in Paragraph 5.2, the amount of such savings shall be recalculated and appropriate credit given to the Owner in determining the net amount to be paid by the Owner to the Contractor. ARTICLE 13 TERMINATION OR SUSPENSION 13.1 The Contract may be terminated by the Contractor, or by the Owner for convenience, as provided in Article 14of AIA Document A201-1997. However, the amount to be paid to the Contractor under Subparagraph 14.1.3 of AIA Document A2O1-1997 shall not exceed the amount the Contractor would be entitled to receive under Paragraph 13.2 below, except that the Contractor's fee based on percentage of completion of the work. 13.2 The contract may be terminated by the Owner for cause as provided in Article 14 of AIA Document A20l-l997. The amount, if any, to be pa1d to the Contractor under Subparagraph 14.2.4 of AIA Document A201-1997 shall not cause the Guaranteed Maximum Price to be exceeded, nor shall it exceed an amount calculated as follows: 13.2.1 Take the Cost of the Work incurred by the Contractor to the date of termination; 13.2.2 Add the Contractor's Fee computed upon the Cost of the Work to the date of termination at the rate stated in Subparagraph 5.1.2 or, if the Contractor's Fee is stated as a fixed sum in that Subparagraph, an amount that bears the same ratio to that fixed-sum Fee as the Cost of the Work at the time of termination bears to a reasonable estimate of the probable Cost of the Work upon its completion; and 13.2.3 Subtract the aggregate of previous payments made by the Owner. 13.3 The Qwner shall also pay the Contractor fair compensation, either by purchase or rental at the election of the Owner, for any equipment owned by the Contractor that the Owner elects to retain and that is not otherwise included in the Cost of the Work under Subparagraph 13.2.1. To the extent that the Owner elects to take legal assignment of subcontracts and purchase orders (including rental agreements), the Contractor shall, as a condition of receiving the payments referred to in this Article 13, execute and deliver all such papers and take all such steps, including the legal assignment of such subcontracts and other contractual rights of the Contractor, as the Owner may require for the purpose of fully vesting in the Owner the rights and benefits of the Contractor under such subcontracts or purchase orders. 13.4 The Work may be suspended by the Owner as provided in Article 14 of AIA Document A201-1997; in such case, the Guaranteed Maximum Price and Contract T1me shall be increased as provided in Subparagraph 14.3.2 of AIA Document A20l-I997 except that the term "profit" shall be understood to to mean the Contractor's Fee as described in Subparagraphs 5.1.2 and Paragraph 6.4 of this Agreement. ARTICLE 14 MISCELLANEOUS PROVISIONS 14.1 Where reference is made in this Agreement to a provision AlA Document A201-1997 or another Contract Document, the reference refers to that provision as amended or supplemented by other provisions of the Contract Documents. Ó 1997 AIAâ The American Insitiute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution. 14.2 Payments due and unpaid under the Contract shall bear interest from the date payment is due at the rate stated below, or in the absence thereof, at the legal rate prevailing from time to time at the place where the Project is located. (Insert rate of interest agreed upon, if any.) 18% APR {1.5%/month) (Usury laws and requirements under the Federal Truth in Lending Act, similar state and local consumer credit laws and other regulations at the Owners and Contractor's principal places of business, the location of the Project and elsewhere may affect the validity of this provision. Legal advice should be obtained with respect to deletions or modifications, and also regarding requirements such as written disclosures or waivers.) 14.3 The Owner's representative is: (Name, address and other information.) Dennis Willhite Synthetech Inc . 1290 Industrial Way SW Albany ,OR 97321 14.4 The Contractor's representative is: (Name, address and other information.) Ronald Reimers R.L. Reimers Company 3939 Old Salem Road Suite 200 Albany, OR 97321 14.5 Neither the Owner's nor the Contractor's representative shall be changed without ten days written notice to the other party. 14.6 Other provisions: ARTICLE 15 ENUMERATION OF CONTRACT DOCUMENTS 15.1 The Contract Documents, except for Modifications issued after execution of this Agreement, are enumerated as follows: 15.1.1 The Agreement is this executed 1997 edition of the Standard Form of Agreement Between Owner and Contractor, AIA Document A111-1997. 15.1.2 The General Conditions are the 1997 edition of the General Conditions of the Contract for Construction, AlA Document A2O1-1997.   Ó 1997 AIAâ The American Insitiute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution.   15.1.3 The Supplementary and other Conditions of the Contract are those contained in the Project Manual dated August 11 , 2000 , and are as follows: Document Title Pages Specifications for the Construction of Laboratory Remodel, Rev. 0 15.1.4 The Specifications are those contained in the Project Manual dated as in Subparagraph 15.1.3, and are as follows: (Either list the Specifications here or refer to an exhibit attached to this Agreement.) Section Title Pages See attached exhibit "B" 15.1.5 The Drawings are as follows, and are dated August 16, 2000 unless different date is shown below: (Either list the Drawings here or refer to an exhibit attached to this Agreement.) Number Title Date See attached exhibit "C"   Ó 1997 AIAâ The American Insitiute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution.   15.1.6 The Addenda, if any, are as follows: Number Date Pages N/A Portions of Addenda relating to bidding requirements are not part of the Contract Documents unless the bidding requirements are also enumerated in this Article 15. 15.1.7 Other Documents, if any, forming part of the Contract Documents are as follows: {List here any additional documents, such as a list of alternates that are intended to form part of the Contract Documents. AIA Document A2O1-1997 provides that bidding requirements such as advertisement or invitation to bid, Instructions to Bidders, sample forms and the Contractors bid are not part of the Contract Documents unless enumerated in this Agreement. They should be listed here only if intended to be part of the Contract Documents.) Original budget dated September 8, 2000. Revised budget dated October 17, 2000. Letter dated October 17, 2000, listing deletions from original bid. Field change Order No.02 dated November 28, 2000.   Ó 1997 AIAâ The American Insitiute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution. ARTICLE 16 INSURANCE AND BONDS (List required limits of liability for insurance and bonds. AIA Document A201-1997 gives other specific requirements for insurance and bonds.) See attached Certificate of Insurance.     This agreement is entered into as of the day and year first written above and is executed in at least three original copies, of which one is to be delivered to the Contractor, one to the Architect for use in the administration of the Contract, and the remainder to the Owner. Synthetech, Inc. By:/s/ Chares B. Williams /s/ Ronald R. Reimers OWNER (Signature) CONTRACTOR (Signature) Charles B. Williams, VP & CFO Ronald R. Reimers, President   CAUTION: You should sign an original AIA document or a licensed reproduction. Originals contain the AIA logo printed in red; licensed reproductions are those produced in accordance wit the Instructions to this document.   Ó 1997 AIAâ The American Institute of Architects AIA Document A111-1997 1735 New York Avenue, N.W. OWNER-CONTRACTOR AGREEMENT Washington, D.C. 2006-5292 WARNING: unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution.   <Table> <Caption> <S><C> <C> <C> <C> <C> <C> <C> <C> Schedule of Purchase Orders ("PO") Vendor: R. L. Reimers Co. 3514 Conser Rd., NE Albany, OR 97321 PO Number PO Date Requisitioner Terms Qty Description Unit Price Total 16329 8-Nov-2000 J.Melka Net 10 Days 1 R&D Lab Remodel per pending lawyer review 852,212.00 852,212.00 16337 13-Nov-2000 D. Willhite Net 10 Days 1 Asbestos removal from R&D Lab area 3,444.00 3,444.00 16353 15-Dec-2000 D. Willhite Net 10 Days 9 Kussel floor drains for R&D Lab project. Floor drains are of sanitary 550.00 4,950.00 design. 16373 7-Feb-2001 D.Willhite Net 10 Days 1 R&D Lab change order - add electrical accomodations to move 3,162.50 3,162.50 Rotovaps back into R&D lab area. 16374 7-Feb-2001 D.Willhite Net 10 Days 1 R&D Lab change order - cost increase for better floor coating from 12,620.30 12,620.30 </Table>  

  ALLIANCE CAPITAL MANAGEMENT L.P. UNIT OPTION PLAN AGREEMENT             AGREEMENT, dated December 11, 2000 between Alliance Capital Management L.P. (the "Partnership"), Alliance Capital Management Holding L.P. (“Alliance Holding”) and Robert H. Joseph, Jr. (the "Participant"), an employee of the Partnership or a subsidiary of the Partnership (an "Employee Participant").           The 1997 Option Committee (the "Administrator") of the Board of the Board of Directors (the “Board”) of Alliance Capital Management Corporation, the general partner of the Partnership and Alliance Holding, pursuant to the Alliance Capital Management L.P. 1997 Long Term Incentive Plan, a copy of which has been delivered to the Participant (the "Plan"), has granted to the Participant an option to purchase units representing assignments of benefi­cial ownership of limited partnership interests in Alliance Holding(the "Units") as hereinafter set forth, and authorized the execution and delivery of this Agreement.           In accordance with that grant, and as a condition thereto, the Partnership, Alliance Holding and the Participant agree as follows:           1.       Grant of Option.  Subject to and under the terms and conditions set forth in this Agreement and the Plan, the Participant is the owner of an option (the "Option") to purchase the number of Units set forth in Section 1 of Exhibit A attached hereto at the per Unit price set forth in Section 2 of Exhibit A.           2.       Term and Exercise Schedule.  This Option shall not be exercisable to any extent prior to December 11, 2001 or after December 11, 2010 (the "Expiration Date").  Subject to the terms and condi­tions of this Agreement and the Plan, the Participant shall be entitled to exercise the Option prior to the Expiration Date and to purchase Units hereunder in accordance with the schedule set forth in Section 3 of Exhibit A.           The right to exercise this Option shall be cumulative so that to the extent this Option is not exercised when it becomes initially exercisable with respect to any Units, it shall be exercisable with respect to such Units at any time thereafter until the Expiration Date and any Units subject to this Option which have not then been purchased may not, thereafter, be pur­chased hereunder.  A Unit shall be considered to have been purchased on or before the Expiration Date if notice of the purchase has been given and payment therefor has actually been received pursuant to Sections 3 and 13, on or before the Expiration Date.           3.       Notice of Exercise, Payment and Certificate.  Exercise of this Option, in whole or in part, shall be by delivery of a written notice to the Partnership and Alliance Holding pursuant to Section 14 which specifies the number of Units being purchased and is accompanied by payment therefor in cash.  Promptly after receipt of such notice and purchase price, the Partnership and Alliance Holding shall deliver to the person exercising the Option a certificate for the number of Units purchased.  Units to be issued upon the exercise of this Option may be either authorized and unissued Units or Units which have been reacquired by the Partnership, a subsidiary of the Partnership, Alliance Holding or a subsidiary of Alliance Holding.           4.       Termination of Employment.  This Option may be exer­cised by an Employee Participant only while the Employee Participant is employed full-time by the Partnership, except as follows:           (a)      Disability.  If the Employee Participant's employment with the Partnership terminates because of Disability, the Employee Participant (or his personal representative) shall have the right to exercise this Option, to the extent that the Employee Participant was entitled to do so on the date of termination of his employ­ment, for a period which ends not later than the earlier of (i) three months after such termination, and (ii) the Expi­ration Date. "Disability" shall mean a determination by the Administrator that the Employee Participant is physically or mentally incapacitated and has been unable for a period of six con­secutive months to perform the duties for which he was responsible immediately before the onset of his incapacity.  In order to assist the Administrator in making a determina­tion as to the Disability of the Employee Participant for purposes of this paragraph (a), the Employee Participant shall, as reasonably re­quested by the Administrator, (A) make himself available for medical examinations by one or more physicians chosen by the Administrator and approved by the Employee Participant, whose approval shall not unreasonably be withheld, and (B) grant the Admin­istrator and any such physicians access to all relevant medical information concerning him, arrange to furnish copies of medical records to them, and use his best efforts to cause his own physicians to be available to discuss his health with them.           (b)      Death.  If the Employee Participant dies (i) while in the employ of the Partnership, or (ii) within one month after termination of his employment with the Partnership because of Disability (as determined in accordance with paragraph (a) above), or (iii) within one month after the Partnership terminates his employment for any reason other than for Cause (as determined in accordance with paragraph (c) be­low), this Option may be exercised, to the extent that the Employee Participant was entitled to do so on the date of his death, by the person or persons to whom the Option shall have been transferred by will or by the laws of descent and distribu­tion, for a period which ends not later than the earlier of (A) six months from the date of the Employee Participant's death, and (B) the Expiration Date.                     (c)      Other Termination.  If the Partnership terminates the Employee Participant's employment for any reason other than death, Disability or for Cause, the Employee Participant shall have the right to exercise this Option, to the extent that he was entitled to do so on the date of the termination of his employment, for a period which ends not later than the earlier of (i) three months after such termination, and (ii) the Expiration Date.  "Cause" shall mean (A) the Employee Participant's continuing willful failure to perform his duties as an employee (other than as a result of his total or partial incapacity due to physical or mental illness), (B) gross negligence or malfeasance in the performance of the Employee Participant's duties, (c) a finding by a court or other governmental body with proper jurisdiction that an act or acts by the Employee Participant constitutes (1) a felony under the  laws of the United States or any state thereof (or, if the Employee Participant's place of employment is outside of the United States, a serious crime under the laws of the foreign jurisdiction where he is employed, which crime if committed in the United States would be a felony under the laws of the United States or the laws of New York), or (2) a violation of federal or state securities law (or, if the Employee Participant's place of employment is outside of the United States, of federal, state or foreign securities law) by reason of which finding of violation described in this clause (2) the Board determines in good faith that the continued employment of the Employee Participant by the Partnership would be seriously detrimental to the Partnership and its business, (D) in the absence of such a finding by a court or other governmental body with proper jurisdiction, such a determination in good faith by the Board by reason of such act or acts constituting such a felony, serious crime or violation, or (E) any breach by the Employee Participant of any obliga­tion of confidentiality or non-competition to the Partnership.           For purposes of this Agreement, employment by a subsidiary of the Partnership shall be deemed to be employment by the Partnership.  A "subsidiary" of the Partnership shall be any corporation or other entity of which the Partnership and/or its subsidiaries (a) have sufficient voting power (not depending on the happening of a contingency) to elect at least a majority of its board of directors, or (b) otherwise have the power to direct or cause the direction of its management and policies.           5.       No Right to Continued Employment.  This Option shall not confer upon the Participant any right to continue in the employ of the Partnership or any subsidiary of the Partnership or to be retained as a Director, and shall not interfere in any way with the right of the Partnership to terminate the service of the Participant at any time for any reason.           6.       Non-Transferability.  This Option is not transferable other than by will or the laws of descent and distribution and, except as otherwise provided in Section 4, during the lifetime of the Participant this Option is exercisable only by the Participant; except that a Participant may transfer this Option, without consideration, subject to such rules as the Committee may adopt to preserve the purposes of the Plan (including limiting such transfers to transfers by Participants who are senior executives), to a trust solely for the benefit of the Participant and the Participant's spouse, children or grandchildren (including adopted and stepchildren and grandchildren) (each a "Permitted Transferee").           7.       Payment of Withholding Tax.  (a) In the event that the Partnership or Alliance Holding determines that any federal, state or local tax or any other charge is required by law to be withheld with respect to the exercise of this Option, the Participant shall promptly pay to the Partnership, a subsidiary specified by the Partnership or Alliance Holding, on at least seven business days' notice, an amount equal to such withholding tax or charge or (b) if the Participant does not promptly so pay the entire amount of such withholding tax or charge in accordance with such notice, or make arrangements satisfactory to the Partnership and Alliance Holding regarding payment thereof, the Partnership or any subsidiary of the Partnership may withhold the remaining amount thereof from any amount due the Participant from the Partnership or the subsidiary.           8.       Dilution and Other Adjustments.  The existence of this Option shall not impair the right of the Partnership or Alliance Holding or their respective partners to, among other things, conduct, make or effect any change in the Partnership's or Alliance Holding’s business, any distribution (whether in the form of cash, limited partnership interests, other securities or other property), recapitalization (including, without limitation, any subdivision or combination of limited partnership interests), reorganization, consolidation, combination, repurchase or exchange of limited partnership interests or other securities of the Partnership or Alliance Holding, issuance of warrants or other rights to purchase limited partnership interests or other securities of the Partnership or Alliance Holding, or any incorporation of the Partnership or Alliance Holding.  In the event of such a change in the partnership interests of the Partnership or Alliance Holding, the Board shall make such adjustments to this Option, including the purchase price specified in Section 1, as it deems appropriate and equitable.  In the event of incorpo­ra­tion of the Partnership or Alliance Holding, the Board shall make such arrangements as it deems appropriate and equitable with respect to this Option for the Participant to purchase stock in the resulting corporation in place of the Units subject to this Option.  Any such adjust­ment or arrangement may provide for the elimination of any fractional Unit or shares of stock which might otherwise become subject to this Option.  Any decision by the Board under this Section shall be final and binding upon the Participant.           9.       Rights as an Owner of a Unit.  The Participant (or a transferee of this Option pursuant to Sections 4 and 6) shall have no rights as an owner of a Unit with respect to any Unit covered by this Option until he becomes the holder of record of such Unit, which shall be deemed to occur at the time that notice of pur­chase is given and payment in full is received under Section 3 and 13.  By such actions, the Participant (or such transferee) shall be deemed to have consented to, and agreed to be bound by, all other terms, conditions, rights and obligations set forth in the then current Amended and Restated Agreement of Limited Partnership of Alliance Holding, and the thencurrent Amended and Restated Agreement of Limited Partnership of the Partnership.  Except as provided in Section 9, no adjustment shall be made with respect to any Unit for any distribution for which the record date is prior to the date on which the Participant becomes the holder of record of the Unit, regardless of whether the distribution is ordinary or extraordinary, in cash, securities or other property, or of any other rights.           10.     Administrator.  If at any time there shall be no 1997 Option Committee of the Board, the Board shall be the Administrator.           11.     Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.           12.     Interpretation.  The Participant accepts this Option subject to all the terms and provisions of the Plan, which shall control in the event of any conflict between any provision of the Plan and this Agreement, and accepts as binding, conclusive and final all decisions or interpretations of the Board or the Administrator upon any questions arising under the Plan and/or this Agreement.           13.     Notices.  Any notice under this Agreement shall be in writing and shall be deemed to have been duly given when deliv­ered personally or when deposited in the United States mail, registered, postage prepaid, and addressed, in the case of the Partnership, to the Secretary of Alliance Capital Management Corporation at 1345 Avenue of the Americas, New York, New York  10105, or if the Partnership should move its principal office, to such principal office, in the case of Alliance Holding, to the Secretary of Alliance Capital Management Corporation at 1345 Avenue of the Americas, New York, New York 10105, or if Alliance Holding should move its principal office, to such principal office, and, in the case of the Participant, to his last permanent address as shown on the Partnership's records, subject to the right of either party to designate some other address at any time hereafter in a notice satisfying the requirements of this Section.           14.     Sections and Headings.  All section references in this Agreement are to sections hereof for convenience of reference only and are not to affect the meaning of any provision of this Agreement.     ALLIANCE CAPITAL MANAGEMENT L.P.           By: Alliance Capital Management       Corporation, its General Partner           By: /s/ John D. Carifa --------------------------------------------------------------------------------       John D. Carifa       President       ALLIANCE CAPITAL MANAGEMENT HOLDING L.P.           By: Alliance Capital Management       Corporation, its General Partner             By: /s/ John D. Carifa --------------------------------------------------------------------------------       John D. Carifa       President             /s/ Robert H. Joseph, Jr. --------------------------------------------------------------------------------       Robert H. Joseph, Jr.     EXHIBIT A To Unit Option Plan Agreement Dated December 11, 2000 between Alliance Capital Management L.P., Alliance Capital Management Holding L.P. and Robert H. Joseph, Jr.   1. The number of Units that the Participant is entitled to purchase pursuant to the Option granted under this Agreement is 15,000.     2. The per Unit price to purchase Units pursuant to the Option granted under this Agreement is $53.75 per Unit. 3. Percentage of Units With Respect to   Which the Option First Becomes   Exercisable on the Date Indicated --------------------------------------------------------------------------------   1. December 11, 2001 20%     2. December 11, 2002 20%     3. December 11, 2003 20%     4. December 11, 2004 20%     5. December 11, 2005 20%      

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.4 As Adopted by the Board of Directors on June 1, 1998, and amended on April 1, 2001 and October 17, 2001 ACTIVISION, INC. 1998 INCENTIVE PLAN     ACTIVISION, INC., a corporation formed under the laws of the State of Delaware (the "Company"), hereby establishes and adopts the following 1998 Incentive Plan (the "Plan"). RECITALS     WHEREAS, the Company desires to encourage high levels of performance by those individuals who are key to the success of the Company, to attract new individuals who are highly motivated and who will contribute to the success of the Company and to encourage such individuals to remain as directors and/or employees of the Company and its subsidiaries by increasing their proprietary interest in the Company's growth and success.     WHEREAS, to attain these ends, the Company has formulated the Plan embodied herein to authorize the granting of incentive awards through grants of share options ("Options"), grants of share appreciation rights, grants of Share Purchase Awards (hereafter defined), grants of Restricted Share Awards (hereafter defined) and grants of Performance-Based Awards (hereafter defined) to those individuals whose judgment, initiative and efforts are or have been responsible for the success of the Company.     NOW, THEREFORE, the Company hereby constitutes, establishes and adopts the following Plan and agrees to the following provisions: ARTICLE 1. PURPOSE OF THE PLAN     1.1.  Purpose.  The purpose of the Plan is to assist the Company and its subsidiaries in attracting and retaining selected individuals to serve as directors, officers, consultants, advisors and other key employees of the Company and its subsidiaries who will contribute to the Company's success and to achieve long-term objectives which will inure to the benefit of all shareholders of the Company through the additional incentive inherent in the ownership or increased ownership of the Company's shares of common stock ("Shares"). Options granted under the Plan will be either "incentive share options," intended to qualify as such under the provisions of section 422 of the Internal Revenue Code of 1986, as from time to time amended (the "Code"), or "nonqualified share options." For purposes of the Plan, the term "subsidiary" shall mean "subsidiary corporation," as such term is defined in section 424(f) of the Code, and "affiliate" shall have the meaning set forth in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For purposes of the Plan, the term "Award" shall mean a grant of an Option, a grant of a share appreciation right, a grant of a Share Purchase Award, a grant of a Restricted Share Award, or any other award made under the terms of the Plan. ARTICLE 2. SHARES SUBJECT TO AWARDS     2.1.  Number of Shares.  Subject to the adjustment provisions of Section 9.10 hereof, the aggregate number of Shares which may be issued under Awards under the Plan, whether pursuant to Options, share appreciation rights, Share Purchase Awards, Restricted Share Awards or Performance-Based Awards shall not exceed 3,000,000. No Options to purchase fractional Shares shall be granted or -------------------------------------------------------------------------------- issued under the Plan. For purposes of this Section 2.1, the Shares that shall be counted toward such limitation shall include all Shares: (1)issued or issuable pursuant to Options that have been or may be exercised; (2)issued or issuable pursuant to Share Purchase Awards; and (3)issued as, or subject to issuance as a Restricted Share Award.     2.2.  Shares Subject to Terminated Awards.  The Shares covered by any unexercised portions of terminated Options granted under Articles 4 and 6, Shares forfeited as provided in Section 8.2(a) and Shares subject to any Awards which are otherwise surrendered by the Participant without receiving any payment or other benefit with respect thereto may again be subject to new Awards under the Plan. In the event the purchase price of an Option is paid in whole or in part through the delivery of Shares, the number of Shares issuable in connection with the exercise of the Option shall not again be available for the grant of Awards under the Plan. Shares subject to Options, or portions thereof, which have been surrendered in connection with the exercise of share appreciation rights shall not again be available for the grant of Awards under the Plan.     2.3.  Character of Shares.  Shares delivered under the Plan may be authorized and unissued Shares or Shares acquired by the Company, or both.     2.4.  Limitations on Grants to Individual Participant.  Subject to adjustments pursuant to the provisions of Section 10.10 hereof, the maximum number of Shares with respect to which Options or stock appreciation rights may be granted hereunder to any employee during any fiscal year shall be 500,000 Shares (the "Limitation"). If an Option is cancelled, the cancelled Option shall continue to be counted toward the Limitation for the year granted. An Option (or a stock appreciation right) that is repriced during any fiscal year is treated as the cancellation of the Option (or stock appreciation right) and a grant of a new Option (or stock appreciation right) for purposes of the Limitation for that fiscal year. ARTICLE 3. ELIGIBILITY AND ADMINISTRATION     3.1.  Awards to Employees and Directors.  (a) Participants who receive (i) Options under Articles 4 and 6 hereof or share appreciation rights under Article 5 ("Optionees"), and (ii) Share Purchase Awards under Article 7 or Restricted Share Awards under Article 8 (in either case, a "Participant"), shall consist of such officers, key employees, consultants, representatives and other contractors and agents and Directors (hereinafter defined) of the Company or any of its subsidiaries or affiliates as the Committee shall select from time to time, provided, however, that an Option that is intended to qualify as an "incentive share option" may be granted only to an individual that is an employee of the Company or any of its subsidiaries. The Committee's designation of an Optionee or Participant in any year shall not require the Committee to designate such person to receive Awards or grants in any other year. The designation of an Optionee or Participant to receive Awards or grants under one portion of the Plan shall not require the Committee to include such Optionee or Participant under other portions of the Plan. (b)No Option which is intended to qualify as an "incentive share option" may be granted to any employee or Director who, at the time of such grant, owns, directly or indirectly (within the meaning of sections 422(b)(6) and 424(d) of the Code), shares possessing more than 10% of the total combined voting power of all classes of shares of the Company or any of its subsidiaries or affiliates, unless at the time of such grant, (i) the option price is fixed at not less than 110% of the Fair Market Value (as defined below) of the Shares subject to such Option, determined on the date of the grant, and (ii) the exercise of such Option is prohibited by its terms after the expiration of five years from the date such Option is granted. 2 --------------------------------------------------------------------------------     3.2.  Administration.  (a) The Plan shall be administered by a committee (the "Committee") consisting of not fewer than two Directors of the Company (the directors of the Company being hereinafter referred to as the "Directors"), as designated by the Directors. The Directors may remove from, add members to, or fill vacancies in the Committee. Unless otherwise determined by the Directors, each member of the Committee will be a "non-employee director" within the meaning of Rule 16b-3 (or any successor rule) of the Exchange Act and an "outside director" within the meaning of Section 162(m)(4)(C)(i) of the Code and the regulations thereunder.     Notwithstanding any other provision of this Plan, any Award to a member of the Committee must be approved by the Board of Directors of the Company (excluding Directors who are also members of the Committee) to be effective. (b)The Committee is authorized, subject to the provisions of the Plan, to establish such rules and regulations as it may deem appropriate for the conduct of meetings and proper administration of the Plan. All actions of the Committee shall be taken by majority vote of its members. (c)Subject to the provisions of the Plan, the Committee shall have authority, in its sole discretion, to grant Awards under the Plan, to interpret the provisions of the Plan and, subject to the requirements of applicable law, including Rule 16b-3 of the Exchange Act, to prescribe, amend, and rescind rules and regulations relating to the Plan or any Award thereunder as it may deem necessary or advisable. All decisions made by the Committee pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including the Company, its shareholders, Directors and employees, and other Plan participants. ARTICLE 4. OPTIONS     4.1.  Grant of Options.  Directors, Officers and Other Key Employees. The Committee shall determine, within the limitations of the Plan, those Directors, officers and other key employees of the Company and its subsidiaries and affiliates to whom Options are to be granted under the Plan, the number of Shares that may be purchased under each such Option and the option price, and shall designate such Options at the time of the grant as either "incentive share options" or "nonqualified share options"; provided, however, that Options granted to employees of an affiliate (that is not also a subsidiary) or to non-employees of the Company may only be "nonqualified share options."     4.2.  Share Option Agreements; etc.  All Options granted pursuant to Article 4 and Article 6 herein (a) shall be authorized by the Committee and (b) shall be evidenced in writing by share option agreements ("Share Option Agreements") in such form and containing such terms and conditions as the Committee shall determine which are not inconsistent with the provisions of the Plan, and, with respect to any Share Option Agreement granting Options which are intended to qualify as "incentive share options," are not inconsistent with Section 422 of the Code. Granting of an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such option. Any individual who is granted an Option pursuant to this Article 4 and Article 6 herein may hold more than one Option granted pursuant to such Articles at the same time and may hold both "incentive share options" and "nonqualified share options" at the same time. To the extent that any Option does not qualify as an "incentive share option" (whether because of its provisions, the time or manner of its exercise or otherwise) such Option or the portion thereof which does not so qualify shall constitute a separate "nonqualified share option."     4.3.  Option Price.  Subject to Section 3.1(b), the option price per each Share purchasable under any "incentive share option" granted pursuant to this Article 4 and any "nonqualified share option" granted pursuant to Article 6 herein shall be determined by the Committee, but in the case of an "incentive share option" shall not be less than 100% of the Fair Market Value (as hereinafter defined) of such Share on the date of the grant of such Option. The option price per share of each Share 3 -------------------------------------------------------------------------------- purchasable under any "nonqualified share option" granted pursuant to this Article 4 shall be determined by the Committee at the time of the grant of such Option, but shall not be less than 85% of the Fair Market Value of such Share on the date of the grant of such Option.     4.4.  Other Provisions.  Options granted pursuant to this Article 4 shall be made in accordance with the terms and provisions of Article 10 hereof and any other applicable terms and provisions of the Plan. ARTICLE 5. SHARE APPRECIATION RIGHTS     5.1.  Grant and Exercise.  Share appreciation rights may be granted in conjunction with all or part of any Option granted under the Plan, as follows: (i) in the case of a nonqualified share option, such rights may be granted either at the time of the grant of such option or at any subsequent time during the term of the option; and (ii) in the case of an incentive share option, such rights may be granted only at the time of the grant of such option. A "share appreciation right" is a right to receive cash or Shares, as provided in this Article 5, in lieu of the purchase of a Share under a related Option. A share appreciation right or applicable portion thereof shall terminate and no longer be exercisable upon the termination or exercise of the related Option, and a share appreciation right granted with respect to less than the full number of Shares covered by a related Option shall not be reduced until, and then only to the extent that, the exercise or termination of the related Option exceeds the number of Shares not covered by the share appreciation right. A share appreciation right may be exercised by the holder thereof (the "Holder"), in accordance with Section 5.2 of this Article 5, by giving written notice thereof to the Company and surrendering the applicable portion of the related Option. Upon giving such notice and surrender, the Holder shall be entitled to receive an amount determined in the manner prescribed in Section 5.2 of this Article 5. Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the related share appreciation rights have been exercised.     5.2.  Terms and Conditions.  Share appreciation rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following: (a)Share appreciation rights shall be exercisable only at such time or times and to the extent that the Options to which they relate shall be exercisable in accordance with the provisions of the Plan. (b)Upon the exercise of a share appreciation right, a Holder shall be entitled to receive up to, but no more than, an amount in cash or whole Shares as determined by the Committee in its sole discretion equal to the excess of the then Fair Market Value of one Share over the option price per Share specified in the related Option multiplied by the number of Shares in respect of which the share appreciation right shall have been exercised. The Holder shall specify in his written notice of exercise, whether payment shall be made in cash or in whole Shares. Each share appreciation right may be exercised only at the time and so long as a related Option, if any, would be exercisable or as otherwise permitted by applicable law. (c)Upon the exercise of a share appreciation right, the Option or part thereof to which such share appreciation right is related shall be deemed to have been exercised for the purpose of the limitation of the number of Shares to be issued under the Plan, as set forth in Section 2.1 of the Plan. (d)With respect to share appreciation rights granted in connection with an Option that is intended to be an "incentive share option," the following shall apply: 4 -------------------------------------------------------------------------------- (i)No share appreciation right shall be transferable by a Holder otherwise than by will or by the laws of descent and distribution, and share appreciation rights shall be exercisable, during the Holder's lifetime, only by the Holder. (ii)Share appreciation rights granted in connection with an Option may be exercised only when the Fair Market Value of the Shares subject to the Option exceeds the option price at which Shares can be acquired pursuant to the Option. ARTICLE 6. RELOAD OPTIONS     6.1.  Authorization of Reload Options.  Concurrently with the award of any Option (such Option hereinafter referred to as the "Underlying Option") to any participant in the Plan, the Committee may grant one or more reload options (each, a "Reload Option") to such participant to purchase for cash or Shares a number of Shares as specified below. A Reload Option shall be exercisable for an amount of Shares equal to (i) the number of Shares delivered by the Optionee to the Company to exercise the Underlying Option, and (ii) to the extent authorized by the Committee, the number of Shares used to satisfy any tax withholding requirement incident to the exercise of the Underlying Option, subject to the availability of Shares under the Plan at the time of such exercise. Any Reload Option may provide for the grant, when exercised, of subsequent Reload Options to the extent and upon such terms and conditions consistent with this Article 6, as the Committee in its sole discretion shall specify at or after the time of grant of such Reload Option. The grant of a Reload Option will become effective upon the exercise of an Underlying Option or Reload Option by the Optionee delivering to the Company Shares owned by the Optionee in payment of the exercise price and/or tax withholding obligations. Notwithstanding the fact that the Underlying Option may be an "incentive share option," a Reload Option is not intended to qualify as an "incentive share option" under Section 422 of the Code.     6.2.  Reload Option Amendment.  Each Share Option Agreement shall state whether the Committee has authorized Reload Options with respect to the Underlying Option. Upon the exercise of an Underlying Option or other Reload Option, the Reload Option will be evidenced by an amendment to the underlying Share Option Agreement.     6.3.  Reload Option Price.  The option price per Share payable upon the exercise of a Reload Option shall be the Fair Market Value of a Share on the date the grant of the Reload Option becomes effective.     6.4.  Term and Exercise.  Each Reload Option is fully exercisable immediately from the effective date of grant. The term of each Reload Option shall be equal to the remaining option term of the Underlying Option.     6.5.  Termination of Employment.  No additional Reload Options shall be granted to Optionees when Options and/or Reload Options are exercised pursuant to the terms of this Plan following termination of the Optionee's employment unless the Committee, in its sole discretion, shall determine otherwise.     6.6.  Applicability of Other Sections.  Except as otherwise provided in this Article 6, the provisions of Article 9 applicable to Options shall apply equally to Reload Options. ARTICLE 7. SHARE PURCHASE AWARDS     7.1.  Grant of Share Purchase Award.  The term "Share Purchase Award" means the right to purchase Shares of the Company and to pay for such Shares through a loan made by the Company to an employee (a "Purchase Loan") as set forth in this Article 7. 5 --------------------------------------------------------------------------------     7.2.  Terms of Purchase Loans.  (a) Purchase Loan. Each Purchase Loan shall be evidenced by a promissory note. The term of the Purchase Loan shall be a period of years, as determined by the Committee, and the proceeds of the Purchase Loan shall be used exclusively by the Participant for purchase of Shares from the Company at a purchase price equal to the Fair Market Value on the date of the Share Purchase Award. (b)Interest on Purchase Loan. A Purchase Loan shall be non-interest bearing or shall bear interest at whatever rate the Committee shall determine (but not in excess of the maximum rate permissible under applicable law), payable in a manner and at such times as the Committee shall determine. Those terms and provisions as the Committee shall determine shall be incorporated into the promissory note evidencing the Purchase Loan. (c)Forgiveness of Purchase Loan. Subject to Section 7.4 hereof, the Company may forgive the repayment of up to 100% of the principal amount of the Purchase Loan, subject to such terms and conditions as the Committee shall determine and set forth in the promissory note evidencing the Purchase Loan. A Participant's Purchase Loan can be prepaid at any time, and from time to time, without penalty.     7.3.  Security for Loans. (a) Stock Power and Pledge. Purchase Loans granted to Participants shall be secured by a pledge of the Shares acquired pursuant to the Share Purchase Award. Such pledge shall be evidenced by a pledge agreement (the "Pledge Agreement") containing such terms and conditions as the Committee shall determine. Purchase Loans shall be recourse or non-recourse with respect to a Participant, as determined from time to time by the Committee. The share certificates for the Shares purchased by a Participant pursuant to a Share Purchase Award shall be issued in the Participant's name, but shall be held by the Company as security for repayment of the Participant's Purchase Loan together with a stock power executed in blank by the Participant (the execution and delivery of which by the Participant shall be a condition to the issuance of the Share Purchase Award). The Participant shall be entitled to exercise all rights applicable to such Shares, including, but not limited to, the right to vote such Shares and the right to receive dividends and other distributions made with respect to such Shares. When the Purchase Loan and any accrued but unpaid interest thereon has been repaid or otherwise satisfied in full, the Company shall deliver to the Participant the share certificates for the Shares purchased by a Participant under the Share Purchase Award. (b)Release and Delivery of Share Certificates During the Term of the Purchase Loan. The Company shall release and deliver to each Participant certificates for Shares purchased by a Participant pursuant to a Share Purchase Award, in such amounts and on such terms and conditions as the Committee shall determine, which shall be set forth in the Pledge Agreement. (c)Release and Delivery of Share Certificates Upon Repayment of the Purchase Loan. The Company shall release and deliver to each Participant certificates for the Shares purchased by the Participant under the Share Purchase Award and then held by the Company, provided the Participant has paid or otherwise satisfied in full the balance of the Purchase Loan and any accrued but unpaid interest thereon. In the event the balance of the Purchase Loan is not repaid, forgiven or otherwise satisfied within 90 days after (i) the date repayment of the Purchase Loan is due (whether in accordance with its term, by reason of acceleration or otherwise), or (ii) such longer time as the Committee, in its discretion, shall provide for repayment or satisfaction, the Company shall retain those Shares then held by the Company in accordance with the Pledge Agreement. (d)Recourse Purchase Loans. Notwithstanding Sections 7.3(a), (b) and (c) above, in the case of a recourse Purchase Loan, the Committee may make such Purchase Loan on such terms as it determines, including without limitation, not requiring a pledge of the acquired Shares.     7.4.  Termination of Employment.  (a) Termination of Employment by Death, Disability or by the Company Without Cause; Change of Control. In the event of a Participant's termination of employment 6 -------------------------------------------------------------------------------- by reason of death, "disability" or by the Company without "cause," or in the event of a "change of control," the Committee shall have the right (but shall not be required) to forgive the remaining unpaid amount (principal and interest) of the Purchase Loan in whole or in part as of the date of such occurrence. "Change of Control," "disability" and "cause" shall have the respective meanings as set forth in the promissory note evidencing the Purchase Loan. (b)Other Termination of Employment. Subject to Section 7.4(a) above, in the event of a Participant's termination of employment for any reason, the Participant shall repay to the Company the entire balance of the Purchase Loan and any accrued but unpaid interest thereon, which amounts shall become immediately due and payable, unless otherwise determined by the Committee.     7.5.  Restrictions on Transfer.  No Share Purchase Award or Shares purchased through such an Award and pledged to the Company as collateral security for the Participant's Purchase Loan (and accrued and unpaid interest thereon) may be otherwise pledged, sold, assigned or transferred (other than by will or by the laws of descent and distribution). ARTICLE 8. RESTRICTED AWARDS     8.1.  Restricted Share Awards.  (a) Grant. A grant of Shares made pursuant to this Article 8 is referred to as a "Restricted Share Award." The Committee may grant to any employee an amount of Shares in such manner, and subject to such terms and conditions relating to vesting, forfeitability and restrictions on delivery and transfer (whether based on performance standards, periods of service or otherwise) as the Committee shall establish (such Shares, "Restricted Shares"). The terms of any Restricted Share Award granted under this Plan shall be set forth in a written agreement (a "Restricted Share Agreement") which shall contain provisions determined by the Committee and not inconsistent with this Plan. The provisions of Restricted Share Awards need not be the same for each Participant receiving such Awards. (b)Issuance of Restricted Shares. As soon as practicable after the date of grant of a Restricted Share Award by the Committee, the Company shall cause to be transferred on the books of the Company, Shares registered in the name of the Company, as nominee for the Participant, evidencing the Restricted Shares covered by the Award; provided, however, such Shares shall be subject to forfeiture to the Company retroactive to the date of grant, if a Restricted Share Agreement delivered to the Participant by the Company with respect to the Restricted Shares covered by the Award is not duly executed by the Participant and timely returned to the Company. All Restricted Shares covered by Awards under this Article 8 shall be subject to the restrictions, terms and conditions contained in the Plan and the Restricted Share Agreement entered into by and between the Company and the Participant. Until the lapse or release of all restrictions applicable to an Award of Restricted Shares, the share certificates representing such Restricted Shares shall be held in custody by the Company or its designee. (c)Shareholder Rights. Beginning on the date of grant of the Restricted Share Award and subject to execution of the Restricted Share Agreement as provided in Sections 8.1(a) and (b), the Participant shall become a shareholder of the Company with respect to all Shares subject to the Restricted Share Agreement and shall have all of the rights of a shareholder, including, but not limited to, the right to vote such Shares and the right to receive distributions made with respect to such Shares; provided, however, that any Shares distributed as a dividend or otherwise with respect to any Restricted Shares as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Shares and shall be represented by book entry and held as prescribed in Section 8.1(b). 7 -------------------------------------------------------------------------------- (d)Restriction on Transferability. None of the Restricted Shares may be assigned or transferred (other than by will or the laws of descent and distribution), pledged or sold prior to lapse or release of the restrictions applicable thereto. (e)Delivery of Shares Upon Release of Restrictions. Upon expiration or earlier termination of the forfeiture period without a forfeiture and the satisfaction of or release from any other conditions prescribed by the Committee, the restrictions applicable to the Restricted Shares shall lapse. As promptly as administratively feasible thereafter, subject to the requirements of Section 12.1, the Company shall deliver to the Participant or, in case of the Participant's death, to the Participant's beneficiary, one or more stock certificates for the appropriate number of Shares, free of all such restrictions, except for any restrictions that may be imposed by law.     8.2.  Terms of Restricted Shares.  (a) Forfeiture of Restricted Shares. Subject to Section 8.2(b), all Restricted Shares shall be forfeited and returned to the Company and all rights of the Participant with respect to such Restricted Shares shall terminate unless the Participant continues in the service of the Company as an employee until the expiration of the forfeiture period for such Restricted Shares and satisfies any and all other conditions set forth in the Restricted Share Agreement. The Committee in its sole discretion, shall determine the forfeiture period (which may, but need not, lapse in installments) and any other terms and conditions applicable with respect to any Restricted Share Award. (b)Waiver of Forfeiture Period. Notwithstanding anything contained in this Article 8 to the contrary, the Committee may, in its sole discretion, waive the forfeiture period and any other conditions set forth in any Restricted Share Agreement under appropriate circumstances (including the death, disability or retirement of the Participant or a material change in circumstances arising after the date of an Award) and subject to such terms and conditions (including forfeiture of a proportionate number of the Restricted Shares) as the Committee shall deem appropriate. ARTICLE 9. DEFERRED SHARE AWARDS     9.1.  Shares and Administration.  Awards of the right to receive Shares that are not to be distributed to the Participant until after a specified deferral period (such Award and the deferred Shares delivered thereunder hereinafter as the context shall require, the "Deferred Shares") may be made either alone or in addition to share options, share appreciation rights, or Restricted Share Awards, or Other Share-based Awards (hereafter defined) granted under the Plan. The Committee shall determine the Directors, officers and other key employees of the Company and its subsidiaries to whom and the time or times at which Deferred Shares shall be awarded, the number of Deferred Shares to be awarded to any Participant, the duration of the period (the "Deferral Period") during which, and the conditions under which, receipt of the Shares will be deferred, and the terms and conditions of the award in addition to those contained in Section 9.2. In its sole discretion, the Committee may provide for a minimum payment at the end of the applicable Deferral Period based on a stated percentage of the Fair Market Value on the date of grant of the number of Shares covered by a Deferred Share award. The Committee may also provide for the grant of Deferred Shares upon the completion of a specified performance period. The provisions of Deferred Share awards need not be the same with respect to each recipient.     9.2.  Terms and Conditions.  Deferred Share awards made pursuant to this Article 9 shall be subject to the following terms and conditions: (a)Subject to the provisions of the Plan, the Shares to be issued pursuant to a Deferred Share award may not be sold, assigned, transferred, pledged or otherwise encumbered during the Deferral Period or Elective Deferral Period (defined below), where applicable, and may be 8 -------------------------------------------------------------------------------- subject to a risk of forfeiture during all or such portion of the Deferral Period as shall be specified by the Committee. At the expiration of the Deferral Period and Elective Deferral Period, share certificates shall be delivered to the Participant, or the Participant's legal representative, in a number equal to the number of shares covered by the Deferred Share award. (b)Amounts equal to any dividends declared during the Deferral Period with respect to the number of Shares covered by a Deferred Share award will be paid to the Participant currently, or deferred and deemed to be reinvested in additional deferred Shares or otherwise reinvested, as determined at the time of the award by the Committee, in its sole discretion. (c)Subject to the provisions of paragraph 9.2(d) of this Article 9, upon termination of employment for any reason during the Deferral Period for a given award, the Deferred Shares in question shall be forfeited by the Participant. (d)In the event of the Participant's death or permanent disability during the Deferral Period (or Elective Deferral Period, where applicable), or in cases of special circumstances, the Committee may, in its sole discretion, when it finds that a waiver would be in the best interests of the Company, waive in whole or in part any or all of the remaining deferral limitations imposed hereunder with respect to any or all of the Participant's Deferred Shares. (e)Prior to completion of the Deferral Period, a Participant may elect to further defer receipt of the award for a specified period or until a specified event (the "Elective Deferral Period"), subject in each case to the approval of the Committee and under such terms as are determined by the Committee, all in its sole discretion. (f)Each award shall be confirmed by a Deferred Share agreement or other instrument executed by the Company and the Participant. ARTICLE 10. GENERALLY APPLICABLE PROVISIONS     10.1.  Option Period.  Subject to Section 3.1(b), the period for which an Option is exercisable shall not exceed ten years from the date such Option is granted, provided, however, in the case of an Option that is not intended to be an "incentive share option," the Committee may prescribe a period in excess of ten years. After the Option is granted, the option period may not be reduced.     10.2.  Fair Market Value.  The "Fair Market Value" of a Share shall be determined in good faith by the Committee in its sole discretion from time to time. In no case shall Fair Market Value be less than the par value of a Share. An Option shall be considered granted on the date the Committee acts to grant the Option or such later date as the Committee shall specify.     10.3.  Exercise of Options.  Options granted under the Plan shall be exercised by the Optionee or by a Permitted Assignee thereof (or by his executors, administrators, guardian or legal representative, as provided in Sections 10.6 and 10.7 hereof) as to all or part of the Shares covered thereby, by the giving of written notice of exercise to the Company, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased. Full payment of such purchase price shall be made within five business days following the date of exercise and shall be made (i) in cash or by certified check or bank check, (ii) with the consent of the Committee, by delivery of a promissory note in favor of the Company upon such terms and conditions as determined by the Committee, (iii) with the consent of Committee, by tendering previously acquired Shares (valued at its Fair Market Value, as determined by the Committee as of the date of tender), or (iv) with the consent of the Committee, any combination of (i), (ii) and (iii). In connection with a tender of previously acquired Shares pursuant to clause (iii) above, the Committee, in its sole discretion, may permit the Optionee to constructively exchange Shares already owned by the Optionee in lieu of 9 -------------------------------------------------------------------------------- actually tendering such Shares to the Company, provided that adequate documentation concerning the ownership of the Shares to be constructively tendered is furnished in form satisfactory to the Committee. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share. The Company shall effect the transfer of Shares purchased pursuant to an Option as soon as practicable, and, within a reasonable time thereafter, such transfer shall be evidenced on the books of the Company. No person exercising an Option shall have any of the rights of a holder of Shares subject to an Option until certificates for such Shares shall have been issued following the exercise of such Option. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such issuance.     10.4.  Transferability.  No Option that is intended to qualify as an "incentive stock option" under Section 422 of the Code shall be assignable or transferable by the Optionee, other than by will or the laws of descent and distribution, and such Option may be exercised during the life of the Optionee only by the Optionee or his guardian or legal representative. "Non-qualified share options" and any share appreciation rights granted in tandem therewith are transferable (together and not separately) with the consent of the Committee by the Optionee or Holder, as the case may be, to any one or more of the following persons (each, a "Permitted Assignee"): (i) the spouse, parent, issue, spouse of issue, or issue of spouse ("issue" shall include all descendants whether natural or adopted) of such Optionee or Holder, as the case may be; (ii) a trust for the benefit of one or more of those persons described in clause (i) above or for the benefit of such Optionee or Holder, as the case may be; (iii) an entity in which the Optionee or Holder or any Permitted Assignee thereof is a beneficial owner; or (iv) in the case of a transfer by an Optionee who is a non-employee director, another non-employee director of the Company; provided that such Permitted Assignee shall be bound by and subject to all of the terms and conditions of this Plan and the Share Option Agreement relating to the transferred Option and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Optionee or Holder shall remain bound by the terms and conditions of this Plan. In the case of a transfer by a non-employee director to another non-employee director, the vesting and exercisability shall after such transfer be determined by reference to the service of the assignee, rather than the assignor. The Company shall cooperate with any Permitted Assignee and the Company's transfer agent in effectuating any transfer permitted under this Section 10.4.     10.5.  Termination of Employment.  In the event of the termination of employment of an Optionee or the termination or separation from service of an advisor or consultant or a Director (who is an Optionee) for any reason (other than death or disability as provided below), any Option(s) granted to such Optionee under this Plan and not previously exercised or expired shall be deemed cancelled and terminated on the day of such termination or separation, unless the Committee decides, in its sole discretion, to extend the term of the Option for a period not to exceed three months after the date of such termination or separation, provided, however, that in no instance may the term of the Option, as so extended, exceed the maximum term established pursuant to Section 3.1(b)(ii) or 10.1 above. Notwithstanding the foregoing, in the event of the termination or separation from service of an Optionee for any reason other than death or disability, under conditions satisfactory to the Company, the Committee may, in its sole discretion, allow any "nonqualified share options" granted to such Optionee under the Plan and not previously exercised or expired to be exercisable for a period of time to be specified by the Committee, provided, however, that in no instance may the term of the Option, as so extended, exceed the maximum term established pursuant to Section 10.1 above.     10.6.  Death.  In the event an Optionee dies while employed by the Company or any of its subsidiaries or affiliates or during his term as a Director of the Company or any of its subsidiaries or affiliates, as the case may be, any Option(s) granted to him (or his Permitted Assignee) and not 10 -------------------------------------------------------------------------------- previously expired or exercised shall, to the extent exercisable on the date of death, be exercisable by the estate of such Optionee or by any person who acquired such Option by bequest or inheritance, or by the Permitted Assignee at any time within one year after the death of the Optionee, unless earlier terminated pursuant to its terms, provided, however, that if the term of such Option would expire by its terms within six months after the Optionee's death, the term of such Option shall be extended until six months after the Optionee's death, provided further, however, that in no instance may the term of the Option, as so extended, exceed the maximum term established pursuant to Section 3.1(b)(ii) or 10.1 above.     10.7.  Disability.  In the event of the termination of employment of an Optionee or the separation from service of a Director (who is an Optionee) due to total disability, the Optionee, or his guardian or legal representative, or a Permitted Assignee shall have the unqualified right to exercise any Option(s) which have not been previously exercised or expired and which the Optionee was eligible to exercise as of the first date of total disability (as determined by the Committee), at any time within one year after such termination or separation, unless earlier terminated pursuant to its terms, provided, however, that if the term of such Option would expire by its terms within six months after such termination or separation, the term of such Option shall be extended until six months after such termination or separation, provided further, however, that in no instance may the term of the Option, as so extended, exceed the maximum term established pursuant to Section 3.1(b)(ii) or 10.1 above. The term "total disability" shall, for purposes of this Plan, be defined in the same manner as such term is defined in Section 22(e)(3) of the Code.     10.8.  Amendment and Modification of the Plan.  The Compensation Committee of the Board of Directors of the Company may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable, subject to any requirement for shareholder approval imposed by applicable law or any rule of any stock exchange or quotation system on which Shares are listed or quoted; provided that such Compensation Committee may not amend the Plan, without the approval of the Company's shareholders, to increase the number of Shares that may be the subject of Options under the Plan (except for adjustments pursuant to Section 10.9 hereof). In addition, no amendments to, or termination of, the Plan shall in any way impair the rights of an Optionee or a Participant (or a Permitted Assignee thereof) under any Award previously granted without such Optionee's or Participant's consent.     10.9.  Adjustments.  In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities, the issuance of warrants or other rights to purchase Shares or other securities, or other similar corporate transaction or event affects the Shares with respect to which Options have been or may be issued under the Plan, such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as the Committee may deem equitable, adjust any or all of (i) the number and type of Shares that thereafter may be made the subject of Options, (ii) the number and type of Shares subject to outstanding Options and share appreciation rights, and (iii) the grant or exercise price with respect to any Option, or, if deemed appropriate, make provision for a cash payment to the holder of any outstanding Option; provided, in each case, that with respect to "incentive stock options," no such adjustment shall be authorized to the extent that such adjustment would cause such options to violate Section 422(b) of the Code or any successor provision; and provided further, that the number of Shares subject to any Option denominated in Shares shall always be a whole number. In the event of any reorganization, merger, consolidation, split-up, spin-off, or other business combination involving the Company (collectively, a "Reorganization"), the Compensation Committee of the Board of Directors or the Board of Directors may cause any Award outstanding as of the effective date of the Reorganization 11 -------------------------------------------------------------------------------- to be cancelled in consideration of a cash payment or alternate Award made to the holder of such cancelled Award equal in value to the fair market value of such cancelled Award. The determination of fair market value shall be made by the Compensation Committee of the Board of Directors or the Board of Directors, as the case may be, in their sole discretion.     10.10.  Change in Control.  The terms of any Award may provide in the Share Option Agreement, Restricted Share Agreement, Purchase Loan or other document evidencing the Award, that upon a "Change in Control" of the Company (as that term may be defined therein), (i) Options (and share appreciation rights) accelerate and become fully exercisable, (ii) restrictions on Restricted Shares lapse and the shares become fully vested, (iii) Purchase Loans are forgiven in whole or in part, and (iv) such other additional benefits as the Committee deems appropriate shall apply. For purposes of this Plan, a "Change in Control" shall mean an event described in the applicable document evidencing the Award or such other event as determined in the sole discretion of the Board of Directors of the Company. The Committee, in its discretion, may determine that, upon the occurrence of a Change in Control of the Company, each Option and share appreciation right outstanding hereunder shall terminate within a specified number of days after notice to the Participant or Holder, and such Participant or Holder shall receive, with respect to each Share subject to such Option or share appreciation right, an amount equal to the excess of the Fair Market Value of such Shares immediately prior to the occurrence of such Change in Control over the exercise price per share of such Option or share appreciation right; such amount to be payable in cash, in one or more kinds of property (including the property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its discretion, shall determine.     10.11.  Employment Violation.  Each Share Option Agreement evidencing an Option granted on or after April 1, 2001, shall include and be subject to the following terms: (a)The terms of this Section 10.11 shall apply to the Option if the Optionee is or shall become subject to an employment agreement with the Company. (b)If the Optionee materially breaches his or her employment agreement (it being understood that any breach of the post-termination obligations contained therein shall be deemed to be material) for so long as the terms of such employment agreement shall apply to the Optionee (each, an "Employment Violation"), the Company shall have the right to require (i) the termination and cancellation of the unexercised portion of the Option, if any, whether vested or unvested, and (ii) payment by the Optionee to the Company of the Recapture Amount (as defined below). Such termination of unexercised Options and payment of the Recapture Amount, as the case may be, shall be in addition to, and not in lieu of, any other right or remedy available to the Company arising out of or in connection with any such Employment Violation including, without limitation, the right to terminate Optionee's employment if not already terminated, seek injunctive relief and additional monetary damages. (c)"Recapture Amount" shall mean the gross gain realized or unrealized by the Optionee upon each exercise of his Option during the period beginning on the date which is twelve (12) months prior to the date of the Optionee's Employment Violation and ending on the date of computation (the "Look-back Period"), which gain shall be calculated as the sum of: (i)if the Optionee has exercised any portion of his Option during the Look-back Period and sold any of the Shares acquired on exercise thereafter, an amount equal to the product of (x) the sales price per Share sold minus the exercise price per Share times (y) the number of Shares as to which the Option was exercised and which were sold at such sales price; plus (ii)if the Optionee has exercised any portion of his Option during the Look-back Period and not sold any of the Shares acquired on exercise thereafter, with respect to each of such Shares an amount equal to the product of (x) the greatest of the following: (1) the Fair Market Value per Share on the date of exercise, (2) the arithmetic average of the per 12 -------------------------------------------------------------------------------- Share closing sales prices as reported on NASDAQ for the thirty (30) trading day period ending on the trading day immediately preceding the date of the Company's written notice of its exercise of its rights under this clause (h), or (3) the arithmetic average of the per Share closing sales prices as reported on NASDAQ for the thirty (30) trading day period ending on the trading day immediately preceding the date of computation, minus the exercise price per Share times (y) the number of Shares as to which this Option was exercised and which were not sold; provided, however, in lieu of payment by the Optionee to the Company of the Recapture Amount determined pursuant to subclause (ii) above, the Optionee, in his or her discretion, may tender to the Company the Shares acquired upon exercise of this Option during the Look-back Period and not sold and the Optionee shall not be entitled to receive any consideration from the Company in exchange therefor.     With respect to any other Awards granted hereunder, the terms of any Restricted Share Agreement, share appreciation right, Share Purchase Award or any other document evidencing an Award under the Plan, may include comparable provisions to those set forth in this Section 10.11.     10.12.  Other Provisions.  (a) The Committee may require each Participant purchasing Shares pursuant to an Award under the Plan to represent to and agree with the Company in writing that such Participant is acquiring the Shares without a view to distribution thereof. The certificates for such Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer. (b)All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such share-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other restrictions of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable Federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (c)Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for, any other Awards granted under the Plan. If Awards are granted in substitution for other Awards, the Committee shall require the surrender of such other Awards in consideration for the grant of the new Awards. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards. (d)Nothing contained in this Plan shall prevent the Board of Directors from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. (e)A Participant shall have no right as a shareholder until he or she becomes the holder of record. (f)The Company will provide to its shareholders, at least annually, reports containing financial statements and management's discussion and analysis of financial conditions and results of operations. 13 -------------------------------------------------------------------------------- ARTICLE 11. PERFORMANCE-BASED AWARDS.     11.1.  General.  (a) Certain Awards granted under the Plan may be granted in a manner such that the Awards qualify as "performance-based compensation"(as such term is used in Section 162(m) of the Code and the regulations thereunder) and thus be exempt from the deduction limitation imposed by Section 162(m) of the Code ("Performance-Based Awards"). Awards shall only qualify as Performance-Based Awards if, among other things, at the time of grant the Committee is comprised solely of two or more "outside directors" (as such term is used in Section 162(m) of the Code and the regulations thereunder). (b)Performance-Based Awards may be granted to Participants at any time and from time to time, as shall be determined by the Committee. The Committee shall have complete discretion in determining the number, amount and timing of awards granted to each Participant. Such Performance-Based Awards may take the form of, without limitation, cash, Shares or any combination thereof. (c)The Committee shall set performance goals at its discretion which, depending on the extent to which they are met, will determine the number and/or value of such Performance-Based Awards that will be paid out to the Participants, and may attach to such Performance-Based Awards one or more restrictions. The maximum amount of Performance-Based Awards to be awarded to any employee during any fiscal year shall be $1,000,000.     11.2.  Options and Share Appreciation Rights.  Options and share appreciation rights granted under the Plan with an exercise price at or above the fair market value of the Shares on the date of grant should qualify as Performance-Based Awards.     11.3.  Other Awards.  Either the granting or vesting of Performance-Based Awards granted under the Plan shall be subject to the achievement of a performance target or targets, as determined by the Committee in its sole discretion, based on one or more of the performance measures specified in Section 11.4 below. With respect to such Performance-Based Awards: (1)the Committee shall establish in writing (x) the objective performance-based goals applicable to a given period and (y) the individual employees or class of employees to which such performance-based goals apply no later than 90 days after the commencement of such period (but in no event after 25 percent of such period has elapsed); (2)no Performance-Based Awards shall be payable to or vest with respect to, as the case may be, any Participant for a given period until the Committee certifies in writing that the objective performance goals (and any other material terms) applicable to such period have been satisfied; and (3)after the establishment of a performance goal, the Committee shall not revise such performance goal or increase the amount of compensation payable thereunder (as determined in accordance with Section 162(m) of the Code) upon the attainment of such performance goal.     11.4.  Performance Measures.  The Committee may use the following performance measures (either individually or in any combination) to set performance targets with respect to Awards intended to qualify as Performance-Based Awards: net sales; pretax income before allocation of corporate overhead and bonus; budget; earnings per share; net income; division, group or corporate financial goals; return on stockholders' equity; return on assets; attainment of strategic and operational initiatives; appreciation in and/or maintenance of the price of the Common Stock or any other publicly-traded securities of the Company; market share; gross profits; earnings before taxes; earnings before 14 -------------------------------------------------------------------------------- interest and taxes; earnings before interest, taxes, depreciation and amortization; economic value-added models; comparisons with various stock market indices; and/or reductions in costs. ARTICLE 12. MISCELLANEOUS     12.1.  Tax Withholding.  The Company shall notify an Optionee or Participant (or a Permitted Assignee thereof) of any income tax withholding requirements arising as a result of the grant of any Award, exercise of an Option or share appreciation rights or any other event occurring pursuant to this Plan. The Company shall have the right to withhold from such Optionee or Participant (or a Permitted Assignee thereof) such withholding taxes as may be required by law, or to otherwise require the Optionee or Participant (or a Permitted Assignee thereof) to pay such withholding taxes. If the Optionee or Participant (or a Permitted Assignee thereof) shall fail to make such tax payments as are required, the Company or its subsidiaries or affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Optionee or Participant or to take such other action as may be necessary to satisfy such withholding obligations. In satisfaction of the requirement to pay withholding taxes, the Optionee (or Permitted Assignee) make a written election, which may be accepted or rejected in the discretion of the Committee, to have withheld a portion of the Shares then issuable to the Optionee (or Permitted Assignee) pursuant to the Option having an aggregate Fair Market Value equal to the withholding taxes.     12.2.  Right of Discharge Reserved.  Nothing in the Plan nor the grant of an Award hereunder shall confer upon any employee, Director or other individual the right to continue in the employment or service of the Company or any subsidiary or affiliate of the Company or affect any right that the Company or any subsidiary or affiliate of the Company may have to terminate the employment or service of (or to demote or to exclude from future Options under the Plan) any such employee, Director or other individual at any time for any reason. Except as specifically provided by the Committee, the Company shall not be liable for the loss of existing or potential profit from an Award granted in the event of termination of an employment or other relationship even if the termination is in violation of an obligation of the Company or any subsidiary or affiliate of the Company to the employee or Director.     12.3.  Nature of Payments.  All Awards made pursuant to the Plan are in consideration of services performed or to be performed for the Company or any subsidiary or affiliate of the Company. Any income or gain realized pursuant to Awards under the Plan and any share appreciation rights constitutes a special incentive payment to the Optionee, Participant or Holder and shall not be taken into account, to the extent permissible under applicable law, as compensation for purposes of any of the employee benefit plans of the Company or any subsidiary or affiliate of the Company except as may be determined by the Committee or by the Directors or directors of the applicable subsidiary or affiliate of the Company.     12.4.  Unfunded Status of the Plan.  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 or Optionee by the Company, nothing contained herein shall give any such Participant or Optionee any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder; provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.     12.5.  Severability.  If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part, such unlawfulness, invalidity or unenforceability shall not affect any other provision of the Plan or part thereof, each of which remain in full force and effect. If the making 15 -------------------------------------------------------------------------------- of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan.     12.6.  Gender and Number.  In order to shorten and to improve the understandability of the Plan document by eliminating the repeated usage of such phrases as "his or her" and any masculine terminology herein shall also include the feminine, and the definition of any term herein in the singular shall also include the plural except when otherwise indicated by the context.     12.7.  Governing Law.  The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware and construed accordingly.     12.8.  Effective Date of Plan; Termination of Plan.  The Plan shall be effective on the date of the approval of the Plan by the Board of Directors. Notwithstanding the foregoing, no Option intended to qualify as an incentive share option shall be granted hereunder until the Plan shall be approved by the holders of a majority of the shares entitled to vote thereon, provided such approval is obtained within 12 months after the date of adoption of the Plan by the Board of Directors. Awards may be granted under the Plan at any time and from time to time prior to May 31, 2008, on which date the Plan will expire except as to Awards and related share appreciation rights then outstanding under the Plan. Such outstanding Awards and share appreciation rights shall remain in effect until they have been exercised or terminated, or have expired.     12.9.  Captions.  The captions in this Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein. 16 -------------------------------------------------------------------------------- STOCK OPTION CERTIFICATE (Non-Transferable) Stock Option #9800xxxx   For x,xxx Shares Issued Pursuant to the 1998 Incentive Plan of ACTIVISION, INC.     THIS CERTIFIES that on            (the "Issuance Date")            (the "Holder") was granted an option (the "Option") to purchase at the option price of $xx.xxx per share, all or any part of      fully paid and non-assessable shares ("Shares") of the Common Stock (no par value) of ACTIVISION, INC., a Delaware corporation (the "Company"), upon and subject to the following terms and conditions:     1.  Terms of the Plan.  The Option is granted pursuant to, and is subject to the terms and conditions of, the 1998 Incentive Plan of the Company (the "Plan"), the terms, conditions and definitions of which are hereby incorporated herein as though set forth at length, and the receipt of a copy of which the Holder hereby acknowledges by his signature below. Capitalized terms used herein shall have the meanings set forth in the Plan, unless otherwise defined herein.     2.  Expiration.  This Option shall expire on            , unless extended or earlier terminated in accordance herewith.     3.  Exercise.  This Option may be exercised or surrendered during the Holder's lifetime only by the Holder or his/her guardian or legal representative. THIS OPTION SHALL NOT BE TRANSFERABLE BY THE HOLDER OTHERWISE THAN BY WILL OR BY THE LAWS OF DESCENT AND DISTRIBUTION, SUBJECT TO THE TERMS AND CONDITIONS OF THE PLAN.     This Option shall vest and be exercisable as follows: Vesting Date --------------------------------------------------------------------------------   Shares Vested at Vesting Date --------------------------------------------------------------------------------   Cumulative Shares Vested at Vesting Date --------------------------------------------------------------------------------                         This Option shall be exercised by the Holder (or by his or her executors, administrators, guardian or legal representative) as to all or part of the Shares, by the giving of written notice of exercise to the Company, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased. Full payment of such purchase price shall be made at the time of exercise and shall be made (i) in cash or by certified check or bank check, (ii) with the consent of the Company, by tendering previously acquired Shares (valued at its Fair Market Value (as defined in the Plan), as determined by the Company as of the date of tender), or (iii) with the consent of the Company, combination of (i) and (ii). Such notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Company may from time to time direct, and shall be in such form, containing such further provisions as the Company may from time to time prescribe. In no event may this Option be exercised for a fraction of a Share. The Company shall effect the transfer of Shares purchased pursuant to an Option as soon as practicable, and, within a reasonable time thereafter, such transfer shall be evidenced on the books of the Company. No person exercising this Option shall have any of the rights of a holder of Shares subject to this Option until certificates for such Shares shall have been issued following the exercise of 17 -------------------------------------------------------------------------------- such Option. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such issuance.     4.  Termination of Employment.  In the event of the termination of employment or separation from service of the Holder for any reason (other than death or disability as provided below), this Option, to the extent not previously exercised or expired, shall be deemed cancelled and terminated 30 days after the day of such termination or separation.     5.  Death.  In the event the Holder dies while employed by the Company or any of its subsidiaries or affiliates, or during his term as a Director of the Company or any of its subsidiaries or affiliates, as the case may be, this Option, to the extent not previously expired or exercised, shall, to the extent exercisable on the date of death, be exercisable by the estate of the Holder or by any person who acquired this Option by bequest or inheritance, at any time within one year after the death of the Holder, unless earlier terminated pursuant to its terms, provided, however, that if the term of this Option would expire by its terms within six months after the Holder's death, the term of this Option shall be extended until six months after the Holder's death.     6.  Disability.  In the event of the termination of employment of the Holder or the separation from service of a Director who is a Holder due to total disability, the Holder, or his or her guardian or legal representative, shall have the unqualified right to exercise any portion of this Option which has not been previously exercised or expired and which the Holder was eligible to exercise as of the first date of total disability (as determined by the Company), at any time within one year after such termination or separation, unless earlier terminated pursuant to its terms, provided, however, that if the term of such Option would expire by its terms within six months after such termination or separation, the term of such Option shall be extended until six months after such termination or separation. The term "total disability" shall, for purposes of this Option Certificate, be defined in the same manner as such term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended.     7.  Change of Control.  If the Holder is an active employee of the Company or any of its subsidiaries at the time there occurs a "Change of Control" of the Company (as defined below) and the Holder's employment is terminated by the Company or any of its subsidiaries other than for Cause (as defined below) within twelve (12) months following such Change of Control, or such longer period as the Committee may determine, the portion, if any, of this Option with respect to which the right to exercise has not yet accrued, shall immediately vest and be exercisable in full, effective upon such termination, for a period of 30 days thereafter, or such longer period as the Committee may determine. For purposes of this Option, a "Change of Control" of the Company shall be deemed to occur if: (i)there shall have occurred a Change of Control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date hereof, whether or not the Company is then subject to such reporting requirement, provided, however, that there shall not be deemed to be a Change of Control of the Company if immediately prior to the occurrence of what would otherwise be a Change of Control of the Company (a) the Holder is the other party to the transaction (a "Control Event") that would otherwise result in a Change of Control of the Company or (b) the Holder is an executive officer, trustee, director or more than 5% equity holder of the other party to the Control Event or of any entity, directly or indirectly, controlling such other party; (ii)the Company merges or consolidates with, or sells all or substantially all of its assets to, another company (each, a "Transaction"), provided, however, that a Transaction shall not be deemed to result in a Change of Control of the Company if (a) immediately prior thereto the circumstances in (i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company, immediately before such Transaction own, directly or indirectly, immediately 18 -------------------------------------------------------------------------------- following such Transaction in excess of fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such Transaction (the "Surviving Corporation") in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Transaction and (2) the individuals who were members of the Company's Board of Directors immediately prior to the execution of the agreement providing for such Transaction constitute at least a majority of the members of the board of directors or the board of trustees, as the case may be, of the Surviving Corporation, or of a corporation or other entity beneficially directly or indirectly owning a majority of the outstanding voting securities of the Surviving Corporation; or (iii)the Company acquires assets of another company or a subsidiary of the Company merges or consolidates with another company (each, an "Other Transaction") and (a) the shareholders of the Company, immediately before such Other Transaction own, directly or indirectly, immediately following such Other Transaction 50% or less of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such Other Transaction (the "Other Surviving Corporation") in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Other Transaction or (b) the individuals who were members of the Company's Board of Directors immediately prior to the execution of the agreement providing for such Other Transaction constitute less than a majority of the members of the board of directors or the board of trustees, as the case may be, of the Other Surviving Corporation, or of a corporation or other entity beneficially directly or indirectly owning a majority of the outstanding voting securities of the Other Surviving Corporation, provided, however, that an Other Transaction shall not be deemed to result in a Change of Control of the Company if immediately prior thereto the circumstances in (i)(a) or (i)(b) above exist.     For purposes of this Option, "Cause" shall mean (unless a different definition is used in the Holder's written employment agreement with the Company, if any, in which case such different definition shall apply to the Holder) any of the following: (i)material breach by the Holder of his or her employment agreement, if any, or material failure by the Holder to perform his or her duties (other than as a result of incapacity due to physical or mental illness) during his or her employment with the Company after written notice of such breach or failure and the Holder failed to cure such breach or failure to the Company's reasonable satisfaction within five (5) days after receiving such written notice; (ii)material breach by the Holder of his or her Employee Proprietary Information Agreement or other similar arrangement entered into by the Holder in connection with his or her employment by the Company; or (iii)any act of fraud, misappropriation, misuse, embezzlement or any other material act of dishonesty in respect of the Company or its funds, properties, assets or other employees.     8.  Employment Violation.  In consideration of the granting of this Option, the Holder hereby agrees that the terms of this paragraph (h) shall apply to the Option. The Holder acknowledges and agrees that each exercise of this Option and each written notice of exercise delivered to the Company and executed by the Holder shall serve as a reaffirmation of and continuing agreement by the Holder to comply with the terms contained in this paragraph (h).     The Company and the Holder acknowledge and agree that if the Holder is or shall become subject to an employment agreement with the Company and the Holder materially breaches his or her 19 -------------------------------------------------------------------------------- employment agreement (it being understood that any breach of the post-termination obligations contained therein shall be deemed to be material) for so long as the terms of such employment agreement shall apply to the Holder (each, an "Employment Violation"), the Company shall have the right to require (i) the termination and cancellation of the unexercised portion of this Option, if any, whether vested or unvested, and (ii) payment by the Holder to the Company of the Recapture Amount (as defined below). The Company and the Holder further agree that such termination of unexercised Options and payment of the Recapture Amount, as the case may be, shall be in addition to, and not in lieu of, any other right or remedy available to the Company arising out of or in connection with any such Employment Violation including, without limitation, the right to terminate the Holder's employment if not already terminated, seek injunctive relief and additional monetary damages.     For purposes of this Option, the "Recapture Amount" shall mean the gross gain realized or unrealized by the Holder upon each exercise of this Option during the period beginning on the date which is twelve (12) months prior to the date of the Holder's Employment Violation and ending on the date of computation (the "Look-back Period"), which gain shall be calculated as the sum of: (i)if the Holder has exercised any portion of this Option during the Look-back Period and sold any of the Shares acquired on exercise thereafter, an amount equal to the product of (x) the sales price per Share sold less the exercise price per Share times (y) the number of Shares as to which this Option was exercised and which were sold at such sales price; plus (ii)if the Holder has exercised any portion of this Option during the Look-back Period and not sold any of the Shares acquired on exercise thereafter, with respect to each of such Shares an amount equal to the product of (x) the greatest of the following: (1) the Fair Market Value per Share on the date of exercise, (2) the arithmetic average of the per Share closing sales prices as reported on NASDAQ for the thirty (30) trading day period ending on the trading day immediately preceding the date of the Company's written notice of its exercise of its rights under this paragraph (h), or (3) the arithmetic average of the per Share closing sales prices as reported on NASDAQ for the thirty (30) trading day period ending on the trading day immediately preceding the date of computation, minus the exercise price per Share times (y) the number of Shares as to which this Option was exercised and which were not sold; provided, however, in lieu of payment by the Holder to the Company of the Recapture Amount determined pursuant to clause (ii) above, the Holder, in his or her discretion, may tender to the Company the Shares acquired upon exercise of this Option during the Look-back Period and not sold and the Holder shall not be entitled to receive any consideration from the Company in exchange therefor.     9.  Adjustments.  In the event that the Company shall determine that any dividend or other distribution (whether in the form of cash, shares of common stock of the Company, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of shares of common stock of the Company or other securities, the issuance of warrants or other rights to purchase shares of common stock of the Company, or other securities, or other similar corporate transaction or event affects the Shares, such that an adjustment is determined by the Company to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available to the Holder, then the Company shall, in such manner as the Company may deem equitable, adjust any or all of (i) the number and type of shares of common stock of the Company subject to this Option, and (ii) the grant or exercise price with respect to this Option, or, if deemed appropriate, make provision for a cash payment to the Holder. 20 --------------------------------------------------------------------------------     10.  Delivery of Share Certificates.  Within a reasonable time after the exercise of this Option, the Company shall cause to be delivered to the person entitled thereto a certificate for the Shares purchased pursuant to the exercise of this Option. If this Option shall have been exercised with respect to less than all of the Shares subject to this Option, the Company shall also cause to be delivered to the person entitled thereto a new Option Certificate in replacement of this Option Certificate if surrendered at the time of the exercise of this Option, indicating the number of Shares with respect to which this Option remains available for exercise, or the Company shall make a notation in its books and records to reflect the partial exercise of this Option.     11.  Withholding.  In the event that the Holder elects to exercise this Option or any part thereof, and if the Company or any subsidiary or affiliate of the Company shall be required to withhold any amounts by reasons of any federal, state or local tax laws, rules or regulations in respect of the issuance of Shares to the Holder pursuant to this Option, the Company or such subsidiary or affiliate shall be entitled to deduct and withhold such amounts from any payments to be made to the Holder. In any event, the Holder shall make available to the Company or such subsidiary or affiliate, promptly when requested by the Company or such subsidiary or affiliate, sufficient funds to meet the requirements of such withholding; and the Company or such subsidiary or affiliate shall be entitled to take and authorize such steps as it may deem advisable in order to have such funds available to the Company or such subsidiary or affiliate out of any funds or property due or to become due to the Holder.     12.  Reservation of Shares.  The Company hereby agrees that at all times there shall be reserved for issuance and/or delivery upon exercise of this Option such number of Shares as shall be required for issuance or delivery upon exercise hereof.     13.  Rights of Holder.  Nothing contained herein shall be construed to confer upon the Holder any right to be continued in the employ of the Company and/or any subsidiary or affiliate of the Company or derogate from any right of the Company and/or any subsidiary or affiliate of the Company to retire, request the resignation of, or discharge the Holder at any time, with or without cause. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or in equity, and the rights of the Holder are limited to those expressed herein and are not enforceable against the Company except to the extent set forth herein.     14.  Exclusion from Pension Computations.  By acceptance of the grant of this Option, the Holder hereby agrees that any income realized upon the receipt or exercise hereof, or upon the disposition of the Shares received upon its exercise, is special incentive compensations and, to the extent permissible under applicable law, shall not be taken into account as "wages", "salary" or "compensation" in determining the amount of any payment under any pension, retirement, incentive, profit sharing, bonus or deferred compensation plan of the Company or any of its subsidiaries or affiliates.     15.  Registration; Legend.  The Company may postpone the issuance and delivery of Shares upon any exercise of this Option until (a) the admission of such Shares to listing on any stock exchange or exchanges on which Shares of the Company of the same class are then listed and (b) the completion of such registration or other qualification of such Shares under any state or federal law, rule or regulation as the Company shall determine to be necessary or advisable. The Holder shall make such representations and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company, in light of the then existence or non-existence with respect to such Shares of an effective Registration Statement under the Securities Act of 1933, as amended, to issue the Shares in compliance with the provisions of that or any comparable act. 21 --------------------------------------------------------------------------------     The Company may cause the following or a similar legend to be set forth on each certificate representing Shares or any other security issued or issuable upon exercise of this Option unless counsel for the Company is of the opinion as to any such certificate that such legend is unnecessary: 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, AS AMENDED (THE "ACT"), OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS ESTABLISHED BY AN OPINION FROM COUNSEL TO THE COMPANY.     16.  Amendment.  The Company may, with the consent of the Holder, at any time or from time to time amend the terms and conditions of this Option, and may at any time or from time to time amend the terms of this Option.     17.  Notices.  Any notice which either party hereto may be required or permitted to give to the other shall be in writing, and may be delivered personally or by mail, postage prepaid, or overnight courier, addressed as follows: if to the Company, at its office at 3100 Ocean Park Blvd., Santa Monica, California 90405, Attn: General Counsel, or at such other address as the Company by notice to the Holder may designate in writing from time to time; and if to the Holder, at the address shown below his or her signature on this Option Certificate, or at such other address as the Holder by notice to the Company may designate in writing from time to time. Notices shall be effective upon receipt.     18.  Interpretation.  A determination of the Company as to any questions which may arise with respect to the interpretation of the provisions of this Option and of the Plan shall be final and binding. The Company may authorize and establish such rules, regulations and revisions thereof as it may deem advisable. 22 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have executed this Option Certificate as of the date set forth above. ACTIVISION, INC.     By:     --------------------------------------------------------------------------------     Dated:     --------------------------------------------------------------------------------     Attest:     --------------------------------------------------------------------------------     ACCEPTED:     --------------------------------------------------------------------------------     Address     --------------------------------------------------------------------------------     City       State       Zip Code     --------------------------------------------------------------------------------     Social Security Number     23 -------------------------------------------------------------------------------- QuickLinks ACTIVISION, INC. 1998 INCENTIVE PLAN RECITALS ARTICLE 1. PURPOSE OF THE PLAN ARTICLE 2. SHARES SUBJECT TO AWARDS ARTICLE 3. ELIGIBILITY AND ADMINISTRATION ARTICLE 4. OPTIONS ARTICLE 5. SHARE APPRECIATION RIGHTS ARTICLE 6. RELOAD OPTIONS ARTICLE 7. SHARE PURCHASE AWARDS ARTICLE 8. RESTRICTED AWARDS ARTICLE 9. DEFERRED SHARE AWARDS ARTICLE 10. GENERALLY APPLICABLE PROVISIONS ARTICLE 11. PERFORMANCE-BASED AWARDS. ARTICLE 12. MISCELLANEOUS STOCK OPTION CERTIFICATE (Non-Transferable)

EXHIBIT 10.24 AMENDMENT NO. 1 TO STOCK REPURCHASE AGREEMENT November 12, 1999 This AMENDMENT NO. 1 TO STOCK REPURCHASE AGREEMENT (this "Amendment") is made as of January 1, 2001, between Merchants Metals Holding Company, a Delaware corporation (the "Company"), and Julius S. Burns (the "Stockholder"). WHEREAS, the Company and Stockholder entered into that certain Stock Repurchase Agreement (the "Repurchase Agreement") dated as of November 12, 1999; WHEREAS, in contemplation of a transfer of 14,000 Repurchase Shares by the Stockholder to the trusts established for the benefit of the Stockholder's children (collectively, the "Trusts"), the Company and Stockholder desire to amend the Repurchase Agreement to clarify that the Repurchase Shares are subject to repurchase upon the termination of Julius S. Burns' employment with the Company; WHEREAS, the Company and Stockholder desire to amend the Repurchase Agreement to provide that if Burns' employment is terminated after a Transaction (as defined in the quoted portion of Section 3 below), all Repurchase Shares (as defined in the Repurchase Agreement) shall become Vested Shares (as defined in the Repurchase Agreement); THEREFORE, the Company and Stockholder hereby agrees as follows: DEFINITIONS All capitalized terms used herein and not otherwise defined herein have the meanings given to those terms in the Repurchase Agreement as amended hereby. amendment to section 1 of the repurchase agreement Effective as of the date hereof, the second sentence of Section 1 of the Repurchase Agreement is hereby amended and restated to read in its entirety as follows: "Except as otherwise provided in this Section 1, if, at any time on or prior to the fourth anniversary of the date of the issuance of the Repurchase Shares to the Julius S. Burns ("Burns"), Burns shall cease to be employed by the Company or one or more of its subsidiaries for the reasons described in Section 2 (a "Termination Event"), then the Company (or its designee) shall have the option (the "Repurchase Option") to purchase from any person owning such shares, including, without limitation any transferee, all or a portion of the Repurchase Shares in accordance with the provisions of Section 2 of this Agreement." AMENDMENT TO SECTION 2 OF THE REPURCHASE AGREEMENT Effective as of the date hereof, the second, third, fourth and fifth paragraphs of Section 2 of the Repurchase Agreement are hereby amended and restated to read in their entirety as follows: "If (i) Burns' employment is terminated on or before the fourth anniversary of the Issuance Date (A) by Burns, or (B) by the Company for Cause, and (ii) a Transaction has not occurred prior to such termination, the Company may repurchase from any person owning such shares, including, without limitation any transferee, the Vested Shares for the Fair Market Value thereof and the Unvested Shares for a price of $1.00 per share. If Burns' employment is terminated on or before the fourth anniversary of the Issuance Date (i) due to Burns' death or disability, (ii) by the Company without Cause, or (iii) by Burns or the Company for any reason after the occurrence of a Transaction, all of the Repurchase Shares shall become Vested Shares upon such termination and the Company may repurchase from any person owning such shares, including, without limitation any transferee, the Vested Shares for the Fair Market Value thereof. As used in this Agreement, (i) "Cause" means conduct by Burns (A) resulting in a conviction of, or plea of nolo contendre to, a felony, (B) constituting material breach of, or continued gross neglect of his duties or responsibilities under, the terms of his employment with the Company or any of its Subsidiaries, (C) constituting fraud, dishonesty in connection with his employment, competition with the Company or any of its subsidiaries, or unauthorized use of any trade secret or other confidential information of the Company or any of its subsidiaries, or (D) constituting the failure to properly perform his duties in the reasonable good faith judgment of the Board of Directors of the Company; provided, however, the Company shall give Burns written notice of any actions alleged to constitute Cause under clause (B) or (D) above, and Burns shall have a reasonable opportunity (as specified by the Board of Directors) to cure any such alleged Cause, (ii) "Issuance Date" means the date of the purchase of the Repurchase Shares by Burns, (iii) a "Transaction" means an event upon which a party unaffiliated with the stockholders of the Company as of the date hereof , (A) acquires all or substantially all of the assets of the Company or its wholly-owned subsidiary, MMI Products, Inc. ("MMI"), or (B) on a post-transaction basis acquires, directly or indirectly or by merger, recapitalization, or consolidation, at least a majority in voting power and in economic interest of the Company's or MMI's outstanding equity, (iv) " Unvested Shares" means the shares of Repurchase Stock not vested pursuant to this Section 2 by the date of the Termination Event, and (v) "Vested Shares" means the shares of Repurchase Stock vested pursuant to this Section 2 on or by the date of the Termination Event. Also, as used in this Agreement, "Fair Market Value" of Vested Shares means the fair market value of such Vested Shares as determined by mutual agreement of the Board of Directors of the Company and Burns. If within 15 days after the date of the Exercise Notice, such parties are unable to agree on such Fair Market Value, the Fair Market Value shall be determined by an independent appraiser mutually selected by the Board of Directors of the Company and Burns. If such parties are unable to agree upon an appraiser within 30 days after the date of the Exercise Notice, the Board of Directors of the Company, on the one hand, and Burns, on the other hand, shall each select an independent appraiser. Those two appraisers shall then select a third independent appraiser. That third independent appraiser shall determine the Fair Market Value, and such determination shall be binding upon the parties hereto." ACKNOWLEDGEMENT OF STOCKHOLDER Stockholder acknowledges that the Board of Directors of the Company has consented to the transfer of 14,000 of the Repurchase Shares (the "Transfer Shares") to the Trusts, subject to the agreement of the Trusts that the Trusts and the Transfer Shares would be bound by all terms on restrictions of such Repurchase Shares as would have been applicable if Burns had held the Transfer Shares directly. Stockholder further acknowledges that the Transfer Shares are the 14,000 shares that became Vested Shares on the first anniversary of the Issuance Date. MISCELLANEOUS 0. Governing Law. This Amendment shall be governed by and construed in accordance with the internal substantive laws (and not the conflict laws) of the State of Delaware. 1. Headings. The section and other headings contained in this Amendment are for reference purposes only and shall not affect in any way the meaning or interpretation of this Amendment. 2. Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.   IN WITNESS WHEREOF, the Company and Stockholder have executed this Amendment No. 1 to Stock Repurchase Agreement as of the date first written above. MERCHANTS METALS HOLDING COMPANY By:   /s/ Thomas F. McWilliams Thomas F. McWilliams Director STOCKHOLDER: By:   s/s Julius S. Burns Julius S. Burns

EXHIBIT 10.10 STANDARD INDUSTRIAL LEASE - MULTI-TENANT AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION 1. Parties. This Lease, dated, for reference purposes only, August 24, 2000, is made by and between The Columbian Publishing, Co., a Washington corporation, (herein called "Lessor") and Egghead.com, Inc., a Delaware corporation (herein called "Lessee"). Premises, Parking and Common Areas. 1. Premises. Lessor hereby leases to Lessee and Lessee leases from Lessor for the term, at the rental, and upon all of the conditions set forth herein, real property situated in the County of Clark, State of Washington, commonly known as 206 Grand Boulevard, Vancouver, Washington 98661 and described as approximately 72,086 square feet building herein referred to as the "Premises," as may be outlined on an Exhibit attached hereto, including rights to the Common Areas as hereinafter specified but not including any rights to the roof of the Premises or to any Building in the Industrial Center. The Premises are a portion of a building herein referred to as the "Building." The Premises, the Building, the Common Areas, the land upon which the same are located, along with all other buildings and improvements thereon, are herein collectively referred to as the "Industrial Center." Attached hereto as Exhibit A-1 is the legal description for the Premises. Attached hereto as Exhibit A-2 is the "Site Plan" for the parking referenced in paragraph 2.2 below. Attached, hereto as Exhibit A-3 is the description of the "Industrial Center". Vehicle Parking. Lessee shall be entitled to three hundred (300) vehicle parking spaces, unreserved and unassigned, on those portions of the Common Areas designated by Lessor for parking. The site plan for specific parking areas shall be approved by Lessor and Lessee and shall be attached to this Lease. Lessee shall not use more parking spaces than said number. Said parking spaces shall be used only for parking by vehicles no larger than full- size passenger automobiles or pickup trucks, herein called "Permitted Size Vehicles." Vehicles other than Permitted Size Vehicles are herein referred to as "Oversized Vehicles." 1. Lessee shall not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee's employees, suppliers, shippers, customers, or invitees to be loaded, unloaded, or parking in areas other than those designated by Lessor and approved by Lessee for such activities. 2. If Lessee permits or allows any of the prohibited activities described in paragraph 2.2 of this Lease, then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor. Common Areas - Definition. The term "Common Areas" is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Industrial Center that are provided and designated by the Lessor from time to time for the general non-exclusive use of Lessor, Lessee, and other lessees of the Industrial Center and their respective employees, suppliers, shippers, customers and invitees, including parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways and landscaped areas. Common Areas - Lessee's Rights. Lessor hereby grants to Lessee, for the benefit of Lessee and its employees, suppliers, shippers, customers and invitees, during the term of this Lease, the non-exclusive right to use, in common with others entitled to such use, the Common Areas as they exist from time to time, subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and regulations or restrictions governing the use of the Industrial Center. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any property, temporarily or permanently, in the Common Areas. Notwithstanding the foregoing, Lessor and Lessee approve the use of the area noted on the site plan as "Staging Area" for purpose of loading and unloading and staging and delivery of products by Lessee. Any such storage shall be permitted only by the prior written consent of Lessor or Lessor's designated agent which consent may be revoked at any time. Common Areas - Rules and Regulations. Lessor or such other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time; to establish, modify, amend, and enforce reasonable rules and regulations with respect thereto. Lessee agrees to abide by and conform to all such rules and regulations, and to cause its employees, suppliers, shippers, customers, and invitees to so abide and conform. Lessor shall not be responsible to Lessee for the noncompliance with said rules and regulations by other lessees of the Industrial Center. All rules and regulations shall be enforced in a non-discriminating manner to all Lessees, their employees, customers and invitees. Common Areas - Changes. Lessor shall have the right, in Lessor's sole discretion, from time to time: (a) To make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas and walkways. (b) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available. (c) To designate other land outside the boundaries of the Industrial Center to be a part of the Common Areas. (d) To add additional buildings and improvements to the Common Areas. (e) To use the Common Areas while engaged in making additional improvements, repairs or alterations to the Industrial Center, or any portion thereof. (f) To do and perform such other acts and make such other changes in, to, or with respect to the Common Areas and Industrial Center as Lessor may, in the exercise of sound business judgment, deem to be appropriate (g) No change to the Common Area shall materially and adversely affect the Lessee's ability to conduct its business or use of the Premises. 1. Lessor shall at all times provide the parking facilities required by applicable law and in no event shall the number of parking spaces that Lessee is entitled to under paragraph 2.2 be reduced. Term. 1. Term. The term of this lease shall be for 36 months commencing on November 15, 2000 and ending on November 15, 2003 unless sooner terminated pursuant to any provision hereof. Delay in Possession. Notwithstanding said commencement date, if for any reason Lessor cannot deliver possession of the Premises to Lessee on said date, Lessor shall not be subject to any liability therefore, nor shall such failure affect the validity of this Lease or the obligations of Lessee hereunder or extend the term hereof, but in such case, Lessee shall not be obligated to pay rent or perform any other obligation of Lessee under the terms of this Lease, except as may be otherwise provided in this Lease, until possession of the Premises is tendered to Lessee, provided, however, that if Lessor shall not have delivered possession of the Premises within forty-five (45) days from said commencement date, Lessee may, at Lessee's option, by notice in writing to Lessor within ten (10) days thereafter, cancel this Lease, in which event the parties shall be discharged from all obligations hereunder, provided further, however, that if such written notice of Lessee is not received by Lessor within said ten (10) day period, Lessee's right to cancel this Lease hereunder shall terminate and be of no further force or effect. Early Possession. If Lessee occupies the Premises prior to said commencement date, such occupancy shall be subject to all provisions of this Lease, such occupancy shall not advance the termination date, and Lessee shall pay rent for such period at the initial monthly rates set forth below except that Lessee shall be allowed possession of the Premises rent free for a period of thirty (30) days prior to Lease Commencement to fixturize the Premises to its needs. Rent. 1. Base Rent. Lessee shall pay to Lessor, as Base Rent for the Premises, without any offset or deduction, except as may be otherwise expressly provided in this Lease, on the first day of each month of the term hereof, monthly payments in advance of in the amounts referenced in Paragraph 52. Lessee shall pay Lessor upon execution hereof the sum of $42,935.00 for first month's Base Rent, first month's operating expenses and security deposit, as set forth in paragraph 52(b). Rent for any period during the term hereof which is for less than one month shall be a pro rata portion of the Base Rent. Rent shall be payable in lawful money of the United States to Lessor at the address stated herein or to such other persons or at such other places as Lessor may designate in writing. Operating Expenses. Lessee shall pay to Lessor during the term hereof, in addition to the Base Rent, Lessee's Share, as hereinafter defined, of all Operating Expenses, as hereinafter defined, during each calendar year of the term of this Lease, in accordance with the following provisions: a. "Lessee's Share" is defined, for purposes of this Lease, 39.30 percent. b. "Operating Expenses" is defined, for purposes of this Lease, as all costs incurred by Lessor, if any, for: i. The operation, repair, and maintenance, in neat, clean, good order and condition, of the following provisions: 1. The Common Areas, including parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area lighting facilities and fences and gates. 2. Management fee not to exceed 15% of operating expenses incurred. 3. Tenant directories. 4. Fire detection systems including sprinkler system maintenance and repair. 5. Security services. 6. Any other service to be provided by Lessor that is elsewhere in this Lease stated to be an "Operating Expense." ii. Any deductible portion of an insured loss concerning any of the items or matters described in this paragraph 4.2. iii. The cost of the premiums for the liability and property insurance policies to be maintained by Lessor under paragraph 8 hereof. iv. The amount of the real property tax to be paid by Lessor under paragraph 10.1 hereof. v. Maintenance of the boiler that serves the Premises, including the cost of employing a 24-hour facility maintenance person. Lessee shall employ, at Lessee's expense, the 24-hour facility maintenance person to oversee the operation and maintenance of the boiler. vi. The cost of water, gas and electricity to service the Common Areas. c. The inclusion of the improvements, facilities and services set forth in paragraph 4.2(b)(i) of the definition of Operating Expenses shall not be deemed to impose an obligation upon Lessor to either have said improvements or facilities or to provide those services unless the Industrial Center already has the same, Lessor already provides the services, or Lessor has agreed elsewhere in this Lease to provide the same or some of them. d. Lessee's Share of Operating Expenses shall be payable by Lessee within ten (10) days after a reasonably detailed statement of actual expenses is presented to Lessee by Lessor. At, Lessor's option, however, an amount may be estimated by Lessor from time to time of Lessee's Share of annual Operating Expenses and the same shall be payable monthly or quarterly, as Lessor shall designate, during each 12-month period of the Lease term, on the same day as the Base Rent is due hereunder. In the event that Lessee pays Lessor's estimate of Lessee's Share of Operating Expenses as aforesaid, Lessor shall deliver to Lessee within 60 days after the expiration of each calendar year a reasonably detailed statement showing Lessee's Share of the actual Operating Expenses incurred during the preceding year. If Lessee's payments under this paragraph 4.2(d) during said preceding year exceed Lessee's Share as indicated on said statement, Lessee shall be entitled to credit the amount of such overpayment against Lessee's Share of Operating Expenses next falling due. If Lessee's payments under this paragraph during said preceding year were less than Lessee's Share as indicated on said statement, Lessee shall pay to Lessor the amount of the deficiency within ten (10) days after delivery by Lessor to Lessee of said statement. Security Deposit. Lessee shall deposit with Lessor upon execution hereof Nineteen Thousand Eight Hundred Sixty-seven and No/100 ($19,867.00) as security for Lessee's faithful performance of Lessee's obligations hereunder. If Lessee fails to pay rent or other charges due hereunder, or otherwise defaults with respect to any provision of this Lease, Lessor may use, apply, or retain all or any portion of said deposit for the payment of any rent or other charge in default or for the payment of any other sum to which Lessor may become obligated by reason of Lessee's default, or to compensate Lessor for any loss or damage which Lessor may suffer thereby. If Lessor so uses or applies all or any portion of said deposit, Lessee shall within ten (10) days after written demand therefor deposit cash with Lessor in an amount sufficient to restore said deposit to the full amount then required of Lessee. If the monthly rent shall, from time to time, increase during the term of this Lease, Lessee shall, at the time of such increase, deposit with Lessor additional money as a security deposit so that the total amount of the security deposit held by Lessor shall at all times bear the same proportion to the then current Base Rent as the initial security deposit bears to the initial Base Rent set forth in paragraph 4. Lessor shall not be required to keep said security deposit separate from its general accounts. If Lessee performs all of Lessee's obligations hereunder, said deposit, or so much thereof as has not theretofore been applied by Lessor, shall be returned, without payment of interest or other increment for its use, to Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's interest hereunder) at the expiration of the term hereof, and after Lessee has vacated the Premises. No trust relationship is created herein between Lessor and Lessee with respect to said Security Deposit. Use. 1. Use. The Premises shall be used and occupied only for data processing services administration services, office functions, storage and distribution of product or any other use which is reasonably comparable and for no other purpose. Compliance with Law. Lessor warrants to Lessee that the Premises, in the state existing on the date that the Lease term commences, but without regard to the use for which Lessee will occupy the Premises, does not violate any covenants or restrictions of record, or any applicable building code, regulation or ordinance excluding Americans Disabilities Act (ADA requirements in effect on such Lease term commencement date. In the event it is determined that this warranty has been violated, then it shall be the obligation of the Lessor, after written notice from Lessee, to promptly, at Lessor's sole cost and expense, rectify any such violation. In the event Lessee does not give to Lessor written notice of the violation of this warranty within six (6) months from the date that the Lease term commences, the correction of same shall be the obligation of the Lessee at Lessee's sole cost. The warranty contained in this paragraph 6.2(a) shall be of no force or effect if, prior to the date of this Lease, Lessee was an owner or occupant of the Premises and, in such event, Lessee shall correct any such violation at Lessee's sole cost. Except as provided in paragraph 6.2(a) Lessee shall, at Lessee's expense, promptly comply with all applicable statutes, ordinances, rules, regulations, orders, covenants and restrictions of record, and requirements of any fire insurance underwriters or rating bureaus, now in effect or which may hereafter come into effect, whether or not they reflect a change in policy from the now existing, during the term or any part of the term hereof, relating in any manner to the Premises and the occupation and use by Lessee of the Premises and of the Common Areas. Lessee shall not use nor permit the use of the Premises or the Common Areas in any manner that will tend to create waste or a nuisance or shall tend to disturb other occupants of the Industrial Center. Condition of Premises. Lessor shall deliver the Premises to Lessee clean and free of debris on the Lease commencement date (unless Lessee is already in possession) and Lessor warrants to Lessee that the plumbing, lighting, heating, and loading doors in the Premises shall be in good operating condition on the Lease commencement date. In the event that it is determined that this warranty has been violated, then it shall be the obligation of Lessor, after receipt of written notice from Lessee setting forth with specificity the nature of the violation, to promptly, at Lessor's sole cost, rectify such violation. Lessee's failure to give such written notice to Lessor within 30 days after the Lease commencement date shall cause the conclusive presumption that Lessor has complied with all of Lessor's obligations hereunder. The warranty contained in this paragraph 6.3(a) shall be of no force or effect if prior to the date of this Lease, Lessee was an owner or occupant of the Premises. Except as otherwise provided in this Lease, Lessee hereby accepts the Premises in their condition existing as of the Lease commencement date or the date that Lessee takes possession of the Premises, whichever is earlier, subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, and any covenants or restrictions of record, and accepts this Lease subject thereto and to all matters disclosed thereby and by any exhibits attached hereto. Lessee acknowledges that neither Lessor nor Lessor's agent has made any representation or warranty as to the present or future suitability of the Premises for the conduct of Lessee's business. Lessor agrees to cooperate with Lessee, at Lessee's expense, in the processing of all required governmental permits, including any necessary conditional use permits but excluding any zone changes, for the Premises. Maintenance, Repairs, Alterations and Common Area Services. 1. Lessor's Obligations. Subject to the provisions of paragraphs 4.2 (Operating Expenses), 6 (Use), 7.2 (Lessee's Obligations) and 9 (Damage or Destruction), and except for damage caused by any negligent or intentional act or omission of Lessee, Lessee's employees, suppliers, shippers, customers, or invitees, in which event Lessee shall repair the damage, Lessor, at Lessor's expense, subject to reimbursement pursuant to paragraph 4.2, shall keep in good condition and repair the foundations, exterior walls, structural condition of interior bearing walls, and roof of the Premises, as well as the parking lots, walkways, driveways, landscaping, fences, signs and utility installations of the Common Areas and all parts thereof, as well as providing the services for which there is an Operating Expense pursuant to paragraph 4.2. Lessor shall not, however, be obligated to paint the exterior or interior surface of exterior walls, nor shall Lessor be required to maintain, repair or replace windows, doors or plate glass of the Premises. Lessor shall have no obligation to make repairs under this paragraph 7.1 until a reasonable time after receipt of written notice from the Lessee of the need for such repairs. Lessee expressly waives the benefits of any statute now or hereafter in effect which would otherwise afford Lessee the right to make repairs at Lessor's expense or to terminate this Lease because of Lessor's failure to keep the Premises in good order, condition and repair. Lessor shall not be liable for damages or loss of any kind or nature by reason of Lessor's failure to furnish any Common Area Services when such failure is caused by accident, breakage, repairs, strikes, lockout, or other labor disturbances or disputes of any character, or by any other cause beyond the reasonable control of Lessor. Lessee's Obligations. Subject to the provisions of paragraphs 6 (Use), 7.1 (Lessor's Obligations), and 9 (Damage or Destruction), Lessee, at Lessee's expense, shall keep in good order, condition and repair the Premises and every part thereof (whether or not the damaged portion of the Premises or the means of repairing the same are reasonably or readily accessible to Lessee) including, without limiting the generality of the foregoing, all plumbing, heating, electrical and lighting facilities and equipment within the Premises, fixtures, interior walls and interior surfaces of exterior walls, ceilings, windows, doors, plate glass, and skylights located within the Premises. Lessor reserves the right to procure and maintain the ventilating and air condition system maintenance contract and if Lessor so elects, Lessee shall reimburse Lessor, upon demand, for the cost thereof. If Lessee fails to perform Lessee's obligations under this paragraph 7.2 or under any other paragraph of this Lease, Lessor may enter upon the Premises after ten (10) days prior written notice to Lessee (except in the case of emergency, in which no notice shall be required), perform such obligations on Lessee's behalf and put the Premises in good order, condition and repair, and the cost thereof together with interest thereon at the maximum rate then allowable by law shall be due and payable as additional rent to Lessor together with Lessee's next Base Rent installment. On the last day of the term hereof, or on any sooner termination, Lessee shall surrender the Premises to Lessor in the same condition as received, ordinary wear and tear excepted, clean and free of debris. Any damage or deterioration of the Premises shall not be deemed ordinary wear and tear if the same could have been prevented by good maintenance practices. Lessee shall repair any damage to the Premises occasioned by the installation or removal of Lessee's trade fixtures, alterations, furnishings and equipment. Notwithstanding anything to the contrary otherwise stated in this Lease, Lessee shall leave the air lines, power panels, electrical distribution systems, lighting fixtures, space heaters, air conditioning, plumbing and fencing on the Premises in good operating condition. Alterations and Additions. Lessee shall not, without Lessor's prior written consent make any alterations, improvements, additions, or Utility Installations in, on, or about the Premises, or the Industrial Center, except for nonstructural alterations to tile Premises not exceeding $300,000 in cumulative costs, during the term of this Lease. In any event, whether or not in excess of $300,000 in cumulative cost, Lessee shall make no change or alteration to the exterior of the Premises nor the exterior of the Building nor the Industrial Center without Lessor's prior written consent. As used in this paragraph 7.3 the term "Utility Installation" shall mean carpeting, window coverings, air lines, power panels, electrical distribution systems, lighting fixtures, space heaters, air conditioning, plumbing, and fencing. Lessor may require that Lessee remove any or all of said alterations, improvements, additions or Utility Installations at the expiration of the term, and restore the Premises and the Industrial Center to their prior condition. Lessor may , require Lessee to provide Lessor, at Lessee's sole cost and expense, a lien and completion bond in an amount equal to one and one-half times the estimated cost of such improvements, to insure Lessor against any liability for mechanic's and materialmen's liens and to insure completion of the work. Should Lessee make any alterations, improvements, additions or Utility Installations without the prior approval of Lessor, Lessor may, at any time during the term of this Lease, require that Lessee remove any or all of the same. Any alterations, improvements, additions or Utility Installations in or about the Premises or the Industrial Center that Lessee shall desire to make and which requires the consent of the Lessor shall be presented to, Lessor in written form, with proposed detailed plans. If Lessor shall give its consent, the consent shall be deemed conditioned upon Lessee acquiring a permit to do so from appropriate governmental agencies, the furnishing of a copy thereof to Lessor prior to the commencement of the work and the compliance by Lessee of all conditions of said permit in a prompt and expeditious manner. Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use in the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Premises, or the Industrial Center, or any interest therein. Lessee shall give Lessor not less than 10 days' notice prior to the commencement of any work in the Premises, and Lessor shall have the right to post notices of nonresponsibility in or on the Premises or the Building as provided by law. If Lessee shall, in good faith, contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend itself and Lessor against the same and shall pay and satisfy and such adverse judgment that may be rendered thereon before the enforcement thereof against the Lessor or the Premises or the Industrial Center, upon the condition that if Lessor shall require, Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to such contested lien claim or demand indemnifying Lessor against liability for the same and holding the Premises and the Industrial Center free from the effect of such lien or claim. In addition, Lessor may require Lessee to pay Lessor's attorneys fees and costs in participating in such action if Lessor shall decide it is to Lessor's best interest to do so. All alterations, improvements, additions and Utility Installations, which may be made on the Premises, shall be the property of Lessor and shall remain upon and be surrendered with the Premises at the expiration of the Lease term, unless Lessor requires their removal pursuant to paragraph 7.3(a). Notwithstanding the provisions of this paragraph 7.3(d), Lessee's machinery and equipment, other than that which is affixed to the Premises so that it cannot be removed without material damage to the Premises, and other than Utility Installations, shall remain the property of Lessee and may be removed by Lessee subject to the provisions of paragraph 7.2. Utility Additions. Lessor reserves the right to install new or additional utility facilities throughout the Building and the Common Areas for the benefit of Lessor or Lessee, or any other lessee of the Industrial Center, including, but not by way of limitation, such utilities as plumbing, electrical systems, security systems, communication systems, and fire protection and detection systems, so long as such installations do not unreasonably interfere with Lessee's use of the Premises. Insurance; Indemnity. 1. Liability Insurance - Lessee. Lessee shall, at Lessee's expense, obtain and keep in force during the term of this Lease a policy of Combined Single Limit Bodily Injury and Property Damage insurance insuring Lessee and Lessor against any liability arising out of the use, occupancy or maintenance of the Premises and the Industrial Center. Such insurance shall be in an amount not less than $2,000,000.00 per occurrence. The policy shall insure performance by Lessee of the indemnity provisions of this paragraph 8. The limits of said insurance shall not, however, limit the liability of Lessee hereunder. Liability Insurance - Lessor. Lessor shall obtain and keep in force during the term of this Lease a policy of Combined Single Limit Bodily Injury and Property Damage Insurance, insuring Lessor, but not Lessee, against any liability arising out of the ownership, use, occupancy or maintenance of the Industrial Center in an amount not less than $2,000,000.00 per occurrence. Property Insurance. Lessor shall obtain and keep in force during the term of this Lease a policy or policies of insurance covering loss or damage to the Industrial Center improvements, but not Lessee's personal property, fixtures, equipment or tenant improvements, in an amount not to exceed the full replacement value thereof, as the same may exist from time to time, providing protection against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, flood (in the event same is required by a lender having a lien on the Premises) special extended perils ("all risk," as such term is used in the insurance industry), plate glass insurance and such other insurance as Lessor deems advisable. In addition, Lessor shall obtain and keep in force, during the term of this Lease, a policy of rental value insurance covering a period of one year, with loss payable to Lessor, which insurance shall also cover all Operating Expenses for said period. In the event that the Premises shall suffer an insured loss as defined in paragraph 9.1(g) hereof, the deductible amounts under the casualty insurance policies relating to the Premises shall be paid by Lessee. Notwithstanding the foregoing, the deductible amount shall not exceed in the aggregate the sum of Five Thousand Dollars and 00/100 ($5,000.00) with Lessee being responsible for its proportionate share. Payment of Premium Increase. After the term of this Lease has commenced, Lessee shall not be responsible for paying Lessee's Share of any increase in the property insurance premium for the Industrial Center specified by Lessor's insurance carrier as being caused by the use, acts or omissions of any other lessee of the Industrial Center, or by the nature of such other lessee's occupancy which create an extraordinary or unusual risk. Lessee, however, shall pay the entirety of any increase in the property insurance premium for the Industrial Center over what it was immediately prior to the commencement of the term of this Lease if the increase is specified by Lessor's insurance carrier as being caused by the nature of Lessee's occupancy or any act or omission of Lessee. Insurance Policies. Insurance required hereunder shall be in companies holding a "General Policyholders Rating" of at lease B plus, or such other rating as may be required by a lender having a lien on the Premises, as set forth in the most current issue of "Best's Insurance Guide." Lessee shall not do or permit to be done anything which shall invalidate the insurance policies carried by Lessor. Lessee shall deliver to Lessor copies of liability insurance policies required under paragraph 8.1 or certificates evidencing the existence and amounts of such insurance within seven (7) days after the commencement date of this Lease. No such policy shall be cancelable or subject to reduction of coverage or other modification except after 30 days prior written notice to Lessor. Lessee shall, at least 30 days prior to the expiration of such policies, furnish Lessor with renewals or "binders" thereof. Waiver of Subrogation. Lessee and Lessor each hereby release and relieve the other and waive their entire right of recovery against the other for loss or damage arising out of or incident to the perils insured against which perils occur in, on or about the Premises, whether due to the negligence of Lessor or Lessee or their agents, employees, contractors and/or invitees. Lessee and Lessor shall, upon obtaining the policies of insurance required give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease. Indemnity. Lessee shall indemnify and hold harmless Lessor from and against any and all claims arising from Lessee's use of the Industrial Center, or from the conduct of Lessee's business or from any activity, work or things done, permitted or suffered by Lessee in or about the Premises or elsewhere and shall further indemnify and hold harmless Lessor from and against any and all claims arising from any breach or default in the performance of any obligation on Lessee's part to be performed under the terms of this Lease, or arising from any act or omission of Lessee, or any of Lessee's agents, contractors, or employees, .and from and against all costs, attorney's fees, expenses and liabilities incurred in the defense of any such claim or any action or proceeding brought thereon; and in case any action or proceeding be brought against Lessor by reason of any such claim, Lessee upon notice from Lessor, shall defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessee, as a material part of the consideration to Lessor, hereby assumes all risk of damage to property of Lessee or injury to persons, in, upon or about the Industrial Center arising from any cause and Lessee hereby waives, all claims in respect thereof against Lessor. Lessor shall indemnify and hold harmless Lessee from and against any and all claims arising from Lessor's use of the Industrial Center, or from the conduct of Lessor's business or from any activity, work or things done, permitted or suffered by Lessor in or about the Premises or elsewhere and shall further indemnify and hold harmless Lessee from and against any and all claims arising from any breach or default in the performance of any obligation on Lessor's part to be performed under the terms of this Leas , or arising from any act or omission of Lessor, or any of Lessor's agents, contractors, or employees, and from and against all costs, attorney's fees, expenses and liabilities incurred in the defense of any such claim or any action or proceeding brought thereon; and in case any action or proceeding be brought against Lessee by reason of any such claim, Lessor upon notice from Lessee, shall defend the same at Lessor's expense by counsel reasonably satisfactory to Lessee and Lessee shall cooperate with Lessor in such defense. Exemption of Lessor from Liability. Subject to paragraph 8.7 above, Lessee hereby agrees that Lessor shall not be liable for injury to Lessee's business or any loss of income therefrom or for damage to the goods, wares, merchandise, or other property of Lessee. Lessee's employees, invitees, customers, or any other person in or about the Premises or the Industrial Center, nor shall Lessor be liable for injury to the person of Lessee, Lessee's employees, agents or contractors, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether said damage or injury results from conditions arising upon the Premises or upon other portions of the Industrial Center, or from other sources or places and regardless of whether the cause of such damage or injury or the means of repairing the same is inaccessible to Lessee. Lessor shall not be liable for any damages arising from any act or neglect of any other lessee, occupant or user of the Industrial Center, nor from the failure of Lessor to enforce the provisions of any other lease of the Industrial Center. Limitation of Liability. No personal liability or personal responsibility is assumed by or shall at any time be asserted or enforceable against Lessor's or Lessee's respective partners, directors, officers, employees, agents or their legal representatives, successors or assigns on account of this Lease or on account of any covenant, undertaking or agreement of Lessor or Lessee contained in this Lease. Damage or Destruction. 1. Definitions. "Premises Partial Damage" shall mean if the Premises are damaged or destroyed to the extent that the cost of repair is less than fifty percent of the then replacement cost of the Premises. "Premises Total Destruction" shall mean if the Premises are damaged or destroyed to the extent that the cost of repair is fifty percent or more of the then replacement cost of the Premises. "Premises Building Partial Damage" shall mean if the Building of which the, Premises are a part is damaged or destroyed to the extent that the cost to repair is less than fifty percent of the then replacement cost of the Building. "Premises Building Total Destruction" shall mean if the Building of which the Premises are a part is damaged or destroyed to the extent that the cost to repair is fifty percent or more of the then replacement cost of the Building. "Industrial Center Buildings" shall mean all of the buildings on the Industrial Center site. "Industrial Center Buildings Total Destruction" shall mean if the Industrial Center Buildings are damaged or destroyed to the extent that the cost of repair is fifty percent or more of the then replacement cost of the Industrial Center Buildings. "Insured Loss" shall mean damage or destruction which was caused by an event required to be covered by the insurance described in paragraph 8. The fact that an Insured Loss has a deductible amount shall not make the loss an uninsured loss. "Replacement Cost" shall mean the amount of money necessary to be spent in order to repair or rebuild the damaged area to the condition that existed immediately prior to the damage occurring excluding all improvements made by lessees. Premises Partial Damage; Premises Building Partial Damage. Insured Loss: Subject to the provisions of paragraphs 9.4 and 9.5, if at any time during the term of this Lease there is damage which is an Insured Loss and which falls into the classification of either Premises Partial Damage or Premises Building Partial Damage, then Lessor shall, at Lessor's expense, repair such damage to the Premises, but not Lessee's fixtures, equipment or tenant improvements, as soon as reasonably possible and this Lease shall continue in full force and effect. Uninsured Loss: Subject to the provisions of paragraphs 9.4 and 9.5, if at any time during the term of this Lease there is damage which is not an Insured Loss and which falls within the classification of Premises Partial Damage or Premises Building Partial Damage, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense), which damage prevents Lessee from using the Premises, Lessor may at Lessor's option either (i) repair such damage as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) give written notice to Lessee within 30 days after the date of the occurrence of such damage of Lessor's intention to cancel and terminate this Lease as of the date of the occurrence of such damage. In the event Lessor elects to give such notice of Lessor's intention to cancel and terminate this Lease, Lessee shall have the right within ten (10) days after the receipt of such notice to give written notice to Lessor of Lessee's intention to repair such damage at Lessee's expense, without reimbursement from Lessor, in which event this Lease shall continue in full force and effect, and Lessee shall proceed to make such repairs as soon as reasonably possible. If Lessee does not give such notice within such 10-day period this Lease shall be canceled and terminated as of the date of the occurrence of such damage. Premises Total Destruction; Premises Building Total Destruction; Industrial Center Buildings Total Destruction. Subject to the provisions of paragraphs 9.4 and 9.5, if at any time during the term of this Lease there is damage, whether or not it is an Insured Loss, and which falls into the classifications of either (i) Premises Total Destruction, or (ii) Premises Building Total Destruction, or (iii) Industrial Center Buildings Total Destruction, then Lessor may at Lessor's option either (i) repair such damage or destruction, but not Lessee's fixtures, equipment or tenant improvements, as soon as reasonably possible at Lessor's expense, and this Lease shall continue in full force and effect, or (ii) give written notice to Lessee within 30 days after the date of occurrence of such damage of Lessor's intention to cancel and terminate this Lease, in which case this Lease shall be canceled and terminated as of the date of the occurrence of such damage. Notwithstanding the foregoing, in the event of either (i) Premises Total Destruction, or (ii) Premises Building Total Destruction, or (iii) Industrial Center Buildings Total Destruction, Lessee may elect to cancel and terminate this Lease by giving written notice to Lessor within thirty (30) days after the date of occurrence of such damage of Lessee's intent to cancel and terminate this Lease, in which case this Lease shall be cancelled and terminated as of the date of the occurrence of such damage. Damage Near End of Term. Subject to paragraph 9.4(b), if at any time during the last six months of the term of this Lease there is substantial damage, whether or not an Insured Loss, which falls within the classification of Premises Partial Damage, Lessor or Lessee may at Lessor's or Lessee's option cancel and terminate this Lease as of the date of occurrence of such damage by giving written notice to the other of its election to do so within 30 days after the date of occurrence of such damage. Notwithstanding paragraph 9.4(a), in the event that Lessee has an option to extend or renew this Lease, and the time within which said option may be exercised has not yet expired, Lessee shall exercise such option, if it is to be exercised at all, no later than 20 days after the occurrence of an Insured Loss falling within the classification of Premises Partial Damage during the last six months of the term of this Lease. If Lessee duly exercises such option during said 20 day period, Lessor shall, at Lessor's expense, repair such damage, but not Lessee's fixtures, equipment or tenant improvements, as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option during said 20-day period, then Lessor may at Lessor's option terminate and cancel this Lease as of the expiration of said 20 day period by giving written notice to Lessee of Lessor's election to do so within ten (10) days after the expiration of said 20 day period, notwithstanding any term or provision in the grant of option to the contrary. Abatement of Rent; Lessee's Remedies. In the event Lessor repairs or restores the Premises pursuant to the provisions of this paragraph 9, the rent payable hereunder for the period during which such damage, repair or restoration continues shall be abated in proportion to the degree to which Lessee's use of the Premises is impaired. Except for abatement of rent, if any, Lessee shall have no claim against Lessor for any damage suffered by reason of any such damage, destruction, repair or restoration. If Lessor shall be obligated to repair or restore the Premises under the provisions of this paragraph 9 and shall not commence such repair or restoration within 90 days after such obligation shall accrue, Lessee may at Lessee's option cancel and terminate this Lease by giving Lessor written notice of Lessee's election to do so at any time prior to the commencement of such repair or restoration. In such event this Lease shall terminate as of the date of this notice. Termination - Advance Payments. Upon termination of this Lease pursuant to this paragraph 9, an equitable adjustment shall be made concerning advance rent and any advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's security deposit as has not theretofore been applied by Lessor. Waiver. Lessor and Lessee waive the provisions of any statute which relate to termination of leases when leased property is destroyed and agree that such event shall be governed by the terms of this Lease. Real Property Taxes. 1. Payment of Taxes. Lessor shall pay the real property tax, as defined in paragraph 10.3, applicable to the Industrial Center subject to reimbursement by Lessee of Lessee's Share of such taxes in accordance with the provisions of paragraph 4.2, except as otherwise provided in paragraph 10.2 Additional Improvements. Lessee shall not be responsible for paying Lessee's Share of any increase in real property tax specified in the tax assessor's records and work sheets as being caused by additional improvements placed upon the Industrial Center by other lessees or by Lessor for the exclusive enjoyment of such other lessees. Lessee shall, however, pay to Lessor at the time that Operating Expenses are payable under paragraph 4.2(c) the entirety of any increase in real property tax if assessed solely by reason of additional improvements placed upon the Premises by Lessee or at Lessee's request. Definition of "Real Property Tax. As used herein, the term "real property tax" shall include any form of real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax (other than inheritance, personal income or estate taxes) imposed on the Industrial Center or any portion thereof by any authority having the direct or indirect power to tax, including any city, county, state or federal government, or any school, agricultural, sanitary, fire, street, drainage or other improvement district thereof, as against any legal or equitable interest of Lessor in the Industrial Center or in any portion thereof, as against Lessor's right to rent or other income therefrom, and as against Lessor's business of leasing the Industrial Center. The term "real property tax" shall also include any tax, fee, levy, assessment or charge (i) in substitution of, partially or totally, any tax, fee, levy, assessment or charge hereinabove included within the definition of "real property tax," or (ii) the nature of which was hereinbefore included within the definition of "real property tax," or (iii) which is imposed for a service or right not charged prior to June 1, 1978, or, if previously charged, has been increased since June 1, 1978, or (iv) which is imposed as a result of a transfer, either partial or total, of Lessor's interest in the Industrial Center of which is added to a tax or charge hereinbefore included within the definition of real property tax by reason of such transfer, or (v) which is imposed by reason of this transaction, any modifications or changes hereto, or any transfers hereof. Joint Assessment. If the Industrial Center is not separately assessed, Lessee's Share of the real property tax liability shall be an equitable proportion of the real property taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. Lessor's reasonable determination thereof, in good faith, shall be conclusive. Personal Property Taxes. Lessee shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of Lessee contained in the Premises or elsewhere. Mien possible, Lessee shall cause said trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee's said personal property shall be assessed with Lessor's real property, Lessee shall pay to Lessor the taxes attributable to Lessee within ten (10) days after receipt of a written statement setting forth the taxes applicable to Lessee's property. Utilities. Lessee shall pay for all water, gas, heat, light, power, telephone and other utilities and services supplied to the Premises, together with any taxes thereon. If any such services are not separately metered to the Premises, Lessee shall pay at Lessor's option, either Lessee's Share or a reasonable proportion to be determined by Lessor of all charges jointly metered with other premises in the Building. Assignment and Subletting. 1. Lessor's Consent Required. Lessee shall not voluntarily or by operation of law assign, transfer, mortgage, sublet, or otherwise transfer or encumber all or any part of Lessee's interest in the Lease or in the Premises, without Lessor's prior written consent, which Lessor shall not unreasonably withhold. Lessor shall respond to Lessee's request for consent hereunder in a timely manner and any attempted assignment, transfer, mortgage, encumbrance or subletting without such consent shall be void, and shall constitute a breach of this Lease without the need for notice to Lessee under paragraph 13.1. Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1 hereof, Lessee may assign or sublet the Premises, or any portion thereof, without Lessor's consent, to any corporation which controls, is controlled by or is under common control with Lessee, or to any corporation resulting from the merger or consolidation with Lessee, or to any person or entity which acquires all the assets of Lessee as a going concern of the business that is being conducted on the Premises, all of which are referred to as "Lessee Affiliate," provided that before such assignment shall be effective said assignee shall assume, in full, the obligations of Lessee under this Lease. Any such assignment shall not, in any way, affect or limit the liability of Lessee under the terms of this Lease even if after such assignment or subletting the terms of this Lease are materially changed or altered without the consent of Lessee, the consent of whom shall not be necessary. Terms and Conditions of Assignment. Regardless of Lessor's consent, no assignment shall release Lessee of Lessee's obligations hereunder or alter the primary liability of Lessee to pay the, Base Rent and Lessee's Share of Operating Expenses, and to perform all other obligations to be performed by Lessee hereunder. Lessor may accept rent from any person other than Lessee pending approval or disapproval of such assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of rent shall constitute a waiver or estoppel of Lessor's right to exercise its remedies for the breach of any of the terms or conditions of this paragraph 12 or this Lease. Consent to one assignment shall not be deemed consent to any subsequent assignment. In the event of default by any assignee of Lessee or any successor of Lessee, in the performance of any of the terms hereof, Lessor may proceed directly against Lessee without the necessity of exhausting remedies against said assignee. Lessor may consent to subsequent assignments of this Lease or amendments or modifications to this Lease with assignees of Lessee, without notifying Lessee, or any successor of Lessee, and without obtaining its or their consent thereto and such action shall not relieve Lessee of liability under this Lease. Terms and Conditions Applicable to Subletting. Regardless of Lessor's consent, the following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be included in subleases: a. Lessee hereby assigns and transfers to Lessor all of Lessee's interest in all rentals and income arising from any sublease heretofore or hereafter made by Lessee, and Lessor may collect such rent and income and apply same toward Lessee's obligations under this Lease; provided, however, that until a default shall occur in the performance of Lessee's obligations under this Lease, Lessee may receive, collect and enjoy the rents accruing under such sublease. Lessor shall not, by reason of this or any other assignment of such sublease to Lessor nor by reason of the collection of the rents from a sublessee, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee's obligations to such sublessee under such sublease. Lessee hereby irrevocably authorizes and dire( ; any such sublessee, upon receipt of written notice from Lessor stating that a default exists in the performance of Lessee's obligations under this Lease, to pay to Lessor the rents due and to become due under the sublease. Lessee agrees that such sublessees shall have the right to rely upon any such statement and request from Lessor, and that such sublessee shall pay such rents to Lessor without any obligation or right to inquire as to whether such default exists and notwithstanding any notice from or claim from Lessee to the contrary. Lessee shall have no right or claim against such sublessee or Lessor for any such rents so paid by said sublessee to Lessor. b. No sublease entered into by Lessee shall be effective unless and until it has been approved in writing by Lessor. In entering into any sublease, Lessee shall use only such form of sublease as is satisfactory to Lessor, and once approved by Lessor, such sublease shall not be changed or modified without Lessor's prior written consent. Any sublessee shall, by reason of entering into a sublease under this Lease, be deemed, for the benefit of Lessor, to have assumed and agreed to conform and comply with each and every obligation herein to be performed by Lessee, other than such obligations as are contrary to or inconsistent with provisions contained in a sublease to which Lessor has expressly consented in writing. c. If Lessee's obligations under this Lease have been guaranteed by third parties, then a sublease and Lessor's consent thereto, shall not be effective unless said guarantors give their written consent to such sublease and the terms thereof. d. The consent by Lessor to any subletting shall not release Lessee from its obligations or alter the primary liability of Lessee to pay the rent and perform and comply with all of the obligations of Lessee to be performed under this Lease. e. The consent by Lessor to any subletting shall not constitute consent to any subsequent subletting by Lessee or to any assignment or subletting by the sublessee. However, Lessor may consent to subsequent sublettings and assignments of the sublease or any amendments or modifications thereto without notifying Lessee or anyone else liable on the Lease or sublease and without obtaining their consent and such action shall not relieve such persons from liability. f. In the event of any default under this Lease, Lessor may proceed directly against Lessee, any guarantors or any one else responsible for the performance of this Lease, including the sublessee, without first exhausting Lessor's remedies against any other person or entity responsible therefor to Lessor, or any security held by Lessor or Lessee. g. In the event Lessee shall default in the performance of its obligations under this Lease, Lessor, at its option and without any obligation to do so, may require any sublessee to attorn to Lessor, in which event Lessor shall undertake the obligations of Lessee under such sublease from the time of the exercise of said option to the termination of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to Lessee or for any other prior defaults of Lessee under such sublease. h. Each and every consent required of Lessee under a sublease shall also require the consent of Lessor. i. No sublessee shall further assign or sublet all or any part of the Premises without Lessor's prior written consent. j. Lessor's written consent to any subletting of the Premises by Lessee shall not constitute an acknowledgment that no default then exists under this Lease of the obligations to be performed by Lessee nor shall such consent be deemed a waiver of any then existing default, except as may be otherwise stated by Lessor at the time. k. With respect to any subletting to which Lessor has consented, Lessor agrees to deliver a copy of any notice of default by Lessee to the sublessee. Such sublessee shall have the right to cure a default of Lessee within 10 days after service of said notice of default upon such sublessee, and the sublessee shall have a right of reimbursement and offset from and against Lessee for any such defaults cured by the sublessee. Attorney's Fees. In the event Lessee shall assign or sublet the Premises or requests the consent of Lessor to any assignment or subletting or if Lessee shall request the consent of Lessor for any act Lessee proposes to do then Lessee shall pay Lessor's reasonable attorneys fees incurred in connection therewith, such attorneys fees not to exceed $350.00 for each such request. Default; Remedies. 1. Default. The occurrence of any one or more of the following events shall constitute a material default of this Lease by Lessee: a. The vacating or abandonment of the Premises by Lessee. , b. The failure by Lessee to make any payment of rent or any other payment required to be made by Lessee hereunder, as and when due, where such failure shall continue for a period of three (3) days after written notice thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes such Notice to Pay Rent or Quit shall also constitute the notice required by this subparagraph. c. Except as otherwise provided in this Lease, the failure by Lessee to observe or perform any of the covenants, conditions, or provisions of this Lease to be observed or performed by Lessee, other than described in paragraph (b) above, where such failure shall continue for a period of 30 days after written notice thereof from Lessor to Lessee; provided, however, that if the nature of Lessee's noncompliance is such that more than 30 days are reasonably required for its cure, then Lessee shall not be deemed to be in default if Lessee commenced such cure within said 30-day period and thereafter diligently prosecutes such cure to completion. To the extent permitted by law, such 30-day notice shall constitute the sole and exclusive notice required to be given to Lessee under applicable Unlawful Detainer statutes. d. (i) The making by Lessee of any general arrangement or general assignment for the benefit of creditors; (ii) Lessee becomes a "debtor" as defined in 11 U.S.C. 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within 60 days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where possession is not restored to Lessee within 30 days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where such seizure is not discharged within 30 days. In the event that any provision of this paragraph 13.1(d) is contrary to any applicable law, such provision shall be of no force or effect. e. The discovery by Lessor that any financial statement given to Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any successor in interest of Lessee or any guarantor of Lessee's obligation hereunder, was materially false. Remedies. In the event of any such material default by Lessee, Lessor may at any time thereafter, with or without notice or demand and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such default: a. Terminate Lessee's right to possession of the Premises by any lawful means, in which case this Lease and the term hereof shall terminate and Lessee shall immediately surrender possession of the Premises to Lessor. In such event Lessor shall be entitled to recover from Lessee all damages incurred by Lessor by reason of Lessee's default including, but not limited to, the cost of recovering possession of the Premises; expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorney's fees, and any real estate commission actually paid; the worth at the time of award by the court having jurisdiction thereof of the amount by which the unpaid rent for the balance of the term after the time of such award exceeds the amount of such rental loss for the same period that Lessee proves could be reasonably avoided; that portion of the leasing commission paid by Lessor pursuant to paragraph 15 applicable to the unexpired term of this Lease. b. Maintain Lessee's right to possession in which case this Lease shall continue in effect whether or not Lessee shall have vacated or abandoned the Premises. In such event Lessor shall be entitled to enforce all of Lessor's rights and remedies under this Lease, including the right to recover the rent as it becomes due hereunder. c. Pursue any other remedy now or hereafter available to Lessor under the laws or judicial decisions of the state wherein the Premises are located. Unpaid installment of rent and other unpaid monetary obligations of Lessee under the terms of this Lease shall bear interest from the date due at the maximum rate then allowable by law. Default by Lessor. Lessor shall not be in default unless Lessor fails to perform obligations required of Lessor within a reasonable time, but in no event later than 30 days after written notice by Lessee to Lessor and to the holder of any first mortgage or deed of trust covering the Premises whose name and address shall have theretofore been furnished to Lessee in writing, specifying wherein Lessor has failed to perform such obligation; provided, however, that if the nature of Lessor's obligation is such that more than 30 days are required for performance then Lessor shall not be in default if Lessor commences performance within such 30 day period and thereafter diligently prosecutes the same to completion. Late Charges. Lessee hereby acknowledges that late payment by Lessee to Lessor of Base Rent, Lessee's Share of Operating Expenses or other sums due hereunder will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed on Lessor by the terms of any mortgage or trust deed covering the Property. Accordingly, if any installment of Base Rent, Operating Expenses, or any other sum due from Lessee shall not be received by Lessor or Lessor's designee within ten (10) days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a late charge equal to five percent (5%) of such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of late payment by Lessee. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's default with respect to such overdue amount, nor prevent Lessor from exercising any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for three (3) consecutive installments of any of the aforesaid monetary obligations of Lessee, then Base Rent shall automatically become due and payable quarterly in advance, rather than monthly, notwithstanding paragraph 4.1 or any other provision of this Lease to the contrary. Condemnation. If the Premises or any portion thereof or the Industrial Center are taken under the power of eminent domain, or sold under the threat of the exercise of said power (all of which are herein called "condemnation"), this Lease shall terminate as to the part so taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the floor area of the Premises, or more than 25% of that portion of the Common Areas designated as parking for the Industrial Center is taken by condemnation, Lessee may, at Lessee's option, to be exercised in, writing only within ten (10) days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the premises remaining, except that the rent shall be reduced in the proportion that the floor area of the Premises taken bears to the total floor area of the Premises. No reduction of rent shall occur if the only area taken is that which does not have the Premises located thereon. Any award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold or for the taking of the fee, or as severance damages: provided, however, that Lessee shall be entitled to any award for loss or damage to Lessee's trade fixtures and removable personal property. In the event that this Lease is not terminated by reason of such condemnation, Lessor shall to the extent of severance damages received by Lessor in connection with such condemnation, repair any damage to the Premises caused by such condemnation except to the extent that Lessee has been reimbursed therefor by the condemning authority. Lessee shall pay any amount in excess of such severance damages required to complete such repair. Broker's Fee. Upon execution of this Lease by both parties, Lessor shall pay to Eric Fuller & Associates, Inc. and Property Brokers. Licensed real estate broker(s), a fee as set forth in a separate agreement between Lessor and said broker(s), or in the event there is no separate agreement between Less r and said broker(s), the sum of $ . for brokerage services rendered by s; i broker(s) to Lessor in this transaction. Lessor further agrees that if Lessee exercises any Option, as defined in paragraph 39.1 of this Lease, which is granted to Lessee under this Lease, or any subsequently granted option which is substantially similar to an Option granted to Lessee under this Lease, or if Lessee acquires any rights to the Premises or other premises described in this Lease which are substantially similar to what Lessee would have acquired had an Option herein granted to Lessee been exercised, or if Lessee remains in possession of the Premises after the expiration of the term of this Lease after having failed to exercise an Option, or if said broker(s) are the procuring cause of any other lease or sale entered into between the parties pertaining to the Premises and/or any adjacent property in which Lessor has an interest, then as to any of said transactions, Lessor shall pay said broker(s) a fee in accordance with the schedule of said broker(s) in effect at the time of the execution of this Lease. Lessor agrees to pay said fee not only on behalf of Lessor but also on behalf of any person, corporation, association, or other entity having an ownership interest in said real property or any part thereof, when such fee is due hereunder. Any transferee of Lessor's interests in this Lease, whether such transfer is by agreement or by operation of law, shall be deemed to have assumed Lessor's obligation under this paragraph 15. Said broker shall be a third party beneficiary of the provisions of this paragraph 15. Estoppel Certificate. Each party (as "responding party") shall at any time upon not less than ten (10) days' prior written notice from the other party ("requesting party") execute, acknowledge and deliver to the requesting party a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the date to which the rent and other charges are paid in advance, if any, and (ii) acknowledging that there are not, to the responding party's knowledge, any uncured defaults on the part of the requesting party, or specifying such defaults if any are claimed. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrance of the Premises or of the business of the requesting party. At the requesting party's option, the failure to deliver such statement within such times shall be a material default of this Lease by the party who is to respond, without any further notice to such party, or it shall be conclusive upon such party that (i) this Lease is in full force and effect, without modification except as may be represented by the requesting party, (ii) there are no uncured defaults in the requesting party's performance, and (iii) if Lessor is the requesting party, not more than one month's rent has been paid in advance. If Lessor desires to finance, refinance, or sell the Property, or any part thereof, Lessee hereby agrees to deliver to any lender or purchaser designated by Lessor such financial statements of Lessee as may be reasonably required by such lender or purchaser. Such statements shall include the past three (3) years' financial statements of Lessee. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth. Lessor's Liability. The term "Lessor" as used herein shall mean only the owner or owners, at the time in question, of the fee title or a lessee's interest in a ground lease of the Industrial Center, and except as expressly provided in paragraph 15, in the event of any transfer of such title or interest, Lessor herein named (and in case of any subsequent transfers then the grantor) shall be relieved from and after the date of such transfer of all liability as respects Lessor's obligations thereafter to be performed, provided that any funds in the hands of Lessor or the then grantor at the time of such transfer, in which Lessee has an interest, shall be delivered to the grantee. The obligations contained in this Lease to be performed by Lessor shall, subject as aforesaid, be binding on Lessor's successors and assigns, only during their respective periods of ownership. Severability. The invalidity of any provision of this Lease as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof. Interest on Past-Due Obligations. Except as expressly herein provided, any amount due to Lessor not paid when due shall bear interest at the maximum rate then allowable by law from the date due. Payment of such interest shall not excuse or cure any default by Lessee under this Lease; provided, however, that interest shall not be payable on late charges incurred by Lessee nor on any amount upon which late charges are paid by Lessee. Time of Essence. Time is of the essence with respect to the obligations to be performed under this Lease. Additional Rent. All monetary obligations of Lessee to Lessor under the terms of this Lease, including but not limited to Lessee's, Share of Operating Expenses and insurance and tax expenses payable shall be deemed to be rent. Incorporation of Prior Agreements; Amendments. This Lease contains all agreements of the parties with respect to any matter mentioned herein. No prior or contemporaneous agreement or understanding pertaining to any such matter shall be effective. This lease may be modified in writing only, signed by the patties in interest at the time of the modification. Except as otherwise stated in this Lease, Lessee hereby acknowledges that neither the real estate broker listed in paragraph 15 hereof nor any cooperating broker on this transaction nor the Lessor or any employee or agents or any of said persons has made any oral or written warranties or representations to Lessee relative to the condition or use by Lessee of the Premises or the Property and Lessee acknowledges that Lessee assumes all responsibility regarding the Occupational Safety Health Act, the legal use and adaptability of the Premises and the compliance thereof with all applicable laws and regulations in effect during the term of this Lease except as otherwise specifically stated in this Lease. Notices. Any notice required or permitted to be given hereunder shall be in writing and may be given by personal delivery or by certified mail, and if given personally or by mail, shall be deemed sufficiently given if addressed to Lessee or to Lessor at the address noted below the signature of the respective parties, as the case may be. Either party may by notice to the other specify a different address for notice purposes except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for notice purposes. A copy of all notices required or permitted to be given to Lessor hereunder shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate by notice to Lessee. Waivers. No waiver by Lessor or any provision hereof shall be deemed a waiver of any other provision hereof or of any subsequent breach by Lessee of the same or any other provision. Lessor's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor's consent to approval of any subsequent act by Lessee. The acceptance of rent hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of any provision hereof other than the failure of Lessee to pay the particular rent so accepted, regardless of Lessor's knowledge of such preceding breach, at the time of acceptance of such rent. Recording. Either Lessor or Lessee shall, upon request of the other, execute, acknowledge and deliver to the other a "short form" memorandum of this Lease for recording purposes. Holding Over. See Paragraph 51. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity. Covenants and Conditions. Each provision of this Lease performable by Lessee shall be deemed both a covenant and a condition. Binding Effect; Choice of Law. Subject to any provisions hereof restricting assignment or subletting by Lessee and subject to the provisions of paragraph 17, this Lease shall bind the parties, their personal representatives, successors and assigns. This Lease shall be governed by the laws of the State where the Industrial Center is located and any litigation concerning this Lease between the parties hereto shall be initiated in the county in which the Industrial Center is located. Subordination. This Lease, and any Option granted hereby, at Lessor's option, shall be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation or security now or hereafter placed upon the Industrial Center and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination, Lessee's right to quiet possession of the Premises shall not be disturbed if Lessee is not in default and so long as Lessee shall pay the rent and observe and perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms. If any mortgagee, trustee, or ground lessor shall elect to have this Lease and any Options granted hereby prior to the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to Lessee, this Lease and such Options shall be deemed prior to such mortgage, deed of trust or ground lease, whether this Lease or such Options are dated prior or subsequent to the date of said mortgage, deed of trust or ground lease or the date of recording thereof. Lessee agrees to execute any documents required to effectuate an attornment, a subordination or to make this Lease or any Option granted herein prior to the lien of any mortgage, deed of trust or ground lease, as the case may be. Lessee's failure to execute such documents within ten (10) days after written demand shall constitute a material default by Lessee hereunder without further notice to Lessee or, at Lessor's option, Lessor shall execute such documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee does hereby make, constitute and irrevocably appoint Lessor as Lessee's attorney-in-fact and in Lessee's name, place and stead, to execute such documents in accordance with this paragraph 30(b). Attorney's Fees. If either party or the broker(s) named herein bring an action to enforce the terms hereof or declare rights hereunder, the prevailing party in any such action, on trial or appeal, shall be entitled to his reasonable attorney's fees to be paid by the losing party as fixed by the court. The provisions of this paragraph shall inure to the benefit of the broker named herein who seeks to enforce a right hereunder. Lessor's Access. Lessor and Lessor's agents shall have the right to enter the Premises at reasonable times for the purpose of inspecting the same, showing the same to prospective purchasers, lenders, or lessees, and making such alterations, repairs, improvements or additions to the Premises or to the building of which they are part as Lessor may deem necessary or desirable. Lessor may at any time place on or about the Premises or the Building any ordinary "For Sale" signs and Lessor may at any time during the last 120 days of the term hereof place on or about the Premises any ordinary "For Lease" signs. All activities of Lessor pursuant to this paragraph shall be without abatement of rent, nor shall Lessor have any liability to Lessee for the same. Auctions. Except for internet auction sales, Lessee shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises or the Common Areas without first having obtained Lessor's prior written consent. Notwithstanding anything to the contrary in this Lease, Lessor shall not be obligated to exercise any standard or reasonableness in determining, whether to grant such consent. Signs. Lessee shall not place any sign upon the Premises or the Industrial Center without Lessor's prior written consent. Under no circumstances shall Lessee place a sign on any roof of the Industrial Center. Merger. The voluntary or ether surrender of this Lease by Lessee, or a mutual cancellation thereof, or a termination by Lessor, shall not work a merger, and shall, at the option of Lessor, terminate all or any existing subtenancies or may, at the option of Lessor, operate as an assignment to Lessor of any or all of such subtenancies. Consents. Except for paragraph 33 hereof, wherever in this Lease the consent of one party is required to an act of the other party such consent shall not be unreasonably withheld or delayed. Guarantor. In the event that there is a guarantor of this Lease, said guarantor shall have the same obligations as Lessee under this Lease. Quiet Possession. Upon Lessee paying the rent for the Premises and observing and performing all of the covenants, conditions and provisions on Lessee's part to be observed and performed hereunder, Lessee shall have quiet possession of the Premises for the entire term hereof subject to all of the provisions of this Lease. The individuals executing this Lease on behalf of Lessor represent and warrant to Lessee that they are fully authorized and legally capable of executing this Lease on behalf of Lessor and that such execution is binding upon all parties holding an ownership interest in the Property. Options. 1. Definition. As used in this paragraph the word "Option" has the following meaning: (1) the right or option to extend the term of this Lease or to renew this Lease or to extend or renew any lease that Lessee has on other property of Lessor; (2) the option or right of first refusal to lease the Premises or the right of first offer to lease the Premises or the right of first refusal to lease other space within the Industrial Center or other property of Lessor; (3) the right or option to purchase the Premises or the Industrial Center, or the right of first refusal to purchase. the Premises or the Industrial Center, or the right of first offer to purchase the Premises or the Industrial Center, or the right or option to purchase other property of Lessor, or the right of first refusal to purchase other property of Lessor or the right of first offer to purchase other property of Lessor. Options Personal. Each Option granted to Lessee in this Lease is personal to the original Lessee and may be exercised only by the original Lessee while occupying the Premises who does so without the intent of thereafter assigning this Lease or subletting the Premises or any portion thereof, and may not be exercised or be assigned, voluntarily or involuntarily, by or to any person or entity other than Lessee, provided, however, that an Option may be exercised by or assigned to any Lessee Affiliate as defined in paragraph 12.2 of this Lease. The Options, if any, herein granted to Lessee are not assignable separate and apart from this Lease, nor may any Option be separated from this Lease in any manner, either by reservation or otherwise. Multiple Options. In the event that Lessee has any multiple options to extend or renew this Lease a later option cannot be exercised unless the prior option to extend or renew this Lease has been so exercised. Effect of Default on Options. Lessee shall have no right to exercise an Option, notwithstanding any provision in the grant of Option to the contrary, (i) during the time commencing from the date Lessor gives to Lessee a notice of default pursuant to paragraph 13.1(b) or 13.1(c) and continuing until the noncompliance alleged in said notice of default is cured, or (ii) during the period of time commencing on the date after a monetary obligation to Lessor is due from Lessee and unpaid (without any necessity for notice thereof to Lessee) and continuing until the obligation is paid, or (iii) at any time after an event of default described in paragraphs 13.1(a), 13.1(d), or 13.1 (e) (without any necessity of Lessor to give notice of such default to Lessee), or (iv) in the event that Lessor has given to Lessee three or more notices of default under paragraph 13.1(b), or paragraph 13.1(c), whether or not the defaults are cured, during the 12-month period of time immediately prior to the time that Lessee attempts to exercise the Subject Option. The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the provisions of paragraph 39.4(a). All rights of Lessee under the provisions of an Option shall terminate and be of no further force or effect, notwithstanding Lessee's due and timely exercise of the Option, if, after such exercise and during the term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee for a period of 30 days after such obligation becomes due (without any necessity of Lessor to give notice thereof to Lessee), or (ii) Lessee fails to commence to cure a default specified in paragraph 13.1(c) within 30 days after the date that Lessor gives notice to Lessee of such default and/or Lessee fails thereafter to diligently prosecute said cure to completion, or (iii) Lessee commits a default described in paragraph 13.1(a), 13.1(d), or 13.1(e) (without any necessity of Lessor to give notice of such default to Lessee), or (iv) Lessor gives to Lessee three or more notices of default under paragraph 13.1(b), or paragraph 13.1(c), whether or not the defaults are cured. Security Measures. Lessee hereby acknowledges that Lessor shall have no obligation whatsoever to provide guard service or other security measures for the benefit of the Premises or the Industrial Center. Lessee assumes all responsibility for the protection of Lessee, its agents, and invitees and the property of Lessee and of Lessee's agents and invitees from acts of third parties. Nothing herein contained shall prevent Lessor, at Lessor's sole option, from providing security protection for the Industrial Center or any part thereof, in which event the cost thereof shall be included within the definition of Operating Expenses, as set forth in paragraph 4.2(b). Easements. Lessor reserves to itself the right, from time to time, to grant such easements, rights and dedications that Lessor deems necessary or desirable, and to cause the recordation of Parcel Maps and restrictions, so long as such easements, rights, dedications, Maps and restrictions do not unreasonably interfere with the use of the Premises by Lessee. Lessee shall sign any of the aforementioned documents upon request of Lessor and failure to do so shall constitute a material default of this Lease by Lessee without the need for further notice to Lessee. Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of money to be paid by one party to the other under the provisions hereof, the party against whom the obligation to pay the money is asserted shall have tile right to make payment "under protest" and such payment shall not be regarded as voluntary payment, and there shall survive the right on the part of said party to institute suit for recovery of such sum. If it shall be adjudged that there was. no legal obligation on the part of said party to pay such sum or any part thereof, said party shall be entitled to recover such sum or so much thereof as it was not legally required to pay under the provisions of this Lease. Authority. If Lessee is a corporation, trust, or general or limited partnership, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of said entity. If Lessee is a corporation, trust or partnership, Lessee shall, within 30 days after execution of this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor. Conflict. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions, if any, shall be controlled by the typewritten or handwritten provisions. Offer. Preparation of this Lease by Lessor or Lessor's agent and submission of same to Lessee shall not be deemed an offer to lease. This Lease shall become binding upon Lessor and Lessee only when fully executed by Lessor and Lessee. Addendum. Attached hereto is an addendum or addenda containing paragraphs 47 through 53 which constitute a part of this Lease. LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES. THIS LEASE HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO: THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. ADDRESSES FOR NOTICES AND RENT ADDRESS The Columbian Publishing Company 701 West 8" Street Vancouver, WA 98660q Egghead.com., Inc. 521 SE Chkalov Vancouver, WA 98683 NOTE: These forms are often modified to meet changing requirements of law and needs of the industry. Always write or call to make sure you are utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 345 So. Figueroa St., M-1, Los Angeles, CA 90071. (213)687- 8777. THIS LEASE IS SUBJECT TO ACCEPTANCE BY LANDLORD: IN WITNESS WHEREOF, the parties hereto have executed this lease the date and year above written. LESSOR: The Columbian Publishing Company, a Washington corporation By: /s/ Douglas E. Ness Its: Vice President, Finance Address: 701 West 8th Street Vancouver, WA 98660 LESSEE: Egghead.com, Inc., a Delaware corporation By: /s/ Norman F Hullinger Its: Vice President of Sales and Operations Address: 521 SE Chkalov ChkalovVancouver Washington LESSOR: STATE OF Washington County of Clark On October 17, 2000 before me, a Notary Public in and for said County and State, residing therein, personally appeared Douglas E. Ness, who, being duly sworn, did say that he is the Vice President, Finance of The Columbian, a corporation and that said instrument was signed in behalf of said corporation by authority of its board of directors; and he acknowledged said instrument to be its voluntary act and deed. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year last above written. Barbara Samuels <Notary Seal> My Commission Expires June 20, 2004 ADDENDUM A Commission. Owner shall pay a commission or fee to Eric Fuller & Associates, Inc. and Property Brokers in accordance with the provisions of a separate commission contract. Each party represents that it has not had dealings with any other real estate broker or salesman with respect to this Lease, and each party shall defend, indemnify and hold harmless the other party from all costs and liabilities including reasonable attorney's fees resulting from any claims to the contrary. Agency Disclosure. At the signing of this Agreement the listing agent, William Connelly or Eric Fuller & Associates, Inc. represented the Landlord. Greg Steele of Property Brokers represented the Tenant. Each party signing this document confirms that prior oral and/or written disclosure of agency was provided to him/her in this transaction. See Attached Exhibit D, Laws of Real Estate Agency. Hazardous Materials. During the term of this Lease, Tenant shall not cause or permit any Hazardous Materials to be placed, held, located or disposed of on, in or under the Premises or to otherwise affect the Premises in any manner that violates federal, state or local laws, ordinances, rules, regulations or policies now in effect or hereafter adopted governing the use, storage, treatment, transportation, manufacture, refinement, handling, production or disposal of Hazardous Materials (collectively, the "Environmental Laws"). For purposes of this section, "Hazardous Materials" shall mean any flammable substances, explosives, radioactive materials, hazardous materials, hazardous wastes, toxic substances, pollutants, pollution or related materials specified as such in, or regulated under, any of the Environmental Laws. Landlord shall have neither the ability nor the duty to direct Tenant's activities with respect to Hazardous Materials or its compliance with Environmental Laws. At the expiration or earlier termination of this Lease, Tenant shall cause any Hazardous Materials permitted or caused by the Tenant, to be placed, held, located or disposed of on in, under or affecting the Premises in any manner that violate the Environmental Laws to be cleaned up and removed from the Premises at Tenant's expense in such manner as to comply with the Environmental Laws. Tenant shall indemnify, defend and hold Landlord and present and future owners of the property harmless from and against any and all losses, liabilities, claims and expenses (including reasonable attorney fees through appeal and fees of environmental engineers) arising out of or in any way relating to any default by Tenant pursuant to this section, and the agreements by Tenant in this section shall survive the expiration or earlier termination of this Lease. Tenant shall immediately advise Landlord in writing of any and all enforcement, cleanup, remedial, removal or other governmental or regulatory actions instituted, completed or threatened pursuant to any Environmental Laws affecting the Premises. Zoning Disclaimer. This agreement will not allow use of the Property described in this agreement in violation of applicable land use laws and regulations. Before signing or accepting this agreement, the person acquiring lease-hold to the Property should check with the appropriate City or County planning department to verify approved uses. Holding Over. Tenant will, at the termination of this Lease by lapse of time or otherwise, yield up immediate possession to Landlord. If Landlord agrees in writing that Tenant may hold over after the expiration or termination of this Lease, unless the parties hereto otherwise agree in writing on the terms of such holding over, the hold over tenancy shall be subject to termination by Landlord at any time upon not less than five (5) days, advance written notice, or by Tenant at any time upon not less than thirty (30) days advance written notice, and all of the other terms and provisions of this Lease shall be applicable during that period, except that Tenant shall pay Landlord from time to time upon demand, as rental for the period of any hold over, an amount equal to one and one-half (1-1/2) the Base Rent in effect on the termination date, plus all additional rental as defined herein, computed on a daily basis for each day of the hold over period, No holding over by Tenant,, whether with or without consent of Landlord, shall operate to extend this Lease except as otherwise expressly provided. The preceding provisions of this paragraph 51 shall not be construed as Landlord's consent for Tenant to hold over. Rent Schedule: a. Months Monthly Rent 1-12 $18,022.00 + operating expenses 13-24 $18,923.00 + operating expenses 25-36 $19,867.00 + operating expenses b. Move In Expense: Tenant shall pay to Landlord the move in expense as stated below upon lease execution: First Month's Rent: $18,022.00 First Month's Operating Expense: $ 5,406.00 Security Deposit: $19,867.00 Move in Expense Due and Payable at Lease Execution: $42,935.00 Counterparts: This lease may be executed in one or more counterparts, each of which shall be deemed as an original but all of which together shall constitute one and the same instrument. EXHIBIT A-1 To the Lease dated August 24, 2000, between The Columbian Publishing Company, Lessor, and Egghead.com, Inc. a Delaware Corporation, Lessee. The leased premises consists of approximately 72,086 square feet at 206 Grand Boulevard, Vancouver, Clark County, Washington which is legally described as a portion of: William Ryan DLC Lot 240. The premises is commonly known as: 206 Grand Boulevard Vancouver, WA 98661 [DRAWING OF 206 GRAND BOULEVARD] EXHIBIT A-2 Note: A temporary barrier will be erected at the appropriate location highlighted, such that 300 parking spaces will be available including those along the Grand Street property line (outside existing fences). [DRAWING OF PARKING SPACES] EXHIBIT A-3 To the Lease dated August 24, 2000, between The Columbian Publishing Company, Lessor, and Egghead.com, Inc., a Delaware Corporation, Lessee. The leased premises consists of approximately 72,086 square feet at 206 Grand Boulevard, Vancouver, Clark County, Washington which is legally described as a portion of: Wiliam Ryan DLC Lot 240. The premises is commonly known as: 206 Grand Boulevard Vancouver, WA 98661 [DRAWING OF 206 GRAND BOULEVARD]   --------------------------------------------------------------------------------

LOAN AGREEMENT Principal $3,000,000.00 Loan Date Maturity 06-30-2002 Loan No. 81145 Call 04A0 Collateral Account 00951 Officer 490 Initials References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Borrower: Industrial Services of America, Inc. (TIN: 69-0712746) 7100 Grade Lane Louisville, KY 40232 Lender: Bank of Louisville 500 West Broadway Louisville, KY 40202             THIS LOAN AGREEMENT between Industrial Services of America, Inc. ("Borrower") and Bank of Louisville ("Lender") is made and executed on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans and other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. All such loans and financial accommodations, together with all future loans and financial accommodations from Lender to Borrower, are referred to in this Agreement individually as the "Loan" and collectively as the "Loans." Borrower understands and agrees that: (a) in granting, renewing, or extending any Loan, Lender is relying upon Borrower's representations, warranties, and agreements, as set forth in this Agreement; (b) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender's sole judgment and discretion; and (c) all such Loans shall be and shall remain subject to the following terms and conditions of this Agreement. TERM. This Agreement shall be effective as of November 30, 2000, and shall continue thereafter until all Indebtedness of Borrower to Lender has been performed in full and the parties terminate this Agreement in writing. DEFINITIONS. The following words shall have the following meanings when used in this Agreement. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. All references to dollar amounts shall mean amounts in lawful money of the United States of America. Agreement. The word "Agreement" means this Loan Agreement, as this Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Loan Agreement from time to time. Account. The word "Account" means a trade account, account receivable, or other right to payment for goods sold or services rendered owing to Borrower (or to a third party grantor acceptable to Lender). Account Debtor. The words "Account Debtor" mean the person or entity obligated upon an Account. Advance. The word "Advance" means a disbursement of Loan funds under this Agreement. Borrower. The word "Borrower" means Industrial Services of America, Inc. The word "Borrower" also includes, as applicable, all subsidiaries and affiliates of Borrower as provided below in the paragraph titled "Subsidiaries and Affiliates." Borrowing Base. The words "Borrowing Base" mean, as determined by Lender from time to time, the lesser of (a) $3,000,000.00; or (b) 80.000% of the aggregate amount of Eligible Accounts. Business Day. The words "Business Day" mean a day on which commercial banks are open for business in the Commonwealth of Kentucky. CERCLA. The word "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended. Cash Flow. The words "Cash Flow" mean net income after taxes, and exclusive of extraordinary gains and income, plus depreciation and amortization. Collateral. The word "Collateral" means and includes without limitation all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. The word "Collateral" includes without limitation all collateral described below in the section titled "COLLATERAL." Debt. The word "Debt" means all of Borrower's liabilities excluding Subordinated Debt. Eligible Accounts. The words "Eligible Accounts" mean, at any time, all of Borrower's Accounts which contain selling terms and conditions acceptable to Lender. The net amount of any Eligible Account against which Borrower may borrow shall exclude all returns, discounts, credits, and offsets of any nature. Unless otherwise agreed to by Lender in writing, Eligible Accounts do not include:   (a) Accounts with respect to which the Account Debtor is an officer, an employee or agent of Borrower.   (b) Accounts with respect to which the Account Debtor is a subsidiary of, or affiliated with or related to Borrower or its shareholders, officers, or directors.   (c) Accounts with respect to which goods are placed on consignment, guaranteed sale, or other terms by reason of which the payment by the Account Debtor may be conditional.   (d) Accounts with respect to which Borrower is or may become liable to the Account Debtor for goods sold or services rendered by the Account Debtor to Borrower.   (e) Accounts which are subject to dispute, counterclaim, or setoff.   (f) Accounts with respect to which the goods have not been shipped or delivered, or the services have not been rendered, to the Account Debtor.   (g) Accounts with respect to which Lender, in its sole discretion, deems the creditworthiness or financial condition of the Account Debtor to be unsatisfactory.   (h) Accounts of any Account Debtor who has filed or has had filed against it a petition in bankruptcy or an application for relief under any provision of any state or federal bankruptcy, insolvency, or debtor-in-relief acts; or who has had appointed a trustee, custodian, or receiver for the assets of such Account Debtor; or who has made an assignment for the benefit of creditors or has become insolvent or fails generally to pay its debts (including its payrolls) as such debts become due.   (i) (j) Accounts with respect to which the Account Debtor is the United States government or any department or agency of the United States. Accounts which have not been paid in full within 90 from the invoice date. The entire balance of any Account of any single Account debtor will be ineligible whenever the portion of the Account which has not been paid within 90 from the invoice date is in excess of 10.000% of the total amount outstanding on the Account. ERISA. The word "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. Event of Default. The words "Event of Default" mean and include without limitation any of the Events of Default set forth below in the section titled "EVENTS OF DEFAULT." Expiration Date. The words "Expiration Date" mean the date of termination of Lender's commitment to lend under this Agreement. Grantor. The word "Grantor" means and includes without limitation each and all of the persons or entities granting a Security Interest in any Collateral for the indebtedness, including without limitation all Borrowers granting such a Security Interest. Guarantor. The word "Guarantor" means and includes without limitation each and all of the guarantors, sureties, and accommodation parties in connection with any Indebtedness. Indebtedness. The word "Indebtedness" means and includes without limitation all Loans, together with all other obligations, debts and liabilities of Borrower to Lender, or any one or more of them, as well as all claims by Lender against Borrower, or any one or more of them; whether now or hereafter existing, voluntary or involuntary, due or not due, absolute or contingent, liquidated or unliquidated; whether Borrower may be liable individually or jointly with others; whether Borrower may be obligated as a guarantor, surety, or otherwise; whether recovery upon such Indebtedness may be or hereafter may become barred by any statute of limitations; and whether such Indebtedness may be or hereafter may become otherwise unenforceable. Lender. The word "Lender" means Bank of Louisville, its successors and assigns. Line of Credit. The words "Line of Credit" mean the credit facility described in the Section titled "LINE OF CREDIT" below. Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus Borrower's readily marketable securities. Loan. The word "Loan" or "Loans" means and includes without limitation any and all commercial loans and financial accommodations from Lender to Borrower, whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time. Note. The word "Note" means and includes without limitation Borrower's promissory note or notes, if any, evidencing Borrower's Loan obligations in favor of Lender, as well as any substitute, replacement or refinancing note or notes therefor. Related Documents. The words "Related Documents" mean and include without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. Security Agreement. The words "Security Agreement" mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest. Security Interest. The words "Security Interest" mean and include without limitation any type of collateral security, whether in the form of a lien, charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. SARA. The word "SARA" means the Superfund Amendments and Reauthorization Act of 1986 as now or hereafter amended. Subordinated Debt. The words "Subordinated Debt" mean indebtedness and liabilities of Borrower which have been subordinated by written agreement to indebtedness owed by Borrower to Lender in form and substance acceptable to Lender. Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total assets excluding all intangible assets (i.e., goodwill, trademarks, patents, copyrights, organizational expenses, and similar intangible items, but including leaseholds and leasehold improvements) less total Debt. Working Capital. The words "Working Capital" mean Borrower's current assets, excluding prepaid expenses, less Borrower's current liabilities. LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time from the date of this Agreement to the Expiration Date, provided the aggregate amount of such Advances outstanding at any time does not exceed the Borrowing Base. Within the foregoing limits, Borrower may borrow, partially or wholly prepay, and reborrow under this Agreement as follows. Conditions Precedent to Each Advance. Lender's obligation to make any Advance to or for the account of Borrower under this Agreement is subject to the following conditions precedent, with all documents, instruments, opinions, reports, and other items required under this Agreement to be in form and substance satisfactory to Lender:   (a) Lender shall have received evidence that this Agreement and all Related Documents have been duly authorized, executed, and delivered by Borrower to Lender.   (b) Lender shall have received such opinions of counsel, supplemental opinions, and documents as Lender may request.   (c) The security interests in the Collateral shall have been duly authorized, created, and perfected with first lien priority and shall be in full force and effect.   (d) All guaranties required by Lender for the Line of Credit shall have been executed by each Guarantor, delivered to Lender, and be in full force and effect.   (e) Lender, at its option and for its sole benefit, shall have conducted an audit of Borrower's Accounts, books, records, and operations, and Lender shall be satisfied as to their condition.   (f) Borrower shall have paid to Lender all fees, costs, and expenses specified in this Agreement and the Related Documents as are then due and payable.   (g) There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement, and Borrower shall have delivered to Lender the compliance certificate called for in the paragraph below titled "Compliance Certificate." Making Loan Advances. Advances under the Line of Credit may be requested orally by authorized persons. All oral requests shall be confirmed in writing on the day of the request. Each Advance shall be conclusively deemed to have been made at the request of and for the benefit of Borrower (a) when credited to any deposit account of Borrower maintained with Lender or (b) when advanced in accordance with the instructions of an authorized person. Lender, at its option, may set a cutoff time, after which all requests for Advances will be treated as having been requested on the next succeeding Business Day. Mandatory Loan Repayments. If at any time the aggregate principal amount of the outstanding Advances shall exceed the applicable Borrowing Base, Borrower, immediately upon written or oral notice from Lender, shall pay to Lender an amount equal to the difference between the outstanding principal balance of the Advances and the Borrowing Base. On the Expiration Date, Borrower shall pay to Lender in full the aggregate unpaid principal amount of all Advances then outstanding and all accrued unpaid interest, together with all other applicable fees, costs and charges, if any, not yet paid. Loan Account. Lender shall maintain on its books a record of account in which Lender shall make entries for each Advance and such other debits and credits as shall be appropriate in connection with the credit facility. Lender shall provide Borrower with periodic statements of Borrower's account, which statements shall be considered to be correct and conclusively binding on Borrower unless Borrower notifies Lender to the contrary within thirty (30) days after Borrower's receipt of any such statement which Borrower deems to be incorrect. COLLATERAL. To secure payment of the Line of Credit and performance of all other Loans, obligations and duties owed by Borrower to Lender, Borrower (and others, if required) shall grant to Lender Security Interests in such property and assets as Lender may require (the "Collateral"), including without limitation Borrower's present and future Accounts and general intangibles. Lender's Security Interests in the Collateral shall be continuing liens and shall include the proceeds and products of the Collateral, including without limitation the proceeds of any insurance. With respect to the Collateral, Borrower agrees and represents and warrants to Lender: Perfection of Security Interests. Borrower agrees to execute such financing statements and to take whatever other actions are requested by Lender to perfect and continue Lender's Security Interests in the Collateral. Upon request of Lender, Borrower will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Borrower will note Lender's interest upon any and all chattel paper if not delivered to Lender for possession by Lender. Contemporaneous with the execution of this Agreement, Borrower will execute one or more UCC financing statements and any similar statements as may be required by applicable law, and will file such financing statements and all such similar statements in the appropriate location or locations. Borrower hereby appoints Lender as its irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect or to continue any Security Interest. Lender may at any time, and without further authorization from Borrower, file a carbon, photograph, facsimile, or other reproduction of any financing statement for use as a financing statement. Borrower will reimburse Lender for all expenses for the perfection, termination, and the continuation of the perfection of Lender's security interest in the Collateral. Borrower promptly will notify Lender of any change in Borrower's name including any change to the assumed business names of Borrower. Borrower also promptly will notify Lender of any change in Borrower's Social Security Number or Employer Identification Number. Borrower further agrees to notify Lender in writing prior to any change in address or location of Borrower's principal governance office or should Borrower merge or consolidate with any other entity. Collateral Records. Borrower does now, and at all times hereafter shall, keep correct and accurate records of the Collateral, all of which records shall be available to Lender or Lender's representative upon demand for inspection and copying at any reasonable time. With respect to the Accounts, Borrower agrees to keep and maintain such records as Lender may require, including without limitation information concerning Eligible Accounts and Account balances and agings. Collateral Schedules. Concurrently with the execution and delivery of this Agreement, Borrower shall execute and deliver to Lender a schedule of Accounts and Eligible Accounts, in form and substance satisfactory to the Lender. Thereafter and at such frequency as Lender shall require, Borrower shall execute and deliver to Lender such supplemental schedules of Eligible Accounts and such other matters and information relating to Borrower's Accounts as Lender may request. Representations and Warranties Concerning Accounts. With respect to the Accounts, Borrower represents and warrants to Lender: (a) Each Account represented by Borrower to be an Eligible Account for purposes of this Agreement conforms to the requirements of the definition of an Eligible Account; (b) All Account information listed on schedules delivered to Lender will be true and correct, subject to immaterial variance; and (c) Lender, its assigns, or agents shall have the right at any time and at Borrower's expense to inspect, examine, and audit Borrower's records and to confirm with Account Debtors the accuracy of such Accounts. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of Loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists: Organization. Borrower is a corporation which is duly organized, validly existing, and in good standing under the laws of the Commonwealth of Kentucky and is validly existing and in good standing in all states in which Borrower is doing business. Borrower has the full power and authority to own its properties and to transact the businesses in which it is presently engaged or presently proposes to engage. Borrower also is duly qualified as a foreign corporation and is in good standing in all states in which the failure to so qualify would have a material adverse effect on its businesses or financial condition. Authorization. The execution, delivery, and performance of this Agreement and all Related Documents by Borrower, to the extent to be executed, delivered or performed by Borrower, have been duly authorized by all necessary action by Borrower; do not require the consent or approval of any other person, regulatory authority or governmental body; and do not conflict with, result in a violation of, or constitute a default under (a) any provision of its articles of incorporation or organization, or bylaws, or any agreement or other instrument binding upon Borrower or (b) any law, governmental regulation, court decree, or order applicable to Borrower. Financial Information. Each financial statement of Borrower supplied to Lender truly and completely disclosed Borrower's financial condition as of the date of the statement, and there has been no material adverse change in Borrower's financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements. Legal Effect. This Agreement constitutes, and any instrument or agreement required hereunder to be given by Borrower when delivered will constitute, legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. Properties. Except for Permitted Liens, Borrower owns and has good title to all of Borrower's properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower's properties are titled in Borrower's legal name, and Borrower has not used, or filed a financing statement under, any other name for at least the last five (5) years. Hazardous Substances. The terms "hazardous waste," "hazardous substance," "disposal," "release," and "threatened release," as used in this Agreement, shall have the same meanings as set forth in the "CERCLA," "SARA," the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or Federal laws, rules, or regulations adopted pursuant to any of the foregoing. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (a) During the period of Borrower's ownership of the properties, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any hazardous waste or substance by any person on, under, about or from any of the properties. (b) Borrower has no knowledge of, or reason to believe that there has been (i) any use, generation, manufacture, storage, treatment, disposal, release, or threatened release of any hazardous waste or substance on, under, about or from the properties by any prior owners or occupants of any of the properties, or (ii) any actual or threatened litigation or claims of any kind by any person relating to such matters. (c) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the properties shall use, generate, manufacture, store, treat, dispose of, or release any hazardous waste or substance on, under, about or from any of the .properties; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation those laws, regulations and ordinances described above. Borrower authorizes Lender and its agents to enter upon the properties to make such inspections and tests as Lender may deem appropriate to determine compliance of the properties with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower's expense and for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower's due diligence in investigating the properties for hazardous waste and hazardous substances. Borrower hereby (a) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (b) agrees to indemnify and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the properties. The provisions of this section of the Agreement, including the obligation to indemnify, shall survive the payment of the Indebtedness and the termination or expiration of this Agreement and shall not be affected by Lenders acquisition of any interest in any of the properties, whether by foreclosure or otherwise. Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower's financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing. Taxes. To the best of Borrower's knowledge, all tax returns and reports of Borrower that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided. Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower's Loan and Note, that would be prior or that may in any way be superior to Lender's Security Interests and rights in and to such Collateral. Binding Effect. This Agreement, the Note, all Security Agreements directly or indirectly securing repayment of Borrower's Loan and Note and all of the Related Documents are binding upon Borrower as well as upon Borrower's successors, representatives and assigns, and are legally enforceable in accordance with their respective terms. Commercial Purposes. Borrower intends to use the Loan proceeds solely for business or commercial related purposes. Employee Benefit Plans. Each employee benefit plan as to which Borrower may have any liability complies in all material respects with all applicable requirements of law and regulations, and (i) no Reportable Event nor Prohibited Transaction (as defined in ERISA) has occurred with respect to any such plan, (ii) Borrower has not withdrawn from any such plan or initiated steps to do so, (iii) no steps have been taken to terminate any such plan, and (iv) there are no unfunded liabilities other than those previously disclosed to Lender in writing. Location of Borrower's Offices and Records. Borrower's place of business, or Borrower's chief executive office, if Borrower has more than one place of business, is located at 7100 Grade Lane, Louisville, KY 40232. Unless Borrower has designated otherwise in writing this location is also the office or offices where Borrower keeps its records concerning the Collateral. Year 2000. Borrower warrants and represents that all software utilized in the conduct of Borrower's business will have appropriate capabilities and compatiblity for operation to handle calendar dates falling on or after January 1, 2000, and all information pertaining to such calendar dates, in the same manner and with the same functionality as the software does respecting calendar dates falling on or before December 31, 1999. Further, Borrower warrants and represents that the data-related user interface functions, data-fields, and data-related program instructions and functions of the software include the indication of the century. Information. All information heretofore or contemporaneously herewith furnished by Borrower to Lender for the purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all information hereafter furnished by or on behalf of Borrower to Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified; and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading. Survival of Representations and Warranties. Borrower understands and agrees that Lender, without independent investigation, is relying upon the above representations and warranties in extending Loan Advances to Borrower. Borrower further agrees that the foregoing representations and warranties shall be continuing in nature and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while this Agreement is in effect, Borrower will: Litigation. Promptly inform Lender in writing of (a) all material adverse changes in Borrower's financial condition, and (b) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor. Financial Records. Maintain its books and records in accordance with generally accepted accounting principles, applied on a consistent basis, and permit Lender to examine and audit Borrower's books and records at all reasonable times. Additional Information. Furnish such additional information and statements, lists of assets and liabilities, agings of receivables and payables, inventory schedules, budgets, forecasts, tax returns, and other reports with respect to Borrower's financial condition and business operations as Lender may request from time to time. Financial Covenants and Ratios. Comply with the following covenants and ratios: Tangible Net Worth. Maintain a minimum Tangible Net Worth of not less than $3,000,000.00. Net Worth Ratio. Maintain a Tangible Net Worth in excess of 80.000% of Total Assets. Other Ratio. Maintain a ratio of Maximum Leverage of 5.00 to 1.00. Except as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct. Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower's properties and operations, in form, amounts, coverages and with insurance companies reasonably acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least thirty (30) days' prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such loss payable or other endorsements as Lender may require. Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (a) the name of the insurer; (b) the risks insured; (c) the amount of the policy; (d) the properties insured; (e) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (f) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower. Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements. Loan Proceeds. Use all Loan proceeds solely for Borrower's business operations, unless specifically consented to the contrary by Lender in writing. Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower's properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (a) the legality of the same shall be contested in good faith by appropriate proceedings, and (b) Borrower shall have established on its books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with generally accepted accounting practices. Borrower, upon demand of Lender, will furnish to Lender evidence of payment of the assessments, taxes, charges, levies, liens and claims and will authorize the appropriate governmental official to deliver to Lender at any time a written statement of any assessments, taxes, charges, levies, liens and claims against Borrower's properties, income, or profits. Performance. Perform and comply with all terms, conditions, and provisions set forth in this Agreement and in the Related Documents in a timely manner, and promptly notify Lender if Borrower learns of the occurrence of any event which constitutes an Event of Default under this Agreement or under any of the Related Documents. Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner and in compliance with all applicable federal, state and municipal laws, ordinances, rules and regulations respecting its properties, charters, businesses and operations, including without limitation, compliance with the Americans With Disabilities Act and with all minimum funding standards and other requirements of ERISA and other laws applicable to Borrower's employee benefit plans. Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower's other properties and to examine or audit Borrower's books, accounts, and records and to make copies and memoranda of Borrower's books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower's expense. Compliance Certificate. Unless waived in writing by Lender, provide Lender at least annually and at the time of each disbursement of Loan proceeds with a certificate executed by Borrower's chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement. Environmental Compliance and Reports. Borrower shall comply in all respects with all environmental protection federal, state and local laws, statutes, regulations and ordinances; not cause or permit to exist, as a result of an intentional or unintentional action or omission on its part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower's part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources. Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests. NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender: Indebtedness and Liens. (a) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (b) sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower's assets, or (c) sell with recourse any of Borrower's accounts, except to Lender. Continuity of Operations. (a) Engage in any business activities substantially different than those in which Borrower is presently engaged, (b) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change ownership, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, (c) pay any dividends on Borrower's stock (other than dividends payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result from the payment of dividends, if Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership of shares of stock of Borrower, or (d) purchase or retire any of Borrower's outstanding shares or alter or amend Borrower's capital structure. Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or assets, (b) purchase, create or acquire any interest in any other enterprise or entity, or (c) incur any obligation as surety or guarantor other than in the ordinary course of business. CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (a) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there occurs a material adverse change in Borrower's financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan with Lender; or (e) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred. NET WORTH COVENANT. Borrower will maintain a maximum debt-to-tangible net worth ratio or 6.75:1 at December 31, 2000 and 5.0:1 at December 31, 2001. USE OF LOAN PROCEEDS. Borrower agrees that proceeds of the line of credit evidenced by the Note will not be used for fixed asset purchases or acquisitions with the consent of Lender. ADDITIONAL COVENANT. Borrower will not increase payments to K & R Corporation for rent and/or management fees without the consent of Lender. "30 DAY CLEAN-UP PROVISION". Borrower agrees that for 30 (thirty) consecutive days during the term of the line of credit outlined (the "Line"), the principal amount of the line will be reduced to $0.00. RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower's right, title and interest in and to, Borrower's accounts with Lender (whether checking, savings, or some other account), including without limitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts. EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Default on Indebtedness. Failure of Borrower to make any payment when due on the Loans. Other Defaults. Failure of Borrower or any Grantor to comply with or to perform when due any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents, or failure of Borrower to comply with or to perform any other term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. Default in Favor of Third Parties. Should Borrower or any Grantor default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's or any Grantor's ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents. False Statements. Any warranty, representation or statement made or furnished to Lender by or on behalf of Borrower or any Grantor under this Agreement or the Related Documents is false or misleading in any material respect at the time made or furnished, or becomes false or misleading at any time thereafter. Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any Security Agreement to create a valid and perfected Security Interest) at any time and for any reason. Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower, any creditor of any Grantor against any collateral securing the Indebtedness, or by any governmental agency. This includes a garnishment, attachment, or levy on or of any of Borrower's deposit accounts with Lender. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. Insecurity. Lender, in good faith, deems itself insecure. EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make Loan Advances or disbursements), and, at Lender's option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender's rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender's right to declare a default and to exercise its rights and remedies. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Applicable Law. This Agreement has been delivered to Lender and accepted by Lender in the Commonwealth of Kentucky. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of Jefferson County, the Commonwealth of Kentucky. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Kentucky. Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement. Consent to Loan Participation. Borrower agrees and consents to Lender's sale or transfer, whether now or later, of one or more participation interests in the Loans to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy it may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loans and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loans irrespective of the failure or insolvency of any holder of any interest in the Loans. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender. Costs and Expenses. Borrower agrees to pay upon demand all of Lender's expenses, including without limitation reasonable attorneys' fees, incurred in connection with the preparation, execution, enforcement, modification and collection of this Agreement or in connection with the Loans made pursuant to this Agreement. Lender may pay someone else to help collect the Loans and to enforce this Agreement, and Borrower will pay that amount. This includes, subject to any limits under applicable law, Lender's reasonable attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including reasonable attorneys' fees for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also will pay any court costs, in addition to all other sums provided by law. Notices. All notices required to be given under this Agreement shall be given in writing, may be sent by telefacsimile (unless otherwise required by law), and shall be effective when actually delivered or when deposited with a nationally recognized overnight courier or deposited in the United States mail, first class, postage prepaid, addressed to the party to whom the notice is to be given at the address shown above. Any party may change its address for notices under this Agreement by giving format written notice to the other parties, specifying that the purpose of the notice is to change the party's address. To the extent permitted by applicable law, if there is more than one Borrower, notice to any Borrower will constitute notice to all Borrowers. For notice purposes, Borrower will keep Lender informed at all times of Borrower's current address(es). Severability. If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable. Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word "Borrower" as used herein shall include all subsidiaries and affiliates of Borrower. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any subsidiary or affiliate of Borrower. Successors and Assigns. All covenants and agreements contained by or on behalf of Borrower shall bind its successors and assigns and shall inure to the benefit of Lender, its successors and assigns. Borrower shall not, however, have the right to assign its rights under this Agreement or any interest therein, without the prior written consent of Lender. Survival. All warranties, representations, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement shall be considered to have been relied upon by Lender and will survive the making of the Loan and delivery to Lender of the Related Documents, regardless of any investigation made by Lender or on Lender's behalf. Time is of the Essence. Time is of the essence in the performance of this Agreement. Waiver. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender's rights or of any obligations of Borrower or of any Grantor as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute, continuing consent in subsequent instances where such consent is required, and in all cases such consent may be granted or withheld in the sole discretion of Lender. BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF NOVEMBER 30, 2000. BORROWER: Industrial Services of America Inc.   By: /s/ Timothy W. Myers, President                  Timothy W. Myers, President   LENDER: Bank of Louisville   By: /s/ Debbie P. Pruitt                                      Authorized Officer  

  FINANCING AGREEMENT           AGREEMENT dated as of June 20, 2000, (the “Agreement”) between AXA Financial, Inc., a Delaware corporation (“AXA Financial”), and Alliance Capital Management L.P., a Delaware limited partnership (“Buyer”). W I T N E S S E T H :           WHEREAS, Buyer desires to issue to AXA Financial, and AXA Financial desires to purchase from Buyer, limited partnership interests of Buyer, each limited partnership interest representing one unit interest in Buyer (collectively, the “Buyer Units”), upon the terms hereinafter set forth below;           WHEREAS, concurrently with the execution and delivery of this Agreement, Alliance Capital Management Holding L.P., a Delaware limited partnership ("Alliance Holding"), Buyer, Sanford C. Bernstein Inc, a Delaware corporation (the “Seller”) and Bernstein Technologies Inc., a California corporation (“BTI”), are entering into an Acquisition Agreement, dated the date hereof (the "Acquisition Agreement"), pursuant to which the parties thereto desire to effect the transactions described therein (the “Acquisition”);           WHEREAS, Buyer desires to use the proceeds received from the sale of Buyer Units hereunder, among other things, to finance the cash portion of the Acquisition;           NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 ISSUE AND PURCHASE           SECTION 1.01.  Issue and Purchase.  Pursuant to the terms of this Agreement, Buyer shall issue to AXA Financial, and AXA Financial shall purchase from Buyer, subject to the receipt by Buyer of the Assignment Determination required by Buyer’s constituent documents (the “Assignment Determination”), that number (rounded down to the nearest whole number ) of Buyer Units (the “Purchased Units”) equal to $1.6 billion (the “Purchase Price”) divided by the Per Unit Purchase Price.  The purchase price per Buyer Unit (the “Per Unit Purchase Price”) shall be determined in accordance with Section 4.02(e) of Buyer ’s Amended and Restated Agreement of Limited Partnership dated October 29, 1999.  The Purchase Price for the Purchased Units hereunder shall be paid on June 21, 2000 (the “Transfer Date”).  On the Transfer Date:           (a)      AXA Financial shall deliver to Buyer (or as Buyer may direct) the Purchase Price in immediately available funds by wire transfer to an account of Buyer (or such other person as Buyer may direct) with a bank in New York City designated by Buyer, by notice to AXA Financial.           (b)      Buyer shall deliver to AXA Financial certificates for the Purchased Units registered in AXA Financial’s name.           SECTION 1.02.  Rights and Preferences of Buyer Units.  The Purchased Units issued by Buyer and purchased by AXA Financial hereunder shall have the same designation, preferences and relative participating, optional or other special rights, powers and duties as do existing limited partnership interests of Buyer.  AXA Financial acknowledges that any distributions on the Purchased Units with respect to the quarter ending on June 30, 2000 will be pro rata based on the portion of such quarter that the Purchased Units are outstanding.   ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF BUYER           Buyer represents and warrants to AXA Financial as of the date hereof and as of the Transfer Date that:           SECTION 2.01.  Partnership Existence and Power.  Buyer is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware.           SECTION 2.02.  Partnership Authorization.  The execution, delivery and performance by Buyer of this Agreement and the consummation of the transactions contemplated hereby are within Buyer’s partnership powers and have been duly authorized by all necessary action on the part of Buyer.  Buyer has received all legal opinions, other than the Assignment Determination, required by its constituent documents in respect of the transactions contemplated hereby.  This Agreement constitutes a valid and binding agreement of Buyer.           SECTION 2.03.  Governmental Authorization.  The execution, delivery and performance by Buyer of this Agreement and the consummation of the transactions contemplated hereby require no action by or in respect of, or filing with, any governmental body, agency or official other than as have been obtained or made or as will be timely made.           SECTION 2.04.  Noncontravention.  The execution, delivery and performance by Buyer of this Agreement and the consummation of the transactions contemplated hereby do not and will not, upon receipt of the Assignment Determination, (i) violate the constituent documents of Buyer, (ii) violate any applicable law, rule, regulation, judgment, injunction, order or decree, or (iii) require any consent or other action by any person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of Buyer or to a loss of any benefit to which Buyer is entitled under, any provision of any agreement or other instrument binding upon Buyer. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF AXA FINANCIAL           AXA Financial represents and warrants to Buyer as of the date hereof and as of the Transfer Date that:           SECTION 3.01.  Corporate Existence and Power.  AXA Financial is a Delaware corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.           SECTION 3.02.  Corporate Authorization.  The execution, delivery and performance by AXA Financial of this Agreement and the consummation of the transactions contemplated hereby are within the corporate powers of AXA Financial and have been duly authorized by all necessary corporate action on the part of AXA Financial.  This Agreement constitutes a valid and binding agreement of AXA Financial.           SECTION 3.03.  Governmental Authorization.  The execution, delivery and performance by AXA Financial of this Agreement and the consummation of the transactions contemplated hereby require no material action by or in respect of, or material filing with, any governmental body, agency or official other than as have been obtained or made or as will be timely made.           SECTION 3.04.  Noncontravention.  The execution, delivery and performance by AXA Financial of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) violate the constituent documents of AXA Financial or any of its subsidiaries, (ii) violate any applicable law, rule, regulation, judgment, injunction, order or decree, or (iii) require any consent or other action by any person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of AXA Financial or any of its subsidiaries or to a loss of any benefit to which AXA Financial or any of its subsidiaries is entitled under, any provision of any agreement or other instrument binding upon AXA Financial or any of its subsidiaries. ARTICLE 4 MISCELLANEOUS           SECTION 4.01.  Notices.  All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given: (a) if to AXA Financial, to AXA Financial, Inc., 1290 Avenue of the Americas, New York, New York 10104, Attention: General Counsel, Fax: (212) 707-1935, with a copy to Debevoise & Plimpton, New York, New York 10022, Attention: Michael W. Blair, Fax: 212-909-6836; and (b) if to Buyer, to Alliance Capital Management L.P., 1345 Avenue of the Americas, New York, New York 10105, Attention: General Counsel, Fax: (212) 969-1334, with a copy to Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York, 10017, Attention: Phillip R. Mills, Fax: (212) 450-4800.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5 p.m. in the place of receipt and such day is a business day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding business day in the place of receipt.           SECTION 4.02.  Amendments and Waivers.  Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.           SECTION 4.03.  Expenses.  Except as provided in the following sentence, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.  If Buyer receives any payment from Seller pursuant to Section 13.03 of the Acquisition Agreement or any other payment, reimbursement or settlement in connection with the termination of the Acquisition, Buyer shall reimburse AXA Financial on demand (by wire transfer of immediately available funds) for all reasonable out-of-pocket fees and expenses (including investment banking and legal fees and expenses) incurred in connection with this Agreement, the Acquisition Agreement and the transactions contemplated hereby and thereby; provided, however, that the aggregate amount payable by Buyer pursuant to this Section 4.03 shall not exceed $2.0 million.           SECTION 4.04.   Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.           SECTION 4.05.  Governing Law.  This Agreement shall be governed by and construed in accordance with the law of the State of New York, without regard to the conflicts of law rules of such state.           SECTION 4.06.  Jurisdiction.  Except as otherwise expressly provided in this Agreement, the parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may be brought in the United States District Court for the Southern District of New York or any New York State court sitting in New York City, so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of New York, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 4.01 shall be deemed effective service of process on such party.           SECTION 4.07.  WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.           SECTION 4.08.  Entire Agreement.  This Agreement supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement.           IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. AXA FINANCIAL, INC.     By: /s/ Stanley B. Tulin --------------------------------------------------------------------------------   Name: Stanley B. Tulin   Title:  Vice Chairman and Chief           Executive Officer   ALLIANCE CAPITAL MANAGEMENT L.P.     By: Alliance Capital Management Corporation, its General Partner     By: /s/ Bruce W. Calvert --------------------------------------------------------------------------------   Name: Bruce W. Calvert   Title:  Vice Chairman and Chief           Executive Officer   FINANCING AGREEMENT dated as of June 20, 2000 between AXA FINANCIAL, INC. and ALLIANCE CAPITAL MANAGEMENT L.P. relating to the purchase and sale of Limited Partnership Interests of Alliance Capital Management L.P.   TABLE OF CONTENTS -------------------------------------------------------------------------------- ARTICLE 1 ISSUE AND PURCHASE SECTION 1.01.  Issue and Purchase SECTION 1.02.  Rights and Preferences of Buyer Units ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF BUYER SECTION 2.01.  Partnership Existence and Power SECTION 2.02.  Partnership Authorization SECTION 2.03.  Governmental Authorization SECTION 2.04.  Noncontravention ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF AXA FINANCIAL SECTION 3.01.  Corporate Existence and Power SECTION 3.02.  Corporate Authorization SECTION 3.03.  Governmental Authorization SECTION 3.04.  Noncontravention ARTICLE 4 MISCELLANEOUS SECTION 4.01.  Notices SECTION 4.02.  Amendments and Waivers SECTION 4.03.  Expenses SECTION 4.04.  Successors and Assigns SECTION 4.05.  Governing Law SECTION 4.06.  Jurisdiction SECTION 4.07.  WAIVER OF JURY TRIAL SECTION 4.08.  Entire Agreement

EXHIBIT 10.19 AGREEMENT FOR WAFER PRODUCTION AND TESTING between Advanced Power Technology, Inc. and Episil Technologies, Inc. [ * ] = Confidential treatment requested.              This Agreement (“Agreement”) is entered into by Advanced Power Technology, Inc.; a Delaware Corporation with headquarters located at 405 SW Columbia Street in Bend, Oregon, USA (hereinafter referred to as “APT”) and Episil Technologies, Inc., a Taiwan Corporation with headquarters located at No 5 Creation  Road II, Science Based Industrial Park in Hsin-Chu, Taiwan (hereinafter referred to as “EPISIL”). RECITALS              WHEREAS APT owns certain intellectual property rights to the technology and design methods used in the design and manufacture of APT’s Power MOS semiconductors.              WHEREAS APT desires EPISIL to produce and supply die to APT in the form of fully processed wafers (including wafer thinning, backside implant and backside metalization).              WHEREAS EPISIL desires to produce and supply fully processed wafers to APT upon the terms and conditions contained in this Agreement.              WHEREAS both parties seek to enter into a long-term business relationship where EPISIL produces wafers / dies conforming to APT’s present and future technologies. These technologies include but are not limited to [*].              WHEREAS APT understands and EPISIL agrees that production ramp-up will commence in EPISIL’s facility located in Hsin-Chu, Taiwan and that the initial wafer diameter will be [*]              WHEREAS Episil agrees to install [*]              WHEREAS APT understands and EPISIL agrees that production capacity will be made available to APT through either capacity expansions at EPISIL’s facility in Hsin-Chu, Taiwan or through manufacturing capability established by EPISIL in other locations including the possibility of the location being in China.              WHEREAS both parties agree to cooperate in order to continuously improve the outgoing quality of wafers manufactured pursuant to this Agreement.              NOW THEREFORE, based on mutual promises contained herein and intending to be legally bound, EPISIL and APT agree as follows:   1. DEFINITIONS     1.1 “Power MOS-Die” shall mean part numbers listed and specified in Exhibit 1, to be manufactured by EPISIL for APT.  Exhibit 1 may be amended or modified in numbers and types from time to time by agreement between APT and EPISIL.     1.2 “Product Information Package” shall mean the technical information (e.g. database tape, test program, etc.) and hardware utilities specified in Exhibit 2 to be provided to EPISIL by APT for each Power MOS Die.     1.3 “Process” shall mean a manufacturing process which has been mutually accepted by APT and EPISIL and which has been specified in Exhibit 3, to be used by EPISIL for the purpose of manufacturing Wafers exclusively for APT.     1.4 “Wafers” shall mean silicon wafers with Power MOS Die manufactured by EPISIL using the Processes and design and database of the Product Information Package.     1.5 “Good Die” shall mean a Die on a Wafer which meets the specifications as per Exhibits 3 and 4, and which fully satisfies the relevant test program for Wafer test, supplied by APT.     1.6 “Proprietary Information” shall mean any and all information including but not limited to technical information, database tapes, specifications, test tapes and supporting documentation provided either orally, in writing, or in machine readable format and reticles or masks generated by or for EPISIL using the Product Information Package; provided that all such information is marked “Confidential” or similarly, or, if oral, identified as proprietary at time of disclosure and reduced to writing within thirty (30) days thereafter.  Additionally, the parties agree that this Agreement and its Exhibits as such and the content thereof shall be kept confidential except as required to comply with U.S. Securities and Exchange Commission rules and regulations and applicable stock exchange rules.  Notwithstanding the foregoing Proprietary Information does not include information generally available to the public, information independently developed or known by the receiving party without reference to information disclosed hereunder, information rightfully received from a third party without breach of confidentiality obligations, or information authorized in writing for release by the disclosing party hereunder.     1.7 “Risk Start” shall mean production of Wafers before qualification, defined in Section 2.3, has been completed.     2. PROCESS TECHNOLOGY, MASKS, QUALIFICATION, WAFER TEST     2.1 PROCESS TECHNOLOGY         2.1.1     APT shall provide EPISIL with the design information for each Process as described in Exhibit 2 for the purpose of specifying the Process in accordance with Section 2.1.2.         2.1.2     Both parties agree that technology transfer and qualification will proceed first on APT’s [*] products / process with the intent that Processes are qualified for each technology listed in Exhibit 5 within [*] months of the date this Agreement is executed.                      APT and EPISIL shall agree upon Process specifications to be described in Exhibit 3, which shall be finalized before EPISIL begins production in accordance with Section 3.                      Subject to the stipulations and procedures set forth in this Agreement and in accordance with the qualification plan described in Exhibit 4, EPISIL shall install the Processes meeting the specifications in Exhibit 3 and deliver Wafers for qualification purposes.     2.2 MASKS         2.2.1     [*]         2.2.2     EPISIL will provide APT with sufficient information such that APT can incorporate EPISIL’s alignment structures into the mask database.  EPISIL may also choose to add the alignment marks or have them added by a third party [*]         2.2.3     APT will supply mask databases to EPISIL or EPISIL’s designated mask vendor.         2.2.4     EPISIL will pay for subsequent masks worn out or broken during the normal course of production.  EPISIL will also pay for any masks redesigned upon EPISIL’s request.   2.3 QUALIFICATION         2.3.1     The qualification approval by APT for each Process and each individual Power MOS Die, manufactured with the Process, is a prerequisite for ordering and delivery of Wafers and/or Good Dies.  This Section 2.3.1 is not applicable in the case of Risk Starts.         2.3.2     APT will pay [*] for qualification wafers, which is defined in Exhibit 5.         2.3.3     A wafer lot will be considered as “qualification worthy” only if it has a probe yield of at least [*] of the yield obtained by APT’s own wafer fab during the prior quarter.  APT may choose to waive this requirement at its own discretion.         2.3.4     For the purpose of qualification as specified in Exhibit 4, EPISIL shall provide APT, with the agreed upon number of Wafers.  Such Wafers delivered for qualification must also meet all agreed APT standards, specifications and requirements defined in the Exhibits 1, 2, 3 and 4 provided, however, that if failures occur due to reasons for which APT is responsible, EPISIL shall be paid 100% of the Wafer price as specified in Exhibit 5.  EPISIL shall, in accordance with the agreed schedule, deliver to APT any documents and reports as required.         2.3.5     Prior to completion of the qualification, APT may request that EPISIL provides Wafers out of “Risk Starts”.  EPISIL will provide these Wafers out of Risk Starts to APT at the price/volume specified in Exhibit 5.         2.3.6     During qualification, APT may stop production of Wafers for any or all APT Power MOS Die by giving written notice to EPISIL.  EPISIL will stop production following completion of the process step at which the Wafer resides at the time of such written notification.  APT will pay EPISIL for all Wafers started prior to EPISIL receiving such notice.  Prices for such Wafers will be based on the stage of production of the Wafers as defined in Exhibit 5.         2.3.7     After APT qualification approval of a Process, EPISIL shall not carry out any major changes as defined by EPISIL’s internal standards unless approved by APT.  EPISIL may only carry out process changes upon written authorization from APT.         2.3.8     In the case that EPISIL desires to perform major changes to a Process, APT shall be informed in writing 9 months, or a shorter period if mutually agreed upon, prior to the planned commencement of such changes to the Process and shall receive a detailed description of the planned changes in writing as well as the results of any re-qualification of the Process with the intended changes to be performed by EPISIL in accordance with Exhibits 2, 3 and 4.  APT will inform EPISIL in writing whether or not desired changes of the Process are acceptable.  In such case, a re-qualification of the Process, according to this Section 2.3, is necessary and EPISIL shall provide APT with the necessary Wafers for such re-qualification free of charge.  APT shall purchase the Wafers for re-qualification, if APT requests such changes to the Process.  Successful re-qualification is the prerequisite for final approval of APT to a major change to a Process.  APT shall not unreasonably deny its consent to a major change to a process requested by EPISIL and APT shall not withhold such consent absent clear proof that such change will have a material adverse effect on the resulting Power MOS Die (e.g., but not limited to yield, quality, reliability, specification of the respective Power MOS Die, or reasonable customer requests affecting a material quantity of Wafers).         2.3.9     The specifications and requirements specified in Exhibits 2, 3 and 4 may only be modified by mutual written agreement between EPISIL and APT.         2.3.10     If APT determines that modifications to the specifications are required, including modifications to photo masks, Process or testing, or next generation MOS technology, EPISIL shall perform such modifications at APT’s cost, which shall be reasonable.  Regarding modification of the Process, the parties have to agree to such proposed modifications in advance.  The parties will negotiate adjustment to production price and delivery schedule in advance if price or delivery schedule are affected by such modifications.     2.4 WAFER TESTING         2.4.1     The testing of Wafers will be performed by EPISIL.  For the purpose of yield improvement and for the calculation of pricing, EPISIL and APT will share all information related to wafer probe results.     3. PRODUCTION, FORECAST/ORDERING     3.1 The business for each technology will be conducted [*].     3.2 Upon written notice from APT of successful completion of the qualification as described in Section 2, and having received a purchase order from APT, EPISIL shall manufacture and deliver Wafers according to the terms of this Agreement.     3.3 EPISIL will make a reasonable best effort to allocate capacity as required by APT during the contract period.  The start date for the contract will be the qualification date for the first production part for APT.  EPISIL agrees to provide a [*] confirmation of capacity which will be reserved for APT at the agreed upon terms of pricing and cycle time. Increases in capacity required by APT will be pre-negotiated with Episil by APT, and EPISIL agrees to give its reasonable best effort to install the additional capacity in EPISIL’s facilities.     3.4 APT agrees to provide a three-month rolling forecast of the gross number of wafer starts on a monthly basis.  This gross number is not required to be device specific. [*]     3.5 The purchase of Wafers and/or Good Die pursuant to this Agreement shall be accomplished by means of purchase orders, which will be issued to EPISIL on at least an annual basis and no more frequently than on a quarterly basis.  The new purchase will be based upon the APT forecast as well as past performance against the prior period’s purchase orders.     [Note – Sections 3.6 and 3.7 intentionally not used]     3.8 APT will release to EPISIL device specific wafer starts by [*]     3.9 EPISIL agrees to provide starting material (epi wafers) pursuant to the forecasts received by APT.     3.10 It is anticipated that from time to time there will be instances where an accelerated cycle time is required to serve APT’s needs.  EPISIL will apply their best effort to meet such accelerated delivery schedules.     3.11 Both parties will immediately advise one another in writing whenever they have reason to believe that wafers may not conform to the applicable specifications.     3.12 In the case of technical problems arising in the processing of wafers, especially with regard to yield, quality, reliability, EPISIL shall notify APT in writing and APT will be prepared to assist EPISIL to a reasonable extent in solving the problem.     3.13 In case any technical problem, defect or malfunction should occur, which EPISIL will be informed about, EPISIL will immediately start investigations and supply a first substantiated answer or status report within seven (7) working days after receipt of APT’s notification of such matter.     3.13 In order to ensure traceability, processing and delivery of wafers and/or good die will be on a lot-by-lot basis unless otherwise agreed upon.  Should lot splitting be necessary, APT will be notified and given the opportunity to decide whether to recombine the sublots prior to delivery or not.     3.14 APT may request EPISIL to stop production at any time by giving written notice to EPISIL.  EPISIL will stop production following completion of the process step at which the wafers reside at the time of the notification from APT.  If the reason for such a stop of production is not attributable to a failure of EPISIL to fulfill its obligations under this Agreement, EPISIL will be paid for the wafers.  If such a stop of production is attributable to EPISIL failing to fulfill its obligations under this Agreement, only those Wafers that meet the criteria applicable to Production Wafers shall be paid for.     3.15 If any circumstances should arise that could result in a delayed delivery to APT, EPISIL shall promptly notify APT and EPISIL will make every reasonable effort to recover the original schedule.     4. PRICES, PAYMENT, DELIVERIES AND SHIPMENTS     4.1. Pricing for Wafers and/or Good Die are specified in Exhibit 5.  Prices are quoted in US currency.     4.2. Payment shall be due 30 days net after receipt by APT or one of its subsidiaries and the respective invoice from EPISIL.     4.3. Payment of invoices will be split at Episil’s discretion and direction between more than one bank account. For example, a portion of the payment for an invoice may be paid to Episil’s Foundry agent in the US and the remaining portion to Episil.     4.4. Subject to a respective purchase order of APT or one of its subsidiaries, Wafers and/or Good Die shall be delivered in accordance with the delivery specification to the address specified by APT.  APT may, without being obligated to, perform an incoming inspection.     5. ON-SITE INSPECTION, DOCUMENTATION AND REPORTING     5.1 Subject to EPISIL’s standard safety and manufacturing procedures, employees of APT shall be allowed to visit EPISIL’s factory during normal working hours with reasonable prior written notice to EPISIL.  Such employees shall be granted access to EPISIL’s production flow and production control information regarding products being manufactured for APT.     5.2 Subject to mutually agreeable confidentiality protections and to EPISIL’s standard safety and manufacturing procedures, and upon APT’s written request reasonable in advance, EPISIL will allow APT representatives and/or APT customers to perform an audit of EPISIL’s production site and quality systems for Wafers.  Such audits shall not occur more than four (4) times per year and no more than two (2) times per quarter unless any such audit discovers material deficiency, in which case additional audits may be conducted by APT as often as reasonably requested by APT, until such deficiencies are corrected.     5.3 On written request, EPISIL shall provide reports to APT.  These reports may include work in process, ordered volumes and outgoing volumes, probe yield, probe rejects and parametric data.  The detailed procedure shall be fixed in writing separately.     5.4 Both parties shall maintain a clear organizational responsibility for execution of this Agreement with respect to technical, logistical as well as quality issues.  At least one person from each party will be nominated to cover the administration of this Agreement full time.     5.5 Each party agrees to pay all expenses associated with communication, travel, and accommodations while visiting or communicating with the other party.     6. WARRANTY     6.1 EPISIL warrants that all Wafers and/or Good Die delivered hereunder will meet the applicable specifications and requirements in Exhibits 1, 2, 3 and 4 and shall be free from defects in material and workmanship.     6.2 [*]     6.3 [*]     6.4 If Wafers and/or Good Die fail to meet specifications in Exhibits 1, 2, 3 and 4, and in APT’s reasonable opinion such failure appears material, APT or one of its subsidiaries may request EPISIL to stop production.  If EPISIL is unable to correct such failures within 30 days, APT or the Subsidiary that has ordered may cancel such particular orders.     6.5 If defects or malfunctions appear to be of excessive or epidemic nature resulting from processing or the use of unsuitable materials by EPISIL, then EPISIL shall take appropriate actions to remedy such defects in agreement with APT and in accordance with industry standards applicable to the individual circumstances.  EPISIL shall inform APT in writing about its actions to be taken within two (2) weeks after notification. If APT finds these actions unacceptable then they can terminate the Agreement per Section 12.     6.6 The foregoing warranty constitutes EPISIL’s exclusive liability, and the exclusive remedy of APT, for any breach of any warranty or any nonconformity of the Wafers to the specifications.  This warranty is exclusive and in lieu of all other warranties, express, implied or statutory, including but not limited to the warranties for merchantability and fitness for a particular purpose, which are hereby expressly disclaimed.     7. FORCE MAJEURE, LATE DELIVERIES     7.1 Neither party shall be liable to the other for failure or delay in the performance of any of its obligations under this Agreement for the time and to the extent such failure or delay is caused by Force Majeure such as, but not limited to, riots, civil commotions, wars, hostilities between nations, governmental laws, orders or regulations, actions by the government or any agency thereof, storms, fires, strikes, lockouts, sabotages or any other contingencies beyond the reasonable control of the respective party and of its subcontractors.  In such events, the affected party shall immediately inform the other party of such circumstances, together with documents of proof, and the performance of obligations hereunder shall be suspended during, but not longer than, the period of existence of such cause and the period reasonably required to perform the obligations in such cases.     7.2 In addition to any other rights, in case of a delay of delivery by one month caused by whatever reason including late deliveries of EPISIL’s vendors, APT shall be entitled to cancel the order delayed, in whole or in part, without incurring any liability, and may reorder the quantities according to then existing needs of APT.  APT will have no right to cancel purchase orders if the late delivery is due to a Force Majeure of less than two months or APT’s fault.   8. PROPRIETARY INFORMATION     8.1 Both EPISIL and APT agree that Proprietary Information of the other will be used by them exclusively for the purpose of manufacturing Wafers and/or Good Dies hereunder and will not be disclosed to any third party without the prior written permission of the disclosing party.     8.2 EPISIL agrees to use reasonable care to maintain in confidence Proprietary Information of APT furnished hereunder, not to make use thereof other than for the purposes set forth in this Agreement, and not to distribute, disclose or disseminate Proprietary Information of APT in any way or form to anyone except its own employees who have a reasonable need to know the same provided, however, that this Agreement shall impose no obligation on EPISIL with respect to any Proprietary Information which:         a)     is already in the public domain or becomes available to the public through no breach by EPISIL;         b)     was rightfully in EPISIL’s possession without obligation of confidence prior to receipt from APT;         c)     was received by EPISIL from a third party without obligation of confidence;         d)     is independently developed by EPISIL without reference to information disclosed hereunder         e)     is approved for release by written Agreement of APT.       Each party acknowledges and agrees that in the course of performing under this Agreement, it shall have access to and become acquainted with information concerning various trade secrets and other confidential and Proprietary Information of the other party.  This includes, but is not limited to, marketing plans, the identities of suppliers and customers, ideas, design rules, secret inventions, unique processes, compilations of information, records, specifications and other information which is owned by the other party, and shall maintain such information in confidence and shall not apply this information either directly or indirectly without prior consent from the other party to any products not included in this Agreement.     8.3 EPISIL shall destroy all defective Wafers, Die and masks unless otherwise requested by APT in writing.  In the case of idle masks, excessive Wafers and/or Good Die, EPISIL will inform APT in writing and APT will give the disposition instructions in writing within thirty (30) days.     8.4 No press release or any publication of the existence of this Agreement shall be allowed unless first approved by the other party in writing, with such approval not being unreasonably withheld.     8.5 Upon written request by APT, EPISIL shall return or destroy all written Proprietary Information received, as well as all copies made of such Proprietary Information.     8.6 All Proprietary Information of APT shall remain the property of APT.  Any masks generated by EPISIL from APT database tapes shall be the property of APT, will be returned to APT or destroyed on APT’s written request, and will be used exclusively to produce Wafers and Good Die for APT.  Nothing contained in this Agreement shall be construed as granting any license or rights under any proprietary right whether present or future.  The disclosure of Proprietary Information shall not result in any obligation to grant EPISIL rights therein.     8.7 If APT is furnished hereunder with Proprietary Information of EPISIL, the stipulation of this Section 8 shall apply accordingly in the reverse relation between the parties.     8.8 Upon termination or expiration of this Agreement for whatever reason, the receiving party shall (i) return to the other party or destroy the original and all copies of any Proprietary Information and (ii) at the disclosing party’s request, have one of its officers certify in writing that it will not make any further use of such Proprietary Information and will not manufacture or have manufactured any product incorporating Proprietary Information.     9. PATENT INDEMNITY, PRODUCT LIABILITY INDEMNITY     9.1 It is APT’s responsibility to defend or otherwise resolve at APT’s sole expense any dispute arising from a claim that the Power MOS Die infringe a third party’s patent, trademark, copyright, mask work rights, trade secret or other intellectual properties.     9.2 Notwithstanding Section 9.1 above, it is EPISIL’s responsibility to defend or otherwise resolve at EPISIL’s sole expense any dispute arising from a claim that the Wafers or Die infringe a third party’s patent, trademark, copyright, mask work rights, trade secret or other intellectual properties due solely to the Process used by EPISIL or its subcontractors to process the Wafers.     9.3 If a third party’s claim is made alleging an infringement of a patent, copyright or other intellectual properties of the said third party, then the party to this Agreement against which this claim is raised shall immediately inform the other party thereof in writing.     9.4 APT shall indemnify and hold EPISIL harmless against any third party claims, costs and expenses due to all liabilities that may arise from EPISIL’s use of know-how supplied by APT.     9.5 EPISIL shall indemnify and hold APT, its subsidiaries and its customers harmless against any third party claims, costs and expenses due to all liabilities that may arise due to reasons other than APT’s product liability as per Section 9.4 above.     9.6 The above liabilities of a party hereto to the other party are in any case under the condition that the other party notifies the first party of the respective third party’s claim without any reasonable delay and does not admit on its own initiative that said claim was rightfully raised.     9.7 The above liability shall be the sole and exclusive remedies between the parties with respect to patent indemnity and product liability.     10. EXPORT REGULATIONS     10.1 APT’s Product Information Package, as well as supplies furnished under this Agreement, is subject to governmental export regulations.  Consequently, these obligations may be subject to the approval by the respective governmental authorities.     10.2 For presentation to the International Export Control Authorities, EPISIL declares that all APT Product Information Packages received by EPISIL from APT are intended for manufacturing of Wafers and Good Die exclusively for APT.  EPISIL declares not to export such APT Product Information Packages to third countries without approval of the competent U.S. Export Control Authorities.     11. ASSIGNMENT     11.1 Neither party shall delegate any obligations under this Agreement, or assign this Agreement or any interest or rights hereunder without the prior written consent of the other, except incident to the Sale or transfer of substantially all of such party’s business.     11.2 APT’s obligations under this Agreement may be performed by its subsidiaries at APT’s discretion.     12. TERMS AND TERMINATION     12.1 This Agreement becomes effective with the execution hereof by both parties and shall remain in effect until terminated pursuant to the provisions of this Section 12.  During the duration of this agreement each party may terminate the Agreement with twenty-four (24) months prior written notice unless mutually agreed to reduce this notice time.     12.2 This Agreement may be terminated immediately by one party if the other party         (i)     breaches any material provision of this Agreement and does not remedy such breach within thirty (30) days of notice of breach; or         (ii)     becomes insolvent or otherwise subject to insolvency procedures;         (iii)     comes under outside control, i.e. 50% or more of the shareholders’ voting rights are held directly or indirectly by a third party or third parties that are direct competitors of the other party.     12.3 APT may terminate this Agreement if the Power MOS Die do not pass APT’s qualification criteria set forth in Exhibit 4 and provided APT has made a reasonable attempt to execute the qualification within 6 months after receipt of qualification wafers.     [Note – Section 12.4 intentionally not used]     12.5 The provisions of Section 6, 8, 13 and 14 shall also apply after termination of this Agreement.     13. ARBITRATION       Any controversy or claim arising out of or relating to this Agreement, including, without limitation, the making, performance, or interpretation of this Agreement, shall be settled by arbitration.  Unless otherwise agreed, the arbitration shall be conducted in Bend, Oregon, in accordance with the then-current Commercial Arbitration Rules of the American Arbitration Association.  The arbitration shall be held before a single arbitrator (unless otherwise agreed by the parties).  The arbitrator shall be chosen from a panel of attorneys knowledgeable in the field of business law in accordance with the then-current Commercial Arbitration Rules of the American Arbitration Association.  If the arbitration is commenced, the parties agree to permit discovery proceedings of the type provided by the Oregon Rules of Civil Procedure both in advance of, and during recesses of, the arbitration hearings.  The parties agree that the arbitrator shall have no jurisdiction to consider evidence with respect to or render an award or judgment for punitive damages (or any other amount awarded for the purpose of imposing a penalty).  The parties agree that all facts and other information relating to any arbitration arising under this Agreement shall be kept confidential to the fullest extent permitted by law.     14. GOVERNING LAW       This Agreement shall be governed by and construed in accordance with the laws of the state of Oregon     15. ATTORNEY FEES       If any suit or action is filed by any party to enforce this Agreement or otherwise with respect to the subject matter of this Agreement, the prevailing party shall be entitled to recover reasonable attorney fees incurred in preparation or in prosecution or defense of such suit or action as fixed by the trial court, and if any appeal is taken from the decision of the trial court, reasonable attorney fees as fixed by the appellate court.     16. NOTICES       All notices required to be sent by either party under this Agreement will be sent to the addresses set forth below, or to such other address as may subsequently be designated in writing:       If to APT: Advanced Power Technology, Inc. 405 S.W. Columbia Street Bend, Oregon 97702 USA Attention:  Russell Crecraft Title:  Vice President, Manufacturing Operations Telephone:  (541) 382-8028 Fax: 541-330-3963 e-mail: [email protected]       If to EPISIL: EPISIL, Inc. No 5 Creation Road II Science Based Industrial Park, Hsin-Chu, Taiwan, R.O.C. Attention:  K. S. Liao Title:  Sales Manager, Sales Department, Device Foundry Telephone:  (886)-3-579-0750 Fax: (886)-3-579-0750 e-mail: [email protected]     17. AMENDMENTS       Only an instrument in writing executed by all the parties may amend this Agreement.     18. ENTIRE AGREEMENT       This document is the entire understanding between EPISIL and APT with respect to the subject matter hereof and merges all prior Agreements, dealings and negotiations.  The terms of this Agreement shall govern the Sales and purchase of Wafers and Good Die.  The parties recognize that the Exhibits to this Agreement will have to be amended or exchanged, as the case may be, from time to time.  No modification, alteration or amendment shall be effective unless in writing and signed by both parties.  No waiver of any breach shall be held to be a waiver of any other or subsequent breach.     AGREED TO:       Advanced Power Technology, Inc. EPISIL, Inc.     By: Russell J. Crecraft By: K.S. Liao     Title: Vice President, Manufacturing Operations Title: Sales Manager     Date: March 7, 2001 Date: March 13, 2001 EXHIBIT 1: List of Die Types – [*]     EXHIBIT 2:  Specification of Processes   1.          APT Lot Traveler 2.          APT Processing Specifications 3.          APT Material Specifications 4.          APT Control and Inspection Specifications 5.          APT Mask Tooling, Procurement and Inspection Specifications 6.          Test Programs 7.          Mask Database EXHIBIT 3:  TBD   This exhibit will contain a mutually agreed upon set of specifications to which EPISIL will produce wafers for APT.   EXHIBIT 4:  Qualification Plan and Procedure [*]     EXHIBIT 5: [*]        

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.41 Partnership agreement of SDI—Molan GmbH & Co. KG -------------------------------------------------------------------------------- Partnership agreement Concerning a limited commercial partnership with a GmbH as general partner trading under the name SDI—Molan GmbH & Co. KG -------------------------------------------------------------------------------- between 1.   SDI Germany GmbH, Grüneburgweg 102, 60323 Frankfurt am Main, duly represented by its managing director Thomas W. Cresante     (hereafter, "SDI Germany") and 2.   Mr. Klaus-Jürgen Dittrich, Schwedenschanze 9 c, 28832 Achim, 3.   Mr. Frank Dittrich, Lüneburger Straße 20, 28203 Bremen. Preamble Whereas (1)   SDI Germany's parent company Special Devices, Incorporated (hereafter, "SDI USA"), seated in 14370 White Sage Road, Moorpark, California 93021, USA, is engaged in the development, manufacture and worldwide distribution and sale of automotive pyrotechnic safety devices, including air bag initiators and micro gas generators. In this field, SDI USA already holds substantial market shares in the USA and keeps close contact with customers in the US, Europe and Asia especially in the field of its air bag initiators. Whereas (2)   Klaus-Jürgen Dittrich and Frank Dittrich are the sole shareholders of Anhaltinische Chemische Fabriken (ACF) GmbH (hereafter, "ACF") in Schönebeck. ACF, together with its sister company Molan Werk Dittrich GmbH & Co. KG (hereafter, "Molan"), is engaged in the development, manufacture, distribution and sale of automotive pyrotechnic safety devices, including micro gas generators and seat belt buckle pretensioners in Europe. Whereas (3)   SDI USA is the only shareholder of SDI Germany, and J.F. Lehman Equity Investors I, L.P., 2001 Jefferson Davis Highway, Suite 607, Arlington, Virginia 22202, and JFL Co-Invest I, L.P., 2001 Jefferson Davis Highway, Suite 607, Arlington, Virginia 22202 (collectively, "Lehman") are major shareholders of SDI USA, The parties now agree on the following: § 1—Trade Name and Headquarters The company's trade name is: SDI—Molan GmbH & Co. KG. The company's registered seat is Schönebeck. -------------------------------------------------------------------------------- § 2—Business of the Company (1)   The company's business is:     (a)   the development, production, marketing, distribution and sale of air bag initiators, micro gas generators and seat belt buckles and pyrotechnic pretentioners (the "Products") in the countries listed in Appendix 1 (the "Territory"); and     (b)   all further commercial and legal transactions and other acts that are connected to the aforementioned business purpose. (2)   If at any time it becomes unlawful under United States law for the partnership to operate, sell its Products, or otherwise engage in business in any country included in the Territory, Appendix 1 shall be deemed to be amended to exclude such country to the extent of such legal prohibition until such legal prohibition has been removed. (3)   The partnership shall conduct its business within the Territory and shall not operate outside the Territory. Production of products shall take place at ACF's existing facility at Schönebeck. (4)   The partnership may acquire participations in other companies conducting a similar business, set up branch offices and incorporate subsidiaries. § 3—Partners; Partnership Capital (1)   The general partner is: SDI—Molan Verwaltungs GmbH     (hereafter, the "General Partner"). The General Partner shall not render contributions or hold a share in the partnership's assets, profits or losses. (2)   The founding limited partners (hereafter, the "Initial Limited Partners") are:     (a)   SDI Germany GmbH, Grüneburgweg 102, 60323 Frankfurt am Main with a limited partner's capital contribution to the nominal value of Fifty Thousand Euro (Euro 50,000)     (b)   Klaus-Jürgen Dittrich, Achim, born February 21, 1944 with a limited partner's capital contribution to the nominal value of Forty-seven Thousand Five Hundred Euro (Euro 47,500)     (c)   Frank Dittrich, Bremen, born January 13, 1965 with a limited partner's capital contribution to the nominal value of Two Thousand Five Hundred Euro (Euro 2,500)     The limited partner contributions shall be rendered in cash upon request by the General Partner. The amount of their contributions will be registered in the commercial register as their liability amounts. -------------------------------------------------------------------------------- (3)   In addition to the cash contributions, Klaus-Jürgen Dittrich and Frank Dittrich shall cause ACF and Molan to transfer to the partnership the entire business of ACF and Molan as it relates to the Products, including all existing technology, know-how, customer contracts, purchase orders, work-in process, inventory and supplies, equipment and personnel associated therewith. The transfer shall become effective on July 1, 2001, unless ACF/Molan and the partnership mutually agree upon a later date. Technology, know-how, customer contracts and purchase orders shall be transferred to the partnership as a capital contribution. Work-in-process, inventory and supplies existing on the transfer date and useable in the partnership's business (as determined by the Supervisory Board) shall be transferred to the partnership at ACF/Molan's actual cost. Trade accounts receivable and payable related to the transferred business but arising prior to the transfer date shall remain with ACF/Molan. The production facility and equipment shall be transferred to the partnership pursuant to lease agreement executed between the partnership and ACF or Molan, as appropriate. Certain persons employed by ACF in the business will be transferred to the partnership by operation of law, and shall become employed by the partnership. Certain administrative services will be provided by ACF to the partnership pursuant to a separate services agreement to be entered into by ACF and the partnership. (4)   Subject to Sections 3(5) and 3(6) hereof, in addition to its cash contribution, SDI Germany shall cause SDI USA to transfer to the partnership the entire business of SDI USA with respect to the Products as it relates to the Territory, including all existing technology, know-how, customer contracts and purchase orders related thereto. The transfer shall become effective on July 1, 2001, unless SDI USA and the partnership mutually agree upon a later date. (5)   It is recognized and acknowledged that SDI USA currently produces two types of air bag initiators, referred to as "standard" and "AGI" initiators, and that it is currently developing a new initiator referred to as the "GSI" initiator. If customers in the Territory desire to purchase the standard or AGI initiators and the partnership is incapable of producing these initiators, or if the partnership otherwise lacks the production capacity to satisfy the demand for any type of initiator from customers in the Territory, SDI Germany will cause SDI USA to manufacture the required initiators and supply them to the customers either directly or through the partnership on terms approved by the Supervisory Board of the General Partner. (6)   It is recognized and acknowledged that SDI USA has entered into agreements (hereafter, the "Master Purchase Agreements") with certain customers (hereafter, the "MPA Customers") to supply the Products to the MPA Customer's various plants throughout the world. A list of the current MPA Customers is attached as Appendix 2. It is acknowledged and agreed that SDI USA shall maintain its contractual relationship as supplier to the MPA Customers worldwide (including the Territory). (7)   SDI Germany shall cause SDI USA to work closely with the partnership on those elements of any Master Purchase Agreement involving the Territory, and to include the Territory in any future Master Purchase Agreement only after consultation with and approval by the partnership. Consistent with Sections 3(4) and 16(1) hereof, SDI Germany shall cause SDI USA to execute and meet through the partnership all of SDI USA's rights and obligations under the Master Purchase Agreements as they relate to the Territory. Pursuant to this arrangement, the partnership shall fulfill all purchase orders under Master Purchase Agreements for MPA Customers in the Territory. The partnership shall outsource to SDI USA any purchase orders in excess of its production capacity. Existing Master Purchase Agreements nearing expiration shall be fulfilled through the partnership for their remaining term only if reasonably practical and beneficial to the partnership. (8)   The parties recognize and acknowledge that the list of MPA Customers will change over time, and that companies that are not currently MPA Customers may become MPA Customers in the future. The parties shall work together to promote the development of MPA Customers by SDI USA, to maintain an accurate list of MPA Customers, and to treat all such MPA Customers in the manner described in this Section 3. -------------------------------------------------------------------------------- (9)   The partnership shall endeavor to coordinate with SDI USA on its pricing to non-MPA Customers so as not to be inconsistent with the pricing policy reflected in the Master Purchase Agreements with respect to the Territory. (10)   All products or technology developed by the partnership (hereafter, "Joint Venture Products") shall be licensed by the partnership to SDI USA for unrestricted use outside the Territory. The license shall provide that (i) no royalty shall be payable by SDI USA to the partnership for sales of the Joint Venture Products in the United States, and (ii) a reasonable license fee shall be paid by SDI USA to the partnership for sales of the Joint Venture Products outside the United States. The reasonable fee will be determined in good faith negotiations between SDI USA and the partnership, represented by the General Partner. A reasonable fee shall not be paid in case that the Dittrichs or one of their affiliates and SDI USA do business jointly together in countries outside the Territory. § 4—Liability; No Obligation to make an additional Contribution The limited partners do not assume any financial obligations, liabilities or obligations to make additional payments to the partnership or third persons that exceed the obligation to render the stipulated contributions mentioned in § 3 (2). This also applies in the case of liquidation. An obligation to make an additional contribution can only be decided with all partners' votes. The limited liability according to §§ 171 et seq. Commercial Code shall sustain. § 5—Organs, Management; Representation (1)   The partnership's organs are the General Partner and the partners' meeting. (2)   The management and representation of the partnership is the duty of the General Partner which is represented by its duly appointed managing director(s). The General Partner and its managing director(s) are released from the restraints of § 181 Civil Code. (3)   The General Partner is obliged to give a written report to the limited partners on all essential business incidences once a year in addition to the written report to be given at the regular partners' meeting. (4)   Inter partes the following legal actions of the general partner are subject to prior written consent of the supervisory board of the General Partner or—in the absence of a supervisory board—shareholders meeting of the General Partner:     (a)   Annual operating plans, capital plans and budgets     (b)   Multi-year strategic plans     (c)   Technology planning, product strategy, R&D investments     (d)   Marketing strategy (to ensure consistency with the global branding of SDI USA)     (e)   Proposals, quotes and pricing agreements with customers (including participation under the global contracts of SDI USA)     (f)   Appointment, dismissal and compensation of key personnel who have reached a certain level within the organization (to be established by the Supervisory Board)     (g)   Appointment and dismissal of the "Prokuristen" (official with general commercial power of representation)     (h)   Opening and closing of branch offices and foundation of subsidiaries     (i)   Purchase and disposition of interests in other companies     (j)   Purchase, sale and encumbrance of land and rights equivalent to real property     (k)   Investments and capital expenditures that exceed the sum of Euro 5,000,—in any individual case --------------------------------------------------------------------------------     (l)   Assumption of guarantee obligations and provision of securities of all kinds for third party debts     (m)   Taking up loans and the increase of current account credit lines at banks     (n)   Granting unsecured credits in any individual case other than trade accounts receivable     (o)   Issuing of promissory notes and bills of exchange (drafts)     (p)   Concluding contracts of employment with a longer period of notice than six months or with annual salaries that exceed the amount of Euro 30,000,—     (q)   Granting pensions and related benefits of any kind beyond the current company pension schemes     (r)   Entering into continuing obligations (e.g. lease and hire contracts) with a fixed commitment of more than two years.     (s)   Entering into contracts with partners, managers, their affiliates or their relatives in the meaning of § 15 General Tax Code including the granting of credits     (t)   Selection of the CPA or tax advisor to prepare annual accounts     (u)   The waiver or release of legal rights, forgiveness of indebtedness, or the settlement of any claim of the partnership involving an amount in excess of Euro 10,000 § 6—Company General Meeting; Subject Matter (1)   Regular partners' meetings shall take place once every fiscal year. (2)   Extraordinary partners' meetings shall take place when requested by the General Partner or limited partners who jointly hold at least 33% of the total liable capital of the company. (3)   The partners' meeting shall be convened by registered letter from the General Partner indicating the agenda and observing the time limit of one month. The time limit starts when the letters to the partners are dispatched. The summons are duly served on the partner when it is sent to his address recently indicated by himself. If the General Partner does not follow a request to call for a partners' meeting according to section (2) within 5 days, then every limited partner has the right to summon the partners' meeting by himself. (4)   Every partner has the right to submit motions to the partners' meeting. These motions shall be in writing and submitted to the General Partner with a copy to each limited partner at least two weeks before the partners' meeting. (5)   The partners' meeting particularly decides over the following matters:     (a)   Approval of the annual accounts which shall be prepared by a tax advisor or a certified public accountant.     (b)   The use of the annual result and of the liquidity surplus (including distributions to the limited partners) as long as the partnership agreement does not contain a special rule     (c)   Discharge of the General Partner     (d)   Any amendment to the partnership agreement     (e)   Exclusion of partners and admission of new partners     (f)   The dissolution of the partnership     (g)   All other matters that must be decided by the partners by law unless this partnership agreement provides otherwise (6)   The General Partner chairs the partners' meeting. -------------------------------------------------------------------------------- § 7—Decisions; Minutes (1)   The partners' meeting is a quorum when it was properly summoned and when limited partners who jointly hold at least 75% of the votes are present or represented. If the partners' meeting is not a quorum the chairman can summon a new general meeting with identical agenda as long as he observes the conditions of § 6. This resummoned meeting has a quorum if more than 50% of the liable capital of the partnership attend or are represented. Partners who are unable to attend may be represented by written proxy. The holder of a proxy shall be either another partner or an individual who is a tax advisor, attorney at law or a certified public accountant, or an executive of a partner if a partner is a legal entity. (2)   The decisions of the partners' meeting have to be made by affirmative vote of at least seventy-five percent (75%) of the capital represented at the meeting as long as the partnership agreement or mandatory statutory provisions do not require higher majorities. Decisions regarding the modification of the partnership agreement, the dissolution of the partnership, the admission of new partners, the release of limited partners from the non-compete covenant (§16) or the increase/decrease of the partnership's capital require the affirmative vote of 100% of the capital represented in the general meeting. Decisions to enforce the non-compete covenant (Section 16 hereof) shall be made by majority vote of the partners, excluding the partner against whom enforcement is sought. (3)   Every EURO 500 (in words: Euro five hundred) of the contribution's nominal amount grant one vote. (4)   If all partners agree, resolutions can be passed in writing, by telephone or by telefax. (5)   Partners' resolutions passed in the partners' meeting or by telephone have to be recorded. The protocol shall be signed by the General Partner and forwarded to all partners promptly. (6)   Resolutions can only be challenged by filing action with the competent court within a period of one month after dispatch of the recording of the relevant resolution or written/telefax resolution. § 8—Partner's Accounts For every limited partner three capital accounts will be established:     (a)   The contributions of the limited partners shall be booked on Capital Account I. Capital Account I is inalterable and fixed. It shall establish the basis for the participation in the partnership's assets, the liquidation credit, the shares in profits and losses and in the voting right.     (b)   Limited partners' shares in losses and profits are booked on Capital Account II until the share in loss is compensated. Exceeding shares in profit are booked on Capital Account III for the limited partners' benefit. A debit balance in Capital Account II will not constitute a claim by the partnership towards the limited partners. An obligation to make an additional contribution which goes beyond § 169 I HGB does not exist for the limited partners.     (c)   Shares in profits as well as all further payments are booked on Capital Account III as far as they are not booked on Capital Account II.     (d)   Capital Accounts I and II are not interest-bearing. Interest has to be paid for Capital Account III at a rate of 2% for the credit balance. § 9—Fiscal Year; Financial Statement; Inspection Rights (1)   The fiscal year is the calendar year. The first fiscal year is a shortened fiscal year. It starts with the registration of the partnership in the commercial register and ends the following 31st of December. -------------------------------------------------------------------------------- (2)   The balance sheet and profit and loss account (annual accounts) shall be drawn up in accordance with applicable German commercial law (Handelsgesetzbuch) and German principles of proper book keeping. The balance sheet shall be drawn up by the General Partner within six months after the end of each fiscal year. (3)   Upon dissenting assessments of the tax office or later modifications resulting from periodic tax audits the balance sheet succeeding the amended valid tax assessment notice shall be adjusted correspondingly. (4)   The limited partners inspection right according to § 166 Commercial Code remains unaffected. Every limited partner is entitled to execute his inspection right at his cost by a person who is bound to professional confidentiality. § 10—Distribution of Profits and Losses; Withdrawal; Capital Increase (1)   The General Partner is entitled to an annual remuneration for assuming personal liability regardless of the partnership annual results of Euro 2,500. In addition, the General Partner is entitled to reimbursement for its expenses incurred in the performance of its duties as the General Partner. (2)   The limited partners participate in the remaining annual surplus or the partnership's annual deficit in accordance with their capital shares (Capital Account I). (3)   Withdrawals that are debited in Capital Account I are not permitted as these accounts are kept as firm capital accounts. Drawdowns from Capital Account II may be made during the running fiscal year by the limited partners for due taxes and other levies if such taxes and levies are incurred by the participation in the partnership. This includes in particular income, clerical, donation and inheritance tax. (4)   In the event that the U.S. revenue authorities should impute to SDI USA income with respect to the License Agreement between SDI USA and the partnership (or with respect to any other transaction between SDI USA and the partnership), any corresponding deduction allowed by the U.S. revenue authorities in connection with the determination of the operating results of the partnership shall be allocated entirely to SDI Germany, provided there is no negative impact on the other limited partners. §11—Term of the Partnership, Withdrawal (1)   The partnership starts at the moment of registration in the commercial register. (2)   The partnership has been established for an indefinite time. (3)   Each limited partner shall have the right to withdraw from the partnership by giving at least 18 months prior written notice of its or his election to withdraw. The withdrawal shall become effective at the end of a fiscal year, however, not earlier than December 31, 2011. Notice of withdrawal shall be given by registered letter addressed to the General Partner. The General Partner shall immediately inform all limited partners about the withdrawal. A withdrawal by the General Partner is not permitted. The right to withdraw for an important reason remains unaffected. A withdrawal from the partnership shall only be effective if the withdrawing partner also withdraws as a shareholder of the General Partner. (4)   In the event a limited partner withdraws from the partnership it will be continued among the remaining partners as of the time the withdrawal becomes effective unless the remaining partners decide to liquidate the partnership. (5)   If the remaining partners do not elect to liquidate the partnership, the partnership shall pay a compensation to the withdrawing partner which shall correspond to the interest's market value which shall be calculated as follows. -------------------------------------------------------------------------------- (6)   The compensation shall be the sum of (i) the balance of the withdrawing partner's capital accounts plus his pro rata share in disclosed reserves, if any, and (ii) his pro rata share in the partnership's assets (liquidation value). The liquidation value including any hidden reserves (i.e., unrealised appreciation) shall be calculated according to the limited contribution's value resulting from the commercial balance sheet that is drawn up on the date of withdrawal. In the liquidation balance sheet, assets and liabilities shall be estimated corresponding to their market value. The withdrawing partner does not participate in pending business transactions. A possible goodwill of the company has to be considered. (7)   The compensation will be determined by the auditor or tax advisor who prepares the annual accounts as of the effective date of the withdrawal or—if the withdrawal does not become effective at the end of a fiscal year—the auditor/tax advisor who prepared the most recent accounts preceding the effective date of the withdrawal. The General Partner shall forward the calculation promptly to all limited partners. If the withdrawing limited partner contests the amount of the remuneration within one month after obtaining knowledge of the determined amount he is entitled to have a new determination made by an independent certified public accountant (CPA). This CPA shall be retained by the partnership upon nomination by the Institute of Auditors (IdW) at Düsseldorf. The withdrawing limited partner has to pay the costs if the CPA determines that the interest value is not at least 5% greater than the value determined by the partnership's auditors/tax consultants. The decision of the auditor nominated by IdW shall be binding on all parties. (8)   The compensation will be paid in five equal annual instalments. The first instalment is due at the first anniversary of the effective date of the withdrawal. The partnership's solvency has to be considered when paying. If it is necessary for the partnership's economic concerns the partnership is entitled to suspend the payments for one year. For the remaining credit interest has to be paid. The interest rate is 2% over the key rate of the European Central Bank p.a. Interests have to be paid from the day on which the partner withdrew. Interest is payable with each instalment of principal. The remaining limited partners shall provide collateral for the outstanding portion of the compensation. (9)   The partnership is entitled to pay the compensation within a shorter term. § 12—Expulsion of Limited Partners (1)   A limited partner may be expelled from the partnership for important reasons, such as a severe violation of the partner's duties, the commencement of insolvency proceedings over the partner's assets or the denial to commence such proceedings due to insufficient assets, attachment proceedings of a partner's creditors in his limited partner's interest if the limited partner does not remedy such attachments within 60 days, or the expulsion as shareholder of the General Partner. (2)   The expulsion of a limited partner requires a vote of 75% of the votes of the partners. The partner who might be subject to expulsion is excluded from this vote. (3)   The expelled partner is entitled to a compensation which shall be calculated and payable in accordance with § 11(6), (7), (8) and (9) of this Agreement, but no interest shall be payable to such expelled limited partner and the remaining limited partners shall not be required to provide collateral. § 13—Transfer of Company Shares; Rights of Pre-emption and Tag Along Rights (1)   The transfer of a partner's interest requires all limited partners' written consent in any case, except as otherwise provided in subsection 2 of this § 13. -------------------------------------------------------------------------------- (2)   A limited partner may sell its interest or portions thereof to any other limited partners without the other partners' consent. The transfer of interests to companies in which a limited partner holds a controlling majority is also permitted without the other partners' consent provided that the Initial Limited Partner at all times remains the holder of a controlling majority in the company to which he transferred his partnership interest. For purposes of this Section 13(2), a "controlling majority in a company" shall mean ownership of more than 75 percent of the voting rights and capital stock of the company. (3)   If a limited partner (the "Selling Limited Partner") wishes to transfer his limited partner's share or part of his limited partner's share (other than pursuant to Section 13(2) above) with or without consideration, and the written consent of the other limited partners (the "Non-Selling Limited Partners") is obtained pursuant to Section 13(1) above, the Selling Limited Partner may transfer such share or partial share subject to the pre-emptive and other rights set forth in Sections 13(4), (5) and (6). (4)   The Non-Selling Limited Partners are entitled to pre-emptive rights regarding the interest to be sold by the Selling Limited Partner at the following terms. The Selling Limited Partner shall inform the General Partner and the Non-Selling Limited Partners of his intention in writing. In the notice, the Selling Limited Partner shall state the following:     a)   Name/company and address/seat of the Selling Limited Partner     b)   Name/company and address/seat of the proposed purchaser     c)   terms of proposed sale, including purchase price resp. other return for the intended assignment     d)   If applicable, due date of purchase price resp. other return     e)   Nominal value of the limited partner's shares intended to be transferred     f)   If applicable, warranties taken by the limited partner willing to sell (5)   Each Non-Selling Limited Partner shall be entitled to exercise his pre-emptive right for a quota in the interest that is subject to an anticipated transfer to a third party that correspond to his quota in the company. If one limited partner waives its pre-emptive right the other limited partners' quota increase in accordance with their quotas in the company. Each Non-Selling Limited Partner shall inform the General Partner within one month after he receives the above information whether he will exercise his right of pre-emption. If less than all the Non-Selling Limited Partners exercise their pre-emptive right, the General Partner will notify those partners who did exercise their pre-emptive right that they have the right to purchase an additional share in the Selling Limited Partner's interest. Those partners then must notify the General Partner within 10 additional days whether they elect to purchase the additional share. The General Partner will inform all partners of the results. Each Non-Selling Limited Partner may only exercise his right of pre-emption with regard to the total interest that is attributable to his right of pre-emption. If terms of the purchase agreement with the third party change after a limited partner has waived or not exercised his pre-emptive right his pre-emptive right shall revive. (6)   To the extent limited partners are entitled to a pre-emptive right according to the foregoing section but not to a pre-emptive right with regard to the shares in the General Partner, they are entitled to demand that the Selling Limited Partner sells his share (or an equivalent portion of his share) in the General Partner to the limited partner(s) who exercise(s) his/their pre-emptive right(s). The consideration for the share (or pro-rata share) in the General Partner shall be their book value. -------------------------------------------------------------------------------- (7)   Any Non-Selling Limited Partner who does not exercise his or its pre-emptive rights shall be entitled to demand that his or its interest and share in the General Partner shall be purchased by the prospective purchaser at the same terms as agreed between the prospective purchaser and the Selling Limited Partner. If the prospective purchaser is not prepared to acquire such interests or the related shares in the General Partner, the partners whose interests are not purchased by the third party purchaser may demand from the Selling Limited Partner that he or it shall acquire the remaining interests and their shares in the General Partner at the terms agreed with the third party purchaser or in the absence of such agreement for the share in the General Partner such share's nominal value. If only a portion of a limited partner's interest is subject to a sale to a third party the above rights and obligations apply with regard to a pro-rata portion of the other partners' interests. (8)   If SDI USA disposes of a majority interest in SDI Germany (other than to a subsidiary) or if Lehman disposes of more than forty percent (40%) of its current capital interest or voting rights in SDI USA (other than to a subsidiary), Klaus-Jürgen Dittrich and Frank Dittrich may demand that SDI USA acquires their interests in the partnership at market value to be calculated in accordance with § 11 (6), (7), (8) and (9) ("Put-Option"). Klaus-Jürgen Dittrich and Frank Dittrich may exercise this right only jointly—as long as both are limited partners of the Company—and (i) if they also transfer their shares in the General Partner to SDI USA and (ii) if they exercise their Put Option within a period of 120 days running from the date of obtaining written knowledge of the change of control in SDI Germany or SDI USA. In the event that either Klaus-Jürgen Dittrich or Frank Dittrich is not a limited partner of the Company anymore (because of decease, transfer of shares, withdrawal or any other reasons) the remaining limited partner (Klaus-Jürgen Dittrich or Frank Dittrich) is entitled to solely exercise his rights mentioned in the sentence before. A disposal of a majority interest shall be defined for the purpose of this provision as a transfer of shares that has the result that the disposing shareholder's voting rights or capital rights in the relevant company fall below 50%. The term "subsidiary" means any company in which the shareholder directly or indirectly holds more than 75% of the voting rights and capital stock. § 14—Liens on Company Shares The pledging of Company shares as well as the granting of an usufruct in a share or the conclusion of a trust agreement or a sub-participation, that grants the sub-participant the same rights as the usufructuary, require consent by all limited partners. The same applies if the limited partner wishes to cede, pledge or debit in any other way claims connected with his limited partner share. § 15—Decease of a Limited Partner (1)   In the event one of the limited partners dies, the Company shall not be dissolved but shall be continued with the limited partner's legal heirs. The same applies to the legatees of a limited partner. Heirs or legatees other than Frank Dittrich and Klaus-Jürgen Dittrich, can be expelled from the company by resolution with a majority of the votes of the remaining Limited Partners within one year after they obtain knowledge of a partner's death, subject to the following § 15 (2). The compensation to be paid to the expelled heir or legatee shall be subject to § 11(6), (7), (8) and (9). -------------------------------------------------------------------------------- (2)   If Frank Dittrich dies earlier than Klaus-Jürgen Dittrich, and Klaus-Jürgen Dittrich is not the heir or legatee of Frank Dittrich, then Klaus-Jürgen Dittrich shall have an option (the "Call Option") to purchase the limited partnership interest of Frank Dittrich from the heirs or legatees of Frank Dittrich. Upon the death of Frank Dittrich, the General Partner shall determine the identity of the heirs or legatees of Frank Dittrich and shall provide this information to the limited partners in writing. Klaus-Jürgen Dittrich shall be entitled to exercise his Call Option within a period of 90 days after the death of Frank Dittrich by giving written notice to the heirs or legatees of Frank Dittrich, to the General Partner and to all other limited partners. The compensation to be paid to the heirs or legatees of Frank Dittrich shall be subject to § 11 (6), (7), (8) and (9). If Klaus-Jurgen Dittrich fails to exercise his Call Option, the remaining limited partners may exercise their rights to expel the heirs or legatees of Frank Dittrich in accordance with Section 15(1) above. (3)   Several heirs are required to appoint a joint representative within three months after the death of the testator, who is authorized to exercise the partner rights of the heirs. In the case that the heirs do not appoint such a representative within the mentioned time, the business management shall appoint such a representative; then the heirs are required to give the appointed person authority. The same applies to the legatees of a limited partner. (4)   If a deceased partner has appointed an estate trustee for his interest in the company the trustee shall be entitled to exercise the partners' rights for the heirs. § 16—Non-compete; Obligation of Confidentiality (1)   Subject to Sections 3(5) and 3(6) hereof, no partner including all current and future limited partners—contrary to § 165 German Commercial Code (HGB)—nor any of their Affiliates (as defined below), shall engage, directly or indirectly, in the manufacture, distribution, marketing or sale of Competing Products (as defined below) in the Territory. Indirect competition shall include (without limitation) the acquisition of any ownership interest in any company or business organization that is engaged, directly or indirectly or through any Affiliate, in the manufacture, distribution, marketing or sale of Competing Products in the Territory; provided, however, that the ownership of less than three percent (3%) of the outstanding voting shares of any publicly held company which otherwise would be prohibited by this Section shall not constitute a violation of this Section. Klaus-Jürgen Dittrich and Frank Dittrich agree that they shall not engage, directly or indirectly or through any Affiliate, in the development, manufacture, distribution, marketing or sale of Competing Products outside the Territory except any business in cooperation or in a joint venture with SDI USA outside the Territory. SDI Germany hereby grants and ensures that neither SDI USA nor Lehman (while it owns an interest in SDI USA) shall violate the non-compete clause of § 16 and that SDI USA and Lehman (while it owns an interest in SDI USA) are bound by this clause in the same way as if they were limited partners to the Company themselves. (2)   The term "Competing Product" means any of the following for use in automobiles (i) air bag initiators, (ii) micro gas generators, (iii) seat belt buckles, or (iv) pyrotechnic pretensioners, whether or not currently manufactured by SDI USA, Klaus-Jürgen Dittrich or Frank Dittrich or any of their Affiliates, and any product that would be a suitable replacement or substitute for any of the foregoing. (3)   The term "Affiliate", as applied to any person, means any person that directly or indirectly controls, or is controlled by that person, or is under common control with that person. For purposes of this definition, "control" (including, with correlative meaning, the terms "controlled by" and "under common control with"), as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, by contract or otherwise. For purposes of this clause, the term "person" shall mean any individual and any legal entity. -------------------------------------------------------------------------------- (4)   If a partner or any of his/its Affiliates violates the above non-compete covenant, and such violation continues for a period of sixty (60) days after such partner receives written notice from another partner describing the violation, he/it shall be liable to the partnership to pay a penalty in the amount of E 100,000 for each violation. If an ongoing action constitutes a violation each month that the violation is continuing shall be deemed one separate violation. The concept of regarding a continuing violation as only one violation (Fortsetzungszusammenhang) shall not apply. In addition § 112 and § 113 German Commercial Code (HGB) shall apply. (5)   The limited partners shall be obligated to keep silent on all confidential material and company secrets, especially all business and trade secrets, that come into their knowledge through their actions for the Company. § 17—Final Clauses (1)   Agreements of the partners with each other and with the Company concerning the Company relations must be in writing, notwithstanding the legal duty to record a contract by notarial deed. (2)   In the event that individual clauses of this agreement are or become ineffective, nevertheless the agreement as a whole remains effective. By way of (even supplementary) interpretation the very provisions apply, which, as far as possible, correspond to the economic objectives of the ineffective clauses. In the case that an interpretation is excluded on legal grounds, the contracting parties are obliged to determine equivalent supplementary stipulations. This also applies if, upon the execution or the interpretation of the agreement, an omission or loophole is revealed. (3)   All disputes arising in connection with this Agreement or its validity shall be settled in accordance with the Arbitration Rules of the German Institution of Arbitration e.V. (DIS) without recourse to the ordinary courts of law. The place of arbitration shall be Frankfurt. The arbitration tribunal consists of three arbitrators. The language of the arbitral proceeding shall be English. (4)   This agreement shall be governed exclusively by the law of the Federal Republic of Germany. The binding language of this agreement shall be German solely. (5)   The notarial costs of this agreement and its execution will be paid by the Company. (6)   The Company shall at all times comply with the applicable laws of the United States (including, without limitation, the Foreign Corrupt Practices Act), the European Union and other applicable governing bodies. Periodic audits shall be undertaken to ensure such compliance. Bremen, this 26th day of June, 2001 Appendix 1: The Territory Appendix 2: Current MPA Customers -------------------------------------------------------------------------------- APPENDIX 1 THE TERRITORY European Economic Community (EEC) Switzerland Scandinavia—Sweden, Norway, Denmark Finland Poland Czech Republic Slovakia Serbia, Croatia, Herzegovina, Macedonia, Slovenia (to the extent permitted by U.S. law) Hungary Bulgaria Romania Albania Bosnia (to the extent permitted by U.S. law) Ukraine Belarus Turkey Estonia Latvia Lithuania Russia Other countries considered—Middle Eastern and African countries to be included if and when permitted by U.S. law and agreed to by all limited partners -------------------------------------------------------------------------------- APPENDIX 2 THE MPA CUSTOMERS Autoliv ASP, Inc. and its global operating divisions and its Affiliates TRW, Inc. and its global operating divisions and its Affiliates Atlantic Research Company (ARC) and its global operating divisions and its Affiliates Takata, Inc. and its global operating divisions and its Affiliates -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.41 Partnership agreement APPENDIX 1 THE TERRITORY APPENDIX 2 THE MPA CUSTOMERS

CHANGE OF CONTROL AGREEMENT EXHIBIT 10.2 This Change of Control Agreement ("Agreement") is entered into on October 31, 2001 by and between Richard L. Pratt, an individual (the "Executive"), and MagneTek, Inc., a Delaware corporation (the "Company"). RECITALS WHEREAS, the Board of Directors of the Company (the "Board") recognizes that the possibility of a Change of Control (as hereinafter defined) exists and that the threat or the occurrence of a Change of Control can result in significant distractions of its key management personnel because of the uncertainties inherent in such a situation; WHEREAS, the Board has determined that it is essential and in the best interest of the Company and its stockholders to retain the services of the Executive in the event of a threat or occurrence of a Change of Control and to ensure the Executive's continued dedication and efforts in such event without undue concern for personal financial and employment security; and WHEREAS, in order to induce the Executive to remain in the employ of the Company, particularly in the event of a threat or the occurrence of a Change of Control, the Company desires to enter into this Agreement with the Executive to provide the Executive with certain benefits in the event his or her employment is terminated as a result of, or in connection with, a Change of Control. AGREEMENT NOW THEREFORE, in consideration of the mutual covenants set forth herein, and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties do hereby agree as follows: 1.             Term of Agreement.  This Agreement shall commence as of the date hereof and shall continue in effect until November 1, 2002; provided, however, that on November 1, 2002 and on each anniversary thereof, the term of this Agreement shall automatically be extended for one year unless either the Company or the Executive shall have given written notice to the other prior thereto that the term of this Agreement shall not be so extended; provided, further, however, that notwithstanding any such notice by the Company or the Executive not to extend, the term of this Agreement shall not expire prior to the second anniversary of a Change of Control Date.  The benefits payable pursuant to Section 2 hereof shall be due in all events if a Change of Control occurs during the term of this Agreement, and a Change of Control will be deemed to have occurred during the term hereof if an agreement for a transaction resulting in a Change of Control is entered into during the term hereof, notwithstanding that the Change of Control Date occurs after the expiration of the term of this Agreement. 2.             Benefits Upon Change of Control. (a)           Events Giving Rise to Benefits.  The Company agrees to pay or cause to be paid to the Executive the benefits specified in this Section 2 if (i) there is a Change of Control, and (ii) within the Change of Control Period, (a) the Company or the Successor terminates the employment of the Executive for any reason other than Cause, death or Disability or (b) the Executive voluntarily terminates employment for Good Reason.   (b)           Benefits Upon Termination of Employment.  If the Executive is entitled to benefits pursuant to this Section 2, the Company agrees to pay or provide to the Executive as severance payment, the following: (i)            A single lump sum payment, payable in cash within five days of the Termination Date (or if later, the Change of Control Date), equal to the sum of: (A)          the accrued portion of any of the Executive's unpaid base salary and vacation through the Termination Date and any unpaid portion of the Executive's bonus for the prior fiscal year; plus (B)           a portion of the Executive's bonus for the fiscal year in progress, prorated based upon the number of days elapsed since the commencement of the fiscal year and calculated assuming that 100% of the target under the bonus plan is achieved; plus (C)           an amount equal to the Executive's Base Compensation times the Compensation Multiplier. (ii)           Continuation, on the same basis as if the Executive continued to be employed by the Company, of Benefits for the Benefit Period commencing on the Termination Date.  The Company's obligation hereunder with respect to the foregoing Benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer's benefit plans, in which case the Company may reduce the coverage of any Benefits it is required to provide the Executive hereunder as long as the aggregate coverages and benefits of the combined benefit plans is no less favorable to the Executive than the Benefits required to be provided hereunder. (iii)          Outplacement services to be provided by an outplacement organization of national repute, which shall include the provision of office space and equipment (including telephone and personal computer) but in no event shall the Company be required to provide such services for a value exceeding 17% of the Executive's Base Compensation. (iv)          Accelerated vesting of all outstanding stock options and of all previously granted restricted stock awards. 3.             Definitions.  When used in this Agreement, the following terms have the meanings set forth below: "Base Compensation" means the sum of (i) the Executive's annual salary in effect on the earlier of the Change of Control Date and the Termination Date and (ii) 100% of the target under the bonus plan for the fiscal year during which the Change of Control Date occurs. "Benefits" means benefits that would be available under the Company's Medical Plan, Dental Plan, Life Insurance and Disability Insurance Plans and any similar health and welfare plan of the Company. "Benefit Period" means 18 months. "Cause" means:  (A) conviction of a felony or misdemeanor involving moral turpitude, or (B) willful gross neglect or willful gross misconduct in carrying out the Executive's duties, resulting in material economic harm to the Company or any Successor. "Change of Control" means (i) any event described in Section 11.2 of the 1999 Stock Incentive Plan of the Company or any event so defined in any stock incentive or similar plan adopted by the Company in the future unless, in either case, such event occurs in connection with a Distress Sale and (ii) any event which results in the Board ceasing to have at least a majority of its members be "continuing directors."  For this purpose, a "continuing director" shall mean a director of the Company who held such position on June 1, 2001 or who thereafter was appointed or nominated to the Board by a majority of continuing directors. "Change of Control Date" means the date on which a Change of Control is consummated. "Change of Control Period" means the period commencing on the earlier of (i) 180 days prior to the Change of Control Date and (ii) the announcement of a transaction expected to result in a Change of Control, and ending on the second anniversary of the Change of Control Date. "Code" means the Internal Revenue Code of 1986, as amended.  References herein to a specific section of the Code shall be deemed to include comparable or analogous provisions of state, local and foreign law. "Compensation Multiplier" means 1.5. "Disability" means the inability of the Executive due to illness (mental or physical), accident, or otherwise, to perform his or her duties for any period of 180 consecutive days, as determined by a qualified physician. "Distress Sale" means a Change of Control occurring within 18 months of any of the following:  (i) the Company's independent public accountants shall have made a "going concern" qualification in their audit report (other than by reason of extraordinary occurrences, such as material litigation, not attributable to poor management practices); (ii) the Company shall lack sufficient capital for its operations by reason of termination of its existing credit lines or the Company's inability to secure credit facilities upon acceptable terms; or (iii) the Company shall have voluntarily sought relief under, consented to or acquiesced in the benefit of application to it of the Bankruptcy Code of the United States of America or any other liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments or similar laws, or shall have been the subject of proceedings under such laws (unless the applicable involuntary petition is dismissed within 60 days after its filing). "Good Reason" means (A) without the Executive's prior written consent, assignment to the Executive of duties materially inconsistent in any respect with his or her position immediately prior to the Change of Control Date or any other action by a Successor that results in a material diminution in the Executive's position, authority, duties, responsibilities, annual base salary or target bonus when compared with the same immediately prior to the Change of Control Date; or (B) assignment of the Executive, without his or her prior written consent, to a place of business that is not within the metropolitan area of the Executive's current place of business. "Stay and Pay Agreement" means a "stay and pay" or retention agreement entered into in contemplation of a sale by the Company of a division or business unit. "Successor" means any acquiror of all or substantially all of the stock, assets or business of the Company. "Termination Date" means the last day of the Executive's employment. 4.             Eligibility; Effect on Other Agreements and Plans. (a)           In the event the Executive is also a party to a Stay and Pay Agreement or severance agreement and becomes entitled to any payment thereunder, this Agreement shall be null and void and the Executive shall not be entitled to any payment or benefit hereunder.  Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company.  Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan or program of the Company shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. (b)           Plan Amendments.  The Company shall adopt such amendments to its employee benefit plans and insurance policies, including, without limitation, the Plans, as are necessary to effectuate the provisions of this Agreement.  If and to the extent any benefits under Section 2 are not paid or payable or otherwise provided to the Executive or his or her dependents or beneficiaries under any such plan or policy (whether due to the terms of the plan or policy, the termination thereof, applicable law, or otherwise), then the Company itself shall pay or provide for such benefits (including any gross-up needed to account for the less favorable tax treatment if the payments are made from the Company and not from the Plans or other employee benefit plans). 5.             Golden Parachute Tax. (a)           If the Value (as hereinafter defined) attributable to the payments and benefits provided in Section 2 above, without regard to this Section 5 ("Agreement Payments"), in combination with the Value attributable to other payments or benefits in the nature of compensation to or for the benefit of Executive (including but not limited to the value attributable to accelerated vesting of options and, collectively with Agreement Payments, "Payments") would, but for this Section 5, constitute an "excess parachute payment" under Code Section 280G, then Agreement Payments will be made to the Executive under Section 2 hereof only to the extent provided in this Section 5.  If (i) the excess of the Value of all Payments over the sum of all taxes (including but not limited to income and excise taxes under Code Section 4999) that would be payable by the Executive with respect to such Payments, is equal to or greater than 110% of (ii) the excess of the greatest Value of all such Payments that could be paid to or for the benefit of the Executive and not result in an “excess parachute payment” (the "Cap"), over the amount of taxes that would be payable by Executive thereon, then the full amount of Agreement Payments shall be paid to the Executive.  Otherwise, Agreement Payments shall be made only to the extent that such payments cause the Value of all Payments to equal the Cap. (b)           For purposes of this Section 5, the Company and the Executive hereby irrevocably appoint the persons who constituted the Compensation Committee of the Board immediately prior to the Change of Control, or a three person panel named by a majority of them, as arbitrators (the "Arbitrators") to make all determinations required under this Section 5, including but not limited to the Value of all Payments (and the components thereof) and the amount and nature of any reduction of Agreement Payments required by this Section 5.  For purposes of this Section 5, "Value" shall mean value as determined by the Arbitrators applying the valuation procedures and methodologies established pursuant to Code Section 280G, including any non-binding interpretive guidance as the Arbitrators determine appropriate.  The determinations of the Arbitrators shall be final and binding on both the Company and Executive, and their successors, assignees, heirs and beneficiaries, for purposes of determining the amount payable under Section 2.  All fees and expenses of the Arbitrators (including attorneys' and accountants' fees) shall be borne by the Company.  The arbitrators will be compensated, to the extent they are not then members of the Board's Compensation Committee, at the rates at which they would have been compensated for their work as Committee members in effect immediately prior to the Change of Control Date. 6.             Employment At-Will.  Notwithstanding anything to the contrary contained herein, the Executive's employment with the Company is not for any specified term and may be terminated by the Executive or by the Company at any time, for any reason, with or without cause, without liability except with respect to the payments provided hereunder or as required by law or any other contract or employee benefit plan. 7.             General. (a)           Entire Agreement.  This document constitutes the final, complete, and exclusive embodiment of the entire agreement and understanding between the parties related to the subject matter hereof and supersedes and preempts any prior or contemporaneous understandings, agreements, or representations by or between the parties, written or oral. (b)           Successors and Assigns.  This Agreement is intended to bind and inure to the benefit of and be enforceable by the Executive and the Company, and their respective successors and assigns, except that the Executive may not assign any of his or her duties hereunder and he or she may not assign any of his or her rights hereunder without the prior written consent of the Company. (c)           Amendments.  No amendments or other modifications to this Agreement may be made except by a writing signed by both parties.  No amendment or waiver of this Agreement requires the consent of any individual, partnership, corporation or other entity not a party to this Agreement.  Nothing in this Agreement, express or implied, is intended to confer upon any third person any rights or remedies under or by reason of this Agreement. (d)           No Amounts Due.  The Executive acknowledges that no payments or benefits whatsoever shall become due hereunder in the absence of a Change of Control. (e)           No Mitigation Obligation.  The parties hereto expressly agree that the payment of the benefits by the Company to the Executive in accordance with the terms of this Agreement will be liquidated damages, and that the Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive hereunder or otherwise except as expressly provided in Sections 2(b)(ii) and 4(a). (f)            Changes to Benefits.  In the event that, within 90 days of the execution of this Agreement, the Company enters into an agreement for a Change of Control in connection with a merger to be accounted for as a "pooling of interests," the Board will be entitled to modify or reduce the payments or benefits due hereunder, or to abrogate this Agreement entirely, if and to the extent that Ernst & Young opines to the Board such measures are necessary in order to ensure that the proposed merger will be accounted for as a "pooling of interests."  The Board will have no such authority after such 90–day period and, in the event such merger does not eventuate or is ultimately not accounted for as a "pooling of interests," this Agreement, with or without any action by the Board or the Executive, shall be automatically reinstated. (g)           Choice of Law.  All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of Tennessee without giving effect to principles of conflicts of law. (h)           ERISA.  This Agreement is pursuant to the Company's severance plan for Executives (the "Plan") which is unfunded and maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.  The Plan constitutes an employee welfare benefit plan ("Welfare Plan") within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").  Any payments pursuant to this Agreement which could cause the Plan not to constitute a Welfare Plan shall be deemed instead to be made pursuant to a separate "employee pension benefit plan" within the meaning of Section 3(2) of ERISA as to which the applicable portions of the document constituting the Plan shall be deemed to be incorporated by reference.  None of the benefits hereunder may be assigned in any way. (i)            Representation.  The Executive acknowledges that neither Tina McKnight nor Gibson, Dunn & Crutcher LLP has represented the Executive in connection with this Agreement and that he or she has had the opportunity to consult with counsel before executing this Agreement. (j)            Mutual Non-Disparagement.  The Company and subsidiaries agree, and the Company shall use its best efforts to cause its respective executive officers and directors to agree, that they will not make or publish any statement critical of the Executive, or in any way adversely affecting or otherwise maligning the Executive's reputation.  The Executive agrees that he or she will not make or publish any statement critical of the Company, its affiliates and their respective executive officers and directors, or in any way adversely affecting or otherwise maligning the business or reputation of the Company, its affiliates and subsidiaries and their respective officers, directors and employees. 8.             Arbitration. (a)           Except as provided in Section 5 hereof, any disputes or claims arising out of or concerning the Executive's employment or termination by the Company, whether arising under theories of liability or damages based upon contract, tort or statute, will be determined exclusively by arbitration before a single arbitrator in accordance with the employment arbitration rules of the American Arbitration Association, except as modified by this Agreement.  The arbitrator's decision will be final and binding on both parties.  Judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction.  In recognition of the fact that resolution of any disputes or claims in the courts is rarely timely or cost effective for either party, the Company and the Executive enter this mutual agreement to arbitrate in order to gain the benefits of a speedy, impartial and cost-effective dispute resolution procedure.  The parties further intend that the arbitration hereunder be conducted in as confidential a manner as is practicable under the circumstances, and intend for the award to be confidential unless that confidentiality would frustrate the purpose of the arbitration or render the remedy awarded ineffective. (b)           Any arbitration will be held in Los Angeles, California.  The arbitrator must be an attorney with substantial experience in employment matters, selected by the parties alternately striking names from a list of five such persons provided by the American Arbitration Association (AAA) office located nearest to the place of employment, following a request by the party seeking arbitration for a list of five such attorneys with substantial professional experience in employment matters.  If either party fails to strike names from the list, the arbitrator will be selected from the list by the other party. (c)           Each party will have the right to take the deposition of one individual and any expert witness designated by the other party.  Each party will also have the right to propound requests for production of documents to any party and the right to subpoena documents and witnesses for the arbitration.  Additional discovery may be made only where the arbitrator selected so orders upon a showing of substantial need.  The arbitrator will have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and will apply the standards governing such motions under the Federal Rules of Civil Procedure. (d)           The Company and the Executive agree that they will attempt, and they intend that they and the arbitrator should use their best efforts in that attempt, to conclude the arbitration proceeding and have a final decision from the arbitrator within 120 days from the date of selection of the arbitrator; provided, however, that the arbitrator will be entitled to extend such 120–day period for one additional 120-day period.  The arbitrator will deliver a written award with respect to the dispute to each of the parties, who must promptly act in accordance therewith. (e)           The Company will pay any and all reasonable fees and expenses incurred by the Executive in seeking to obtain or enforce any rights or benefits provided by this Agreement, including all reasonable attorneys' and experts' fees and expenses, accountants' fees and expenses, and court costs (if any) that may be incurred by the Executive in pursuing a claim for payment of compensation or benefits or other right or entitlement under this Agreement, provided that the Executive is successful as to material issues, resulting in an award of at least $100,000.  In addition, the Company will pay without regard to the results of the arbitration all costs and fees not normally associated with a civil proceeding, such as any fees charged by the arbitrator or any room rental charges. (f)            In a contractual claim under this Agreement, the arbitrator must act in accordance with the terms and provisions of this Agreement and applicable legal principles and will have no authority to add, delete or modify any term or provision of this Agreement.  In addition, the arbitrator will have no authority to award punitive damages under any circumstances unless repudiating the arbitrator's authority to do so would cause this arbitration clause to be ruled ineffective under applicable law. IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date it is last executed below by either party.   RICHARD L. PRATT     MAGNETEK, INC.           By:       Name:   Title:    

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.1 TULLY'S COFFEE EXCLUSIVE LICENSE AGREEMENT     THIS AGREEMENT, effective as of the 11th day of April, 2001, is entered into between TULLY'S COFFEE CORPORATION, a Washington corporation, doing business at 3100 Airport Way South, Seattle, Washington 98134 U.S.A. ("Licensor"), and UCC UESHIMA COFFEE COMPANY, Ltd., a company organized under the laws of Japan ("Licensee"). RECITALS     A.  Licensor is in the business of developing and operating specialty stores featuring coffee drinks and other beverages and a light food menu for on and off premises consumption and which offer retail sales of whole beans and ground coffee, tea, herbal teas, and related goods and services (referred to herein as a "Tully's Store" or as "Tully's Stores").     B.  Tully's Stores are operated with uniform design, formats, signs, equipment, layout, systems, and procedures utilizing the know-how, confidential business information and proprietary trade dress and designs of Licensor.     C.  Licensor owns rights in, and uses, promotes and licenses, certain business names and trademarks for services relating to such stores and trademarks for goods and services sold through such stores including without limitation the business names shown in Schedule A (the "Business Names"), the trademarks for services and trademarks for goods shown in Schedule B (the "Trademarks").     D.  Licensee currently engages in the wholesale and retail sale of coffee and related products. Subject to the terms and conditions of this Agreement, Licensee is interested in acquiring the sole, perpetual exclusive license to use Licensor's know how, trade secrets, proprietary trade dress and designs, tradenames and trademarks (registered and unregistered) Business Names, and Trademarks in association with the operation of Tully's Stores in the territories identified in Schedule C (referred to herein as the "Territories").     NOW, THEREFORE, in consideration of the covenants and obligations of this agreement and for other good and valuable consideration, the parties hereto have agreed with each other as follows:     1.  Grant.  Subject to the terms and conditions of this Agreement and effective immediately upon payment of the License Fee (this sum being the net amount after applicable tax withholdings in Japan and subject to refunding to Licensee of the amount upon which Licensor successfully receives a tax credit), Licensor hereby grants to Licensee, under all its current or future intellectual property rights, the sole, exclusive and perpetual license to operate Tully's Stores in the Territories and to use all such designs, formats, signs, equipment, layout, systems, procedures, copyrights, know how, trade secrets, proprietary trade dress and designs, tradenames and trademarks (registered and unregistered), the Business Names, and the Trademarks for Tully's Stores in the Territories, including the U.S. rights in the same to the extent such rights relate to use of the same in the Territories, and, for the purpose of the security interest granted Section 19 below, the goodwill associated with any of the foregoing (collectively, the "Asia Rights") only in association with the Licensee or authorized sublicensee's operation of Tully's Stores and as otherwise provided in this Section 1. The Asia Rights include the rights to utilize in the Territories the now owned or hereafter acquired registered and unregistered intangible proprietary rights used by Licensor in its operations of Tully's Stores whether registered or unregistered. The rights conferred by this Agreement include the current or future right to sell packages of roasted coffee, roasted coffee beans, tea, herbal tea and related goods under the Business Names and with the Trademarks in third party retail locations other than Tully's Stores in the Territories, provided such off site sales are (a) conducted in a manner that is consistent with the Tully's brand concept and image of high quality, premium, gourmet specialty coffee, (b) otherwise complies 1 -------------------------------------------------------------------------------- with the terms of this Agreement, and (c) that all such sales are subject to the royalty and service fees provided for in this Agreement.     Licensee may sublicense (without any permission from Licensor) the right conferred by this Agreement to any entity in which Licensee holds—directly or indirectly—at least fifty percent of the actual or beneficial voting control of such subsidiary. Otherwise, upon the prior written consent of Licensor (which consent shall not unreasonably be withheld), Licensee may sublicense all or part of the rights conferred upon Licensee by this Agreement. Licensor's consent shall be subject to, among other things, the execution and delivery of such documents and agreements as Licensor shall find reasonably necessary to protect Licensor's interests with respect to such proposed sublicense.     2.  Operation and Development of Stores.  Licensor will furnish to Licensee standard basic plans and specifications for Tully's Store's (the "Standard Specifications") for use in the Territories, including specifications for general interior design, color schemes, finish materials, furniture, equipment and signs. Licensee agrees that all of Licensee's stores in the Territories which are identified to the public as a Tully's Store or which utilize any of the Business Names or Trademarks (referred to herein as a "Licensee Tully's Store") shall materially comply with Licensor's Standard Specifications as announced by Licensor from time to time. Notwithstanding the foregoing, Licensee Tully's Stores may be modified to the extent necessary to comply with applicable ordinances, building codes, permit requirements, lease or deed requirements and restrictions, and with due consideration to local market conditions and tendencies (the foregoing being collectively referred to herein as "Local Regulations and Conditions").     3.  Equipment, Fixtures and Signs.  Licensee agrees to use in the operation of each Licensee Tully's Store equipment, fixtures, and furniture that are materially consistent with Licensor's Standard Specifications with due consideration for the Local Regulations and Conditions. Licensee further agrees to place or display at the premises of each Store (interior and exterior) only such signs, emblems, logos, lettering, and display materials that are consistent with Licensor's Standard Specifications. Licensee agrees to purchase all equipment, fixtures, furniture and signs ("Store Furnishings") used in connection with the operation of Tully's Stores from Licensor provided that the price, applicable taxes, delivery cost to the applicable store, and other terms for such purchases from Licensor shall be competitive with the price, applicable taxes, delivery cost to the applicable store, and other terms Licensee can obtain such items from other sources. In the event Licensor's price and terms for such items are not competitive with other sources with respect to any proposed purchase of such items, Licensee shall be entitled to purchase such items from other sources. In the event Licensor fails to respond to any request from Licensee for prices and terms with respect to any purchase of Store Furnishings within fourteen calendar days, Licensee shall then have the right to immediately purchase such items from other sources.     4.  Training and Operating Assistance.       a.  Initial Training.  Prior to the opening of Licensee's first Tully's Store in the Territories, Licensor shall train one or more Licensee managers in the operation of a Tully's Store. Training shall be conducted at Licensor's training headquarters at a time which is mutually acceptable to the parties. Licensee and Licensor shall share the cost for any travel and living expenses which Licensee and the manager(s) incur in connection with such training. Licensor shall provide at its own cost all materials and personnel and facilities for such training.     b.  Additional Training.  Upon Licensee's request Licensor will conduct additional training for Licensee's employees at Licensee's travel and living cost and expense (not more than five of Licensee's employees at any one time semiannually). Licensor shall provide at its own cost all materials, personnel and facilities for such training.     c.  Hiring and Training of Employees by Licensee.  Licensee shall hire all employees of each Tully's Store in the Territories, and shall be exclusively responsible for the terms of their employment and compensation and for the proper training of such employees in the operation of a Tully's Store. 2 --------------------------------------------------------------------------------     d.  Consulting Assistance.  Licensor shall be available at mutually convenient times to consult with Licensee from time to time with respect to general operating issues related to any Tully's Store in the Territories, including without limitation any problems or deficiencies disclosed by reports submitted to or inspections made by Licensor related to Tully's Stores in the Territories.     e.  Annual Meetings.  Except as otherwise hereinafter agreed to by the parties, Licensor and Licensee agree that the parties shall meet at least annually on or about the anniversary date of the signing of this Agreement to review the status of the operations of the Licensee Tully's Stores and Licensor's operation and licensing of Tully's Stores in the United States and elsewhere. The first such meeting shall take place at a location to be designated by Licensee. Thereafter, Licensor and Licensee shall take turns designating the location of such annual meetings.     5.  Store Image and Operating Standards.       a.  Condition and Appearance of Stores.  Licensee agrees to maintain the condition and appearance of each Licensee Tully's Store consistent in all material respects with the image of a Licensor owned and operated Tully's Stores with each Licensee Tully's Store as an attractive, modern, sanitary, convenient, and efficiently operated store selling premium, high quality products and service with due consideration given to Local Regulations and Conditions. Licensee agrees to effect such maintenance in all material respects of each Licensee Tully's Store as is reasonably required from time to time to maintain such condition, appearance, and efficient operation, including, without limitation, replacement of worn out or obsolete equipment, fixtures, furniture, and signs; repair of the interior and exterior of such Stores. If at any time in Licensor's commercially reasonable judgment, the general state of repair, appearance, or cleanliness of the premises of a Licensee Tully's Store or its equipment, fixtures, furniture, signs, or decor does not meet Licensor's standards therefor, Licensor shall so notify Licensee, specifying the action Licensor believes should be taken by Licensee to correct such deficiency.     b.  Authorized Products and Services.  The presentation of a uniform image to the public and the furnishing of uniform products and services are an essential element of the Tully's Store system and brand concept. Licensee therefore agrees that each Licensee Tully's Store will offer beverages, food, and other products and services that are consistent in all material respects with the Tully's Store concept as announced from time to time by Licensor with due consideration given to Local Regulations and Conditions.     c.  Food and Beverage Products, Supplies, and Materials.  The reputation and goodwill of the Tully's Store system is based upon, and can be maintained and enhanced only by, the sale of consistent, quality products and the rendering of fast, efficient, consistent and quality service. Licensee therefore agrees that all beverages and food products, cooking materials, containers, packaging materials, other paper and plastic products, glassware, utensils, uniforms, menus, forms, cleaning and sanitation materials, and other supplies and materials used in the operation of Licensee Tully's Stores shall conform to Licensor's specifications and quality standards as established by Licensor from time to time with due consideration given to Local Regulations and Conditions.     d.  Use of Materials Imprinted With Trademarks.  Licensee shall in the operation of each Tully's Store in the Territories use containers, napkins, uniforms, packaging, and other forms and materials imprinted with the Trademarks as prescribed from time to time by Licensor except as otherwise consented to by Licensor in writing.     6.  Specifications, Standards, and Procedures.  With due consideration given to Local Regulations and Conditions, Licensee agrees to comply with Licensor's specifications, standards and general procedures for the operation of Tully's Stores including without limitation the following:     a.  Recipes, quality of ingredients, portions, and methods and procedures relating to the storage, handling, preparation, and serving of beverages and food;     b.  Safety, maintenance, cleanliness, sanitation, function, and appearance of each Tully's Store premises and its equipment, fixtures, furniture, and signs; and 3 --------------------------------------------------------------------------------     c.  Uniforms to be worn by and general appearance of Store employees;     7.  Compliance with Laws and Good Business Practices.  Licensee shall secure and maintain in force all required licenses, permits, and certificates relating to the operation of each Licensee Tully's Store and shall operate each such Store in full compliance with all applicable, material laws, ordinances, and regulations. Licensee agrees to refrain from any business or advertising practice which may be injurious to the business of Licensor and the goodwill associated with the Business Names and Trademarks and Tully's Stores. Licensor and Licensee each agrees to refrain from any business or advertising practice which may be injurious to the business of Licensee and the goodwill associated with the Business Names and Trademarks and Tully's Stores.     8.  Management of Store.  All stores shall at all times be under the direct, on-premises supervision of Licensee or a trained and competent employee thereof. Licensee agrees to use its best efforts to promote and enhance the business of the Tully's Stores in the Territories.     9.  Indemnification.  Licensee agrees to indemnify, defend and hold harmless Licensor and all of its shareholders, directors, officers, employees and representatives from and against all claims, lawsuits, fines, penalties or damages of any kind by a third party (collectively, "Damages") arising out of or related to Licensee's use of the Business Names or Trademarks or operation of Tully's Stores, except to the percentage extent that any such Damages are caused by Licensor's own acts or omissions to act. Licensor agrees to indemnify, defend and hold harmless Licensee and all of its shareholders, directors, officers, employees and representatives from and against all claims, lawsuits, fines, penalties or damages of any kind by a third party (collectively, "Damages") arising out of or related to Licensor's use of the Business Names or Trademarks or operation of Tully's Stores, except to the percentage extent that any such Damages are caused by Licensee's own acts or omissions to act.     10.  Trade Secrets of Licensor.  Licensor will take commercially reasonable steps to safeguard the trade secrets of Licensor provided under this Agreement. Licensee acknowledges that its knowledge of the operation of a Tully's Store will be derived from information disclosed to Licensee by Licensor pursuant to the License and that certain of such information, including without limitation all recipes and Licensor's Standard Specifications is proprietary, confidential, and a trade secret of Licensor. Except for disclosing such information to sublicensees authorized under Section 1 hereof, Licensee agrees that Licensor will maintain the absolute confidentiality of all such information during and after the term of the License, and that they will not use any such information in any other business or in any manner not specifically authorized or approved in writing by Licensor.     11.  Business Names and Trademarks.       a.  Ownership of Names and Marks.  Licensee acknowledges and agrees that Licensor is the owner of all Business Names and Trademarks licensed to Licensee by this Agreement, that Licensee's right to use the Business Names and Trademarks is derived solely from this Agreement and is limited to the operation of Licensee Tully's Stores in the Territories and as otherwise provided for in this Agreement. Licensee agrees that after the termination or expiration of the License, Licensee will not directly or indirectly at any time or in any manner identify itself or any other business operation of Licensee as a Tully's Store, a former Tully's Store, or as a Licensee of or otherwise associated with Licensor, or use in any manner or for any purpose any Business Name or Trademark or other indicia of a Tully's Store.     b.  Limitations on Licensee's Use of Business Names and Trademarks.  Licensee agrees to use the Business Names and Trademarks as the sole service mark and trademark and trade name identification of each Licensee Tully's Store, except as otherwise consented to in writing by Licensor.     12.  License Fee.  Upon the execution of this Agreement by the parties and the satisfaction or waiver of the conditions precedent set forth in Sections 20 b. and c. below, Licensee shall immediately pay to Licensor the sum of Twelve Million United States Dollars (USD 12,000,000) (the "License Fee") in cash or by wire transfer of immediately available funds (this sum being the net amount after 4 -------------------------------------------------------------------------------- applicable tax withholdings in Japan and subject to refunding to Licensee of the amount upon which Licensor successfully receives a tax credit). The License Fee shall be fully earned upon payment.     13.  Royalty and Service Fee.       a.  Amount and Payment of Royalty and Service Fee.  Upon payment of the License Fee, the licensing fee shall be deemed fully paid up for the first seven years. Commencing on the eight anniversary of the date of this Agreement, Licensee agrees to pay to Licensor a * royalty and service fee of * of the aggregate net revenues of the Tully's Stores in the Territories together with all other sales of products or services made in connection with the Tully's Business Names and Trademarks, *.     b.  Definition of Net Revenues.  As used in this Agreement, the term "net revenues" shall mean and include the actual gross charges for all products and services of any kind or nature sold in connection with the Tully's Business Names or Trademarks, for cash or credit, whether such purchases are made in, upon, or from the premises of any Licensee Tully's Store, or through or by means of the business conducted therein or otherwise by Licensee or any sublicensee thereof, but excluding sales, use, service, or excise taxes collected from customers and paid to the appropriate taxing authority.     c.  Interest on Late Payments. All royalties and service fees, amounts due for products purchased from Licensor, and any other amounts owed to Licensor by Licensee pursuant to the License shall be subject to a late payment interest calculated at an annual rate equal to twelve percent (12%) during delinquency.     d.  Reporting Requirements.  During the first eight years of this Agreement, upon request by Licensor (not more than semi-annually), Licensee shall furnish to Licensor a report setting forth new store openings, net revenues and comparable store sales (totaled or reasonably grouped) for Tully Stores in the Territories. Commencing on the eighth anniversary of the date of this Agreement, and continuing thereafter during the remaining term of this Agreement, Licensee shall furnish to Licensor * reports setting forth new store openings, net revenues and comparable store sales (totaled or reasonably grouped) for Tully's Store in the Territories ("* Reports").     14.  Inspections and Audits.       a.  Licensor's Right to Inspect Stores.  To determine whether Licensee is complying with this Agreement, Licensor shall have the right, at any time during business hours and without prior notice to Licensee, to inspect any of the Licensee Tully's Stores.     b.  Licensor's Right to Audit.  Commencing on the eighth anniversary of this Agreement, Licensor shall have the right, upon prior written notice, to audit or cause to be audited the * Reports. Licensee shall fully cooperate with representatives of Licensor and independent accountants hired by Licensor conducting any such audit including without limitation providing all back up records, information and financial statements related to the calculation of net revenues. In the event any such audit, taking into account local variations in generally accepted accounting principles, shall disclose an understatement of the net revenues of the the Licensee Tully's Stores for any period or periods, Licensee shall pay to Licensor, within fifteen (15) calendar days after receipt of the audit report, the royalty and service fee due on the amount of such understatement. Further, in the event such audit is made necessary by the failure of Licensee to furnish *as herein required, or if an understatement of net revenues for any period is determined by any such audit to be greater than five percent (5%), Licensee shall reimburse Licensor for the reasonable cost of such audit, including, without limitation, the charges of any independent accountant and the travel and lodging expenses. -------------------------------------------------------------------------------- *Confidential material has been intentionally omitted at this point pursuant to a request for confidential treatment, and such material has been filed separately with the Securities and Exchange Commission. 5 --------------------------------------------------------------------------------     15.  Termination of License.       a.  By Licensee.  If Licensee is in substantial compliance with this Agreement and Licensor breaches this Agreement and fails to cure such breach within cure periods described below, Licensee may terminate this Agreement subject to its compliance with Section 15 d. below.     b.  By Licensor.  Subject to compliance with Section 15 d. below, Licensor may terminate this Agreement if Licensee:     (1) Makes an assignment for the benefit of creditors or an admission of its inability to pay its obligations as they become due;     (2) Files or has filed against it a petition in bankruptcy or any similar proceeding or files any pleading seeking any reorganization, liquidation, or dissolution under any law, or admits or fails to contest the material allegations of any such pleading filed against it, or is adjudicated a bankrupt or insolvent, or a receiver is appointed for a substantial part of the assets of Licensee, or the claims of creditors of Licensee are abated or subject to a moratorium under any law;     (3) Makes an unauthorized assignment of the License or ownership of Licensee as hereinafter defined in the section entitled "Assignment, Transfer, and Encumbrance;"     (4) Fails to comply with any provision of this Agreement (other than a payment default for which the remedy shall be an action for damages) or any other mandatory specification, standard, or operating procedure prescribed by Licensor.     c.  Unilateral Termination by Licensee.  Notwithstanding Section 15 d. below, this Agreement may be terminated by Licensee effective upon one year's prior written notice to Licensor, provided that such termination will not have any effect on payments previously received by Licensor or Licensee's obligations under this Agreement with respect to royalty and service fees which arise prior to the effective date of the termination under this Section 15 c.     d.  Termination Procedures.  Prior to exercising a right to terminate this Agreement under either Section 15 a. or 15 b. above, Licensor or Licensee, as applicable, shall give written notice to the other party (the "Party in Breach") of any alleged breach of this Agreement which gives rise to a right of termination as provided in either Section 15 a. or b. above. The Party in Breach shall then have thirty calendar days after the receipt of such written notice cure the alleged breach (the "Cure Period"). In the event that the alleged breach is not cured by the Party in Breach within the Cure Period, the parties shall commence a mandatory mediation regarding the alleged breach within thirty calendar days of the end of the Cure Period. Upon the earlier of (1) the completion of the required mediation or (2) sixty calendar days following the end of the Cure Period (unless otherwise extended by agreement of the parties) if for any reason the parties are unable to arrange the mediation, the party alleging the default shall, if no acceptable resolution of the alleged default shall have been reached, have the right to declare a termination of this Agreement and thereafter pursue all remedies under this Agreement including without limitation any of the proceedings described in Section 21 below.     e.  Termination of Security Interest. The Asia Rights Security Interest (defined herein in Section 19) shall automatically terminate (1) effective upon the effective date of a unilateral termination of this Agreement by Licensee pursuant to Section 15 c. above; (2) effective upon such date as the parties shall mutually agree upon in the case of any mutually agreed upon termination of this Agreement; and (3) effective upon the final and conclusive arbitration decision of any arbitrator rendered pursuant to Section 21 b. below if such decision upholds a declared termination of this Agreement by any Party hereto. The terminations referred to in subparagraphs' (1) to (3) above are collectively referred to herein as an "Automatic Termination". Upon Automatic Termination, Licensee agrees to execute and/or file any documents or instruments necessary to release or terminate any filing made by or on behalf of Licensee with respect to the Security Interest. 6 --------------------------------------------------------------------------------     16.  Licensee's Obligation upon Termination or Expiration.       a.  Payment of Amounts Owed to Licensor.  Licensee agrees to pay to Licensor within fifteen (15) calendar days after the effective date of termination or expiration of the License such royalty and service fees, amounts owed for products purchased by Licensee from Licensor, and all other amounts owed to Licensor which are then unpaid.     b.  Return of Information.  Licensee further agrees that upon termination of the License, it will immediately return to Licensor all copies of any manuals, recipes, specifications, menus, software, records or documents of any kind (in any form of media) delivered to Licensee by Licensor during the term of the License.     c.  Cancellation of Assumed Names.  Licensee further agrees that upon termination or expiration of the License, it will take such action as may be required to cancel all assumed name or equivalent registrations relating to its use of any Business Name or Trademark.     d.  Continuing Obligations.  All obligations of Licensor and Licensee which expressly, or by their nature, survive the expiration or termination of the License shall continue in full force and effect subsequent to and notwithstanding the expiration or termination of the License under this Agreement and until they are satisfied in full or by their nature expire.     17.  Assignment, Transfer, and Encumbrance.       a.  By Licensor.  With the prior written consent of Licensee (which consent may not unreasonably be withheld) this Agreement may be assigned by Licensor and shall inure to the benefit of any assignee or other legal successor to the interest of Licensor herein, provided that Licensor, subsequent to any such assignment, shall remain liable for the performance of its obligations under this Agreement.     b.  By Licensee.  With the prior written consent of Licensor (which consent may not unreasonably be withheld) this Agreement may be assigned by Licensee and shall inure to the benefit of any assignee or other legal successor to the interest of Licensee herein, provided that Licensee, subsequent to any such assignment, shall remain liable for the performance of its obligations under this Agreement. It shall be a condition of any such consent that the proposed transferee agrees to be bound by all of the terms of this Agreement. Notwithstanding the foregoing, Licensee shall, upon prior written notice to Licensor, be entitled to assign its rights and obligations under this Agreement to UCC or any entity in which Licensee holds—directly or indirectly—at least fifty percent of the actual or beneficial voting control of such subsidiary provided that UCC, subsequent to any such assignment, shall remain liable for the performance of its obligations under this Agreement.     18.  Representations and Warranties.       a.  By Licensor.  Licensor hereby represents and warrants as follows:     1.  Licensor shall use all commercially reasonable efforts to maintain and protect the value of the Asia Rights against any infringement, unauthorized disclosure, misuse bankruptcy or other failures or any other acts by Licensor or its affiliates and shall bear all costs associated therewith.     2.  This Agreement has been entered into at arms length between Licensor and Licensee and that there is no overreaching on the part of Licensee.     3.  Except as disclosed with respect to Korea, the Asia Rights are free of any encumbrances, security interest, or other limitations except the blanket security interest held by Bank of America NT&SA. Licensor agrees to procure from Bank of America NT&SA a release (the "BofA Release") of its security interest in the Asia Rights and the related other collateral described in Section 19 and shall assist Licensee in filing and perfecting a security interest in the Asia Rights and the other collateral described in Section 19.     4.  There is no action or proceeding pending or threatened against it before any court, administrative agency or other tribunal which might have a material adverse effect on its business 7 -------------------------------------------------------------------------------- or condition, financial or otherwise or on the Asia Rights. Other than in Korea and New York, Licensor knows of no infringement by any third party of Licensor's trademarks, trade secrets or other intellectual property rights in the U.S. or the Territories. Licensor agrees to indemnify, defend and hold harmless Licensee from and against any claims, losses, lawsuits or damages of any kind related to (1) any unauthorized registration of Licensor trademark or tradename in Korea occurring prior to the date of this Agreement, (2) any third party claim of infringement brought against Licensee related to Licensee's use of the Asian Rights in the Territories, and (3) any third party claim of senior use of the trademark ("Tully's") in the U.S. to the extent such use, if any, has a material adverse effect upon the Asian Rights or the Security Interest.     5.  Licensor has full power and authority to grant a license in the Asia Rights to Licensee.     6.  Licensor is a corporation duly organized, validly existing and in good standing under the laws of the state of Washington, USA.     7.  Licensor has taken all actions necessary to authorize it to enter into and perform fully its obligations under this Agreement and all other documents specifically referenced herein ("Licensor Documents") and to consummate the transactions contemplated herein and therein. This Agreement is, and upon their execution the Licensor Documents will be, the legal, valid and binding obligations of Licensor, enforceable in accordance with their respective terms.     8.  There have not been and there is not now existing any product liability claims associated with Licensor's products represented by Licensor's intellectual property.     9.  Neither the execution of this Agreement or any of the Licensor Documents nor the consummation of the transactions contemplated herein or therein will: (a) violate any provision of the Articles of Incorporation, bylaws or other constituent documents of Licensor; (b) violate, conflict with or constitute a default under, permit the termination or acceleration of, or cause the loss of any rights or options under, any agreement binding upon Licensor; or (c) require the approvals of any third parties.     b.  By Licensee.  Licensee hereby represents and warrants as follows:     1.  Licensee has full power and authority to license the Asia Rights from Licensor.     2.  Licensee is a corporation duly organized, validly existing and in good standing under the laws of Hong Kong.     3.  Licensee has taken all actions necessary to authorize it to enter into and perform fully its obligations under this Agreement and to consummate the transactions contemplated herein and therein. This Agreement is the legal, valid and binding obligation of Licensee, enforceable in accordance with its terms.     4.  Neither the execution of this Agreement nor the consummation of the transactions contemplated herein or therein will: (a) violate any provision of the Articles of Incorporation, bylaws or other constituent documents of Licensee.     c.  Survival.  The covenants, representations and warranties made by Licensor and Licensee herein shall survive the Closing.     19.  Covenants.       a.  Security Agreement; Exclusive and Perpetual License Registration.  Effective immediately upon the Payment of the License Fee (less any applicable tax withholding) Licensor hereby grants to Licensee a security interest (the "Asia Rights Security Interest") in all of Licensor's right title and interest in and to the (a) Asia Rights, (b) the registered and unregistered intangible proprietary rights held or used by Licensor related to Tully's Stores in the Territories; and (c) all increases in any of the foregoing, all cash proceeds and noncash proceeds (including, without limitation, payments due under this Agreement), products, offspring, rents and profits and all related goodwill of all of the foregoing 8 -------------------------------------------------------------------------------- collateral, and all payments under insurance (whether or not Secured Party (Licensee) is the loss payee thereof) of such collateral, to secure Licensor's performance of its obligations under this Agreement (other than any obligation which is limited to the payment of money or which involves an obligation to protect the Asia Rights from infringement where Licensee shall have the right to prosecute such action on its own and seek reimbursement from Licensor) and agrees if reasonably necessary to execute a separate security agreement in form and substance acceptable to the parties to effectuate the security interest herein provided for. Licensor covenants that Licensee shall have a first priority security interest in the Asia Rights and other collateral described in this paragraph. Licensor shall provide all reasonably necessary assistance and shall execute and deliver such documents and instruments as shall be reasonably necessary to Licensee to register (at Licensee's sole expense) Licensee's sole and exclusive rights in the Asia Rights and perfect the Asia Rights Security Interest in applicable jurisdictions and in the Territories.     b.  Financial Records.  Licensor shall on an annual basis provide Licensee with copies of Licensor's audited financial statements.     20.  Closing.       a.  Time and Place.  Subject to the conditions precedent stated herein, the consummation of this License Agreement (the "Closing") shall take place at the designated office of Licensee, provided that all parties agree to accept facsimile signatures on documents other than the UCC-1 financing statement described in Section 20.c.1 for the purposes of the Closing.     b.  Deliveries at Closing.  Subject to the satisfaction of the conditions precedent contained in Section 20 c., at the Closing the following shall occur:     1.  Licensee shall pay to Licensor the License Fee (this sum being the net amount after applicable tax withholdings in Japan and subject to refunding to Licensee of the amount upon which Licensor successfully receives a tax credit), in cash or by wire transfer of immediately available funds.     2.  Licensor shall provide to Licensee a certificate of good standing and certified copy of its Articles of Incorporation, and Licensee shall provide to Licensor documentation as to Licensee's company standing.     3.  Licensor shall provide to Licensee copies of all U.S. federal registrations made with respect to the Business Names and Trademarks together with copies of available state registrations of the same.     c.  Conditions Precedent.  At Closing, all of the following conditions precedent shall be complete and true, as applicable, unless waived by the party entitled to receive the same:     1.  There shall have been filed in the state of Washington a UCC-1 Financing Statement which shall include the Asia Rights as the collateral described therein and Licensee shall have received evidence that Licensor shall have executed and placed in first class mail to the United States Patent and Trademark office a notice in form suitable for recording with such office and satisfactory to licensee counsel providing that Licensor has granted to Licensee a security interest with respect to the Asia Rights..     2.  All representations and warranties made by each party shall be true and correct in all respects on and as of the Closing with the same force and effect as though made on and as of the Closing. Each party shall have performed and complied with all agreements and conditions required to be performed or complied with prior to or at the Closing.     3.  There shall have been no material adverse change to the business or operations of Licensor since the commencement of the parties' negotiations. 9 --------------------------------------------------------------------------------     4.  No action or proceeding shall have been initiated to restrain or challenge this License Agreement or any matter contemplated hereby.     5.  Licensor shall have delivered to Licensee a fax copy of the BofA Release showing filing with the state of Washington.     21.  Enforcement.       a.  Judicial Enforcement, Injunction, and Specific Performance.  Notwithstanding Section 21 b., Licensor shall have the right to elect to seek injunctive or equitable relief as provided for in this Section 21 a. in the state or federal courts situated in Seattle, Washington, USA (and/or in any appellate court therefrom). The parties each consent to jurisdiction in such courts, waive objection to such venue, Agreement which is entered in a court located within the State of Washington shall be binding throughout the world and may be sued upon, docketed, entered and/or enforced, without challenge or opposition on their part and without re-trial of any of the issues which gave rise to such judgment, in any state, country, province, commonwealth or territory having jurisdiction over their respective persons or properties. Licensor shall be entitled, without bond, to the entry of temporary and permanent injunctions and orders of specific performance enforcing the provisions of this Agreement relating to Licensee's use of the Business Names and Trademarks, the obligations of Licensee upon termination or expiration of this Agreement and assignment of the License and ownership interests in Licensee, and to prohibit any act or omission by Licensee that constitutes a violation of any applicable law, ordinance, or regulation, is dishonest or misleading to customers or prospective customers of any Licensee Tully's Store, constitutes a danger to employees or customers of the Store or to the public, or may impair the goodwill associated with the Business Names and Trademarks and Tully's Stores. If Licensor secures any such injunction or order of specific performance, Licensee agrees to pay to Licensor an amount equal to the aggregate of its costs of obtaining such relief, including without limitation reasonable attorney and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses, and travel and living expenses, and any damages incurred by Licensor as a result of the breach of any such provision.. If Licensor commences any such action for an injunction or order of specific performance and is not the prevailing party therein, Licensor agrees to pay to Licensee an amount equal to the aggregate of Licensee's costs of defending against such relief, including without limitation reasonable attorney and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses, and travel and living expenses, and any damages incurred by Licensee as a result of such proceedings.     b.  Arbitration.  Except insofar as Licensor elects to enforce this Agreement by judicial process, injunction, or specific performance as hereinabove provided, all disputes and claims relating to any provision hereof, any specification, standard, or operating procedure, or any other obligation of Licensee prescribed by Licensor, or any obligation of Licensor, or the alleged breach thereof (including without limitation any claim that this Agreement, any provision thereof, any specification, standard, or operating procedure, or any other obligation of Licensee or Licensor, is illegal or otherwise unenforceable or voidable under any law, ordinance, or ruling) shall be settled by arbitration at Seattle, Washington, under the U.S. Arbitration Act (9 U.S.C. §§ 1 et seq.), if applicable, and the Rules of the American Arbitration Association (relating to the arbitration of disputes arising under License and license agreements, if any, otherwise the general rules of commercial arbitration), provided that the arbitrator shall award, or include in his award, the specific performance of this Agreement unless he determines that performance is impossible. Judgment upon the award of the arbitrator may be entered in any court having jurisdiction thereof or over Licensor or Licensee.     c.  * -------------------------------------------------------------------------------- *Confidential material has been intentionally omitted at this point pursuant to a request for confidential treatment, and such material has been filed separately with the Securities and Exchange Commission. 10 --------------------------------------------------------------------------------     d.  Severability and Substitution of Valid Provisions.  All provisions of this Agreement are severable, and this Agreement shall be interpreted and enforced as if all completely invalid or unenforceable provisions were not contained herein, and partially valid and enforceable provisions shall be enforced to the extent valid and enforceable. If any applicable and binding law or rule of any jurisdiction requires a greater prior notice of the termination of or refusal to renew this Agreement than is required hereunder, or the taking of some other action not required hereunder, or if under any applicable and binding law or rule of any jurisdiction, any provision of this Agreement or any specification, standard, or operating procedure prescribed by Licensor is invalid or unenforceable, the prior notice and/or other action required by such law or rule shall be substituted for the notice requirements hereof, or such invalid or unenforceable provision, specification, standard, or operating procedure shall be modified to the extent required to be valid and enforceable. Such modifications to this Agreement shall be effective only in such jurisdiction and shall be enforced as originally made and entered into in all other jurisdictions.     e.  Rights Of Parties Are Cumulative.  The right of Licensor and Licensee hereunder are cumulative, and no exercise or enforcement by Licensor or Licensee of any right or remedy hereunder shall preclude the exercise or enforcement by Licensor or Licensee of any other right or remedy hereunder, or which Licensor or Licensee is entitled by law to enforce.     22.  U.S. Dollars.  All references to dollars as expressed herein are to United States currency.     23.  Goodwill, Trademark and Business Name Protection, Third Party Litigation, Cessation of Use.       a.  To the extent that the ownership of any rights in the Trademarks and Business Names becomes established in Licensee, whether by operation of law or otherwise, Licensee agrees to execute such assignments and other documents as Licensor may reasonably request to transfer such rights to Licensor, provided that no such assignments or other documents in any way affect or limit Licensee's exclusive and perpetual license to use the rights conferred under this Agreement. In addition, this Section 23 a. shall not apply to a transfer of rights in the Business Names and Trademarks pursuant to a foreclosure of the security interest granted pursuant to Section 19 a. below.     b.  Licensor retains the right to protect the Trademarks and Business Names from infringement and to prosecute infringers. Licensor and Licensee shall cooperate to bring suit for infringement of the Trademarks and Business Names. In the event Licensor fails to prosecute any infringement of the Trademarks and Business Names, Licensee shall have the right to prosecute such infringement and seek reimbursement for all reasonable costs incurred in such prosecution from Licensor. Licensor has the right to control all actions against infringers and to resolve such matters whether by settlement or suit. If Licensee becomes aware of any infringement of the Trademarks or Business Names, it shall notify Licensor in writing. Licensee shall cooperate with Licensor by promptly supplying, at a reasonable cost to Licensor, assistance and information reasonably considered necessary by Licensor for settlement or suit.     c.  Subject to Section 24, Licensee agrees not to adopt, use, apply to register or register anywhere any trademark or Business Names, service mark or business name which is confusingly similar to the Trademarks or which contain the designations "TULLY" or "TULLY'S", without regard to the nature of the associated goods, services or business either during the term of Licensee or thereafter.     24.  Registration of Business Names and Trademarks in the Territories.  The parties acknowledge that the Asia Rights have not been registered in the Territories. Licensee agrees to give Licensor advance written notice of its intention to open one or more Tully's Stores in any one or more of the Territories. Upon such notice the parties agree to cooperate in making such registrations or in taking all such preliminary steps as are necessary to protect the Business Names and Trademarks prior to the opening of any Tully's Store in any of the Territories. Licensor shall bear all of the costs of making such registrations, including any such registrations that Licensor request Licensee to undertake 11 -------------------------------------------------------------------------------- on its behalf. Licensee shall be responsible for all costs associated with registering Licensee's interest in the Asia Rights in any jurisdiction or any of the Territories.     25.  Notices.  All notices and requests in connection with this Agreement shall be in writing and may be given by registered or certified mail, personal delivery or facsimile addressed as follows. To:   Tully's Coffee Corporation 3100 Airport Way South Seattle, WA 98134 U.S.A. Attn: Mr. Jamie S. Colbourne Facsimile No. (206) 233-2077 with a copy to:   Carney Badley Smith & Spellman, P.S. 2200 Bank of America Tower 701 Fifth Avenue Seattle, Washington 98104 Attn: Patrick R. Lamb Facsimile No. (206) 467-8215 To:   UCC Ueshima Coffee Company Ltd. 7-7, Minatojima Nakamachi 7-Chome Kobe, Japan 650-8577 Attn: Mr. Gota Ueshima Facsimile No. 011-078-304-8879 with a copy to:   Sakura Kyodo Law Offices Shuwa Kioicho TBR Suite 814 5-7 Kohjimachi Chiyoda-Ku Tokyo, Japan 102-0083 Facsimile No. 011-03 3263-7785 or to such other address as the party to receive the notice or request shall designate by written notice to the other. The effective date of any notice or request shall be five (5) calendar days from the date on which it is sent by the addressor, or when received when personally delivered or sent by facsimile.     26.  Waiver.  The failure of either party to insist in any one or more instances upon strict performance by the other of its obligations hereunder shall not constitute a waiver or relinquishment of any such obligation for the future, and the obligation shall continue in full force and effect.     27.  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Washington, U.S. A. without giving effect to the conflict of law rules or choice of law rules thereof to the contrary, and by applicable federal law.     28.  Headings.  Headings used in this Agreement are for reference purposes only and shall not be deemed part of this Agreement.     29.  Relationship.  The relationship between the parties hereto is that of Licensor and Licensee as defined in this Agreement, and this Agreement is not to be construed as creating a partnership, joint venture, master-servant, principal-agent, or other relationship for any purpose whatsoever. Except as may be expressly provided herein, neither party may be held for the acts either of omission or commission of the other party, and neither party is authorized to, or has the power to, obligate or bind the other party by contract, agreement, warranty, representation or otherwise in any manner whatsoever.     30.  Force Majeure.  If either party is delayed or interrupted in or prevented from, the performance of its obligations hereunder by reason of an act of God, fire, flood, war, public disaster, 12 -------------------------------------------------------------------------------- strikes or labor difficulties, governmental enactment, regulation or order, or any other cause beyond its control, such party shall not be liable to the other therefor; and the time for the performance of its obligations shall thereupon be extended for a period equal to the duration of the contingency that occasioned the delay, interruption or prevention.     31.  Integration and Modification.  This is the entire agreement between the parties. There are no other agreements or representations not set forth herein, and this Agreement incorporates all prior negotiations, agreements, and representations. This Agreement may not be modified except in writing signed by each party.     32.  Languages.  Both parties acknowledge that this agreement is written in English.     33.  Counterparts.  This Agreement may be signed in one or more counterparts, each of which may be deemed an original, but all of which together shall constitute one and the same agreement notwithstanding that both parties are not signatories to each counterpart, however, this agreement shall not be enforceable against any party until a counterpart has been executed by both parties hereto.     34.  Waiver of Breach.  The waiver by either party of any breach of this Agreement shall not be deemed a waiver of any subsequent breach.     35.  Other Agreement.  Licensor and Licensee have agreed to discuss and execute a memorandum or agreement relating to certain other matters related to the supply and roasting of coffee.     The remainder of this page has been left blank intentionally. 13 --------------------------------------------------------------------------------     Executed as of the date set forth above.     LICENSOR:     TULLY'S COFFEE CORPORATION     By:   /s/ JAMIE S. COLBOURNE    -------------------------------------------------------------------------------- Jamie S. Colbourne, its President and CEO     LICENSOR:     UCC UESHIMA COFFEE COMPANY LTD.     By:   /s/ TATSUSHI UESHIMA    -------------------------------------------------------------------------------- Tatsushi Ueshima, its Chairman/President/CEO 14 -------------------------------------------------------------------------------- SCHEDULE A TO TULLY'S COFFEE LICENSE AGREEMENT LIST OF BUSINESS NAMES Tully's Tully's Coffee Tully's Roaster of Fine Coffee Swirkle Tullini Tullini Sandwiches And the equivalents of any of the above in any foreign languages And any derivatives of foregoing. 15 -------------------------------------------------------------------------------- SCHEDULE B TO TULLY'S COFFEE LICENSE AGREEMENT LIST OF TRADEMARKS FOR SERVICES AND GOODS See attached Seed Intellectual Property Group Status Report re All Pending/Registered Applications Dated February 14, 2001. 16 -------------------------------------------------------------------------------- Trademark Status Report Tully's Coffee Corporation Sorted by Country, then by Mark   February 14, 2001 -------------------------------------------------------------------------------- Docket No:   910114.217CA   Appln No:   859106   Reg No:       Status:   Pending Mark:   TULLY'S   Filing Date:   10/17/97   Reg Date:             Country:   Canada   Class:   N/A   Renewal:             Goods/Services:   Coffee, ground coffee, whole bean coffee, coffee beverages and coffee-based beverages, sandwiches, pastries. Coffee bar services, restaurant services (cafe services), coffee distribution services, catering services, retail store services in the field of coffee, coffee making equipment and supplies.         -------------------------------------------------------------------------------- Docket No:   910114.218CA   Appln No:   859105   Reg No:       Status:   Pending Mark:   TULLY'S AND DESIGN   Filing Date:   10/17/97   Reg Date:             Country:   Canada   Class:   N/A   Renewal:             Goods/Services:   Ground coffee, whole bean coffee, coffee beverages and coffee-based beverages, sandwiches, pastries. Coffee bar services, restaurant services (cafe services), coffee distribution services, catering services, retail store services in the field of coffee, coffee making equipment and supplies.         -------------------------------------------------------------------------------- Docket No:   910114.215CN   Appln No:   9700114735   Reg No:   1253051   Status:   Registered Mark:   TULLY'S   Filing Date:   10/30/97   Reg Date:   3/7/99         Country:   China   Class:   30   Renewal:   3/7/09         Goods/Services:   Ground coffee, whole bean coffee, cocoa-based beverages, coffee-based beverages, sandwiches, pastries, chocolate-based beverages, tea.         -------------------------------------------------------------------------------- Prepared by Seed Intellectual Property Law Group N/A = Not Applicable   U = Unknown 17 -------------------------------------------------------------------------------- Docket No:   910114.216CN   Appln No:   9700114734   Reg No:   1235907   Status:   Registered Mark:   TULLY'S   Filing Date:   10/30/97   Reg Date:   12/28/98         Country:   China   Class:   42   Renewal:   12/28/08         Goods/Services:   Coffee bar services, restaurant services.         -------------------------------------------------------------------------------- Docket No:   910114.226CT   Appln No:   1261387   Reg No:       Status:   Pending Mark:   TULLY'S   Filing Date:   7/30/99   Reg Date:             Country:   European Community   Class:   30,35,39,42   Renewal:             Goods/Services:   Ground coffee, whole bean coffee, coffee beverages, coffee-based beverages, flavorings (other than essential oils), tea leaves, tea powder, tea beverages, tea-based beverages, cocoa, cocoa-based beverages, sandwiches, pastries, confectionery, in Class 30.             The bringing together, for the benefit of others goods, in the field of coffee, coffee making equipment and supplies, enabling customers to conveniently view and purchase those goods; advertising and promotions services in the field of coffee, coffee making equipment and supplies and information relating thereto including such services provided on-line from a computer database or the Internet; retail store services in the field of coffee, coffee making equipment and supplies, retail store services, available through computer communications and interactive television, featuring coffee making equipment and supplies, in Class 35.             Coffee distribution services, in Class 39.             Restaurant services, coffee distribution services, catering services, in Class 42.         -------------------------------------------------------------------------------- 18 -------------------------------------------------------------------------------- Docket No:   910114.227CT   Appln No:   1275874   Reg No:       Status:   Pending Mark:   TULLY'S ROASTER OF FINE COFFEE AND DESIGN   Filing Date:   8/12/99   Reg Date:             Country:   European Community   Class:   30,35,42   Renewal:             Goods/Services:   Ground coffee, whole bean coffee, coffee beverages, coffee-based beverages, flavorings (other than essential oils), tea leaves, tea powder, tea beverages, tea-based beverages, cocoa, cocoa-based beverages, sandwiches, pastries, confectionery, in Class 30.             The bringing together, for the benefit of others goods, in the field of coffee, coffee making equipment and supplies, enabling customers to conveniently view and purchase those goods; advertising and promotions services in the field of coffee, coffee making equipment and supplies and information relating thereto including such services provided on-line from a computer database or the Internet; retail store services in the field of coffee, coffee making equipment and supplies, retail store services, available through computer communications and interactive television, featuring coffee making equipment and supplies.             Restaurant services, café services, coffee bar services, coffee distribution services, catering services, in Class 42.         -------------------------------------------------------------------------------- Docket No:   910114.213JP   Appln No:   9-166518   Reg No:   4357668   Status:   Registered Mark:   TULLY'S AND TULLY'S (in Katakana)   Filing Date:   10/9/97   Reg Date:   1/28/2000         Country:   Japan   Class:   30,42   Renewal:   1/28/10         Goods/Services:   Roasted ground coffee, artificial coffee and other coffee and cocoa, in Class 30.             Catering services, serving coffee and other restaurant services in Class 42.         -------------------------------------------------------------------------------- 19 -------------------------------------------------------------------------------- Docket No:   910114.214JP   Appln No:       Reg No:       Status:   Closed Mark:   TULLY'S AND TULLY'S (in Katakana)   Filing Date:   10/9/97   Reg Date:             Country:   Japan   Class:   42   Renewal:             Goods/Services:   Catering services, coffee distribution services, serving coffee and other restaurant services.         -------------------------------------------------------------------------------- Docket No:   910114.219JP   Appln No:   11-050237   Reg No:       Status:   Pending Mark:   TULLY'S AND TULLY'S (in Katakana)   Filing Date:   10/9/97   Reg Date:             Country:   Japan   Class:   30   Renewal:             Goods/Services:   Coffee beans, sandwiches, pastries and other confectionery and bread.         -------------------------------------------------------------------------------- Docket No:   910114.229SG   Appln No:   T00/04891A   Reg No:       Status:   Pending Mark:   TULLY'S   Filing Date:   3/17/2000   Reg Date:             Country:   Singapore   Class:   35   Renewal:             Goods/Services:   Retail store services in the field of coffee, coffee making equipment and supplies.         -------------------------------------------------------------------------------- 20 -------------------------------------------------------------------------------- Docket No:   910114.220SG   Appln No:   T99/07375A   Reg No:   T99/07375A   Status:   Registered Mark:   TULLY'S   Filing Date:   7/16/99   Reg Date:   7/16/09         Country:   Singapore   Class:   30   Renewal:   7/16/99         Goods/Services:   Ground coffee, coffee beans, coffee beverages and coffee-based beverages; flavorings other than essential oils); tea leaves, tea powder and tea; cocoa and cocoa-based beverages; substitutes for all the aforesaid goods; sugar and sugar substitutes; pastries, confectionery and sandwiches.         -------------------------------------------------------------------------------- Docket No:   910114.221SG   Appln No:   T99/07376Z   Reg No:       Status:   Pending Mark:   TULLY'S   Filing Date:   7/16/99   Reg Date:             Country:   Singapore   Class:   42   Renewal:             Goods/Services:   Restaurant, cafe, coffee bar and catering services; consultancy, research and development (for others).         -------------------------------------------------------------------------------- Docket No:   910114.224SG   Appln No:   T99/08215G   Reg No:   T99/0821G   Status:   Registered Mark:   TULLY'S AND DESIGN   Filing Date:   8/4/99   Reg Date:   8/4/99         Country:   Singapore   Class:   30   Renewal:   8/4/09         Goods/Services:   Ground coffee, coffee beans, coffee beverages and coffee-based beverages; flavorings (other than essential oils); tea leaves, tea powder and tea; cocoa and cocoa-based beverages; substitutes for all the aforesaid goods; sugar and sugar substitutes; pastries, confectionery and sandwiches.         -------------------------------------------------------------------------------- 21 -------------------------------------------------------------------------------- Docket No:   910114.225SG   Appln No:   T99/08216E   Reg No:       Status:   Pending Mark:   TULLY'S AND DESIGN   Filing Date:   8/4/99   Reg Date:             Country:   Singapore   Class:   42   Renewal:             Goods/Services:   Restaurant, café, coffee bar and catering services, consultancy, research and development (for others).         -------------------------------------------------------------------------------- Docket No:   910114.228SG   Appln No:   T00/02834A   Reg No:       Status:   Pending Mark:   TULLY'S AND DESIGN   Filing Date:   2/24/2000   Reg Date:             Country:   Singapore   Class:   35   Renewal:             Goods/Services:   Retail store services in the field of coffee, coffee making equipment and supplies.         -------------------------------------------------------------------------------- Docket No:   910114.223TW   Appln No:   88035008   Reg No:   128542   Status:   Registered Mark:   TULLY'S   Filing Date:   7/19/99   Reg Date:   9/1/2000         Country:   Taiwan   Class:   42   Renewal:   8/31/10         Goods/Services:   Restaurant services; coffee bar services; catering services.         -------------------------------------------------------------------------------- Docket No:   910114.222TW   Appln No:   88034428   Reg No:       Status:   Published Mark:   TULLY'S   Filing Date:   7/15/99   Reg Date:             Country:   Taiwan   Class:   30   Renewal:             Goods/Services:   Ground coffee, whole bean coffee, coffee beverages and coffee-based beverages, sandwiches, pastries.         -------------------------------------------------------------------------------- 22 -------------------------------------------------------------------------------- Docket No:   910114.208   Appln No:   75/211,578   Reg No:   2,354,315   Status:   Registered Mark:   FANCIFUL COFFEE CUP DESIGN   Filing Date:   12/11/96   Reg Date:   6/6/2000         Country:   United States of America   Class:   35, 42   Renewal:   6/6/10         Goods/Services:   Retail coffee store services and cafe services, in Class 35. Cafe services, in Class 42.         -------------------------------------------------------------------------------- Docket No:   910114.211   Appln No:       Reg No:       Status:   Unfiled Mark:   FANCIFUL COFFEE CUP DESIGN   Filing Date:       Reg Date:             Country:   United States of America   Class:   30   Renewal:             Goods/Services:             -------------------------------------------------------------------------------- Docket No:   910114.206   Appln No:   75/096,562   Reg No:   2,179,028   Status:   Registered Mark:   SWIRKLE   Filing Date:   5/2/96   Reg Date:   8/4/98         Country:   United States of America   Class:   32   Renewal:   8/4/08         Goods/Services:   Non-alcoholic coffee-flavored drinks.         -------------------------------------------------------------------------------- 23 -------------------------------------------------------------------------------- Docket No:   910114.205   Appln No:   75/001,005   Reg No:   2,089,778   Status:   Registered Mark:   TULLINI   Filing Date:   10/2/95   Reg Date:   8/19/97         Country:   United States of America   Class:   30   Renewal:   8/19/07         Goods/Services:   Sandwiches.         -------------------------------------------------------------------------------- Docket No:   910114.201   Appln No:   74/731,366   Reg No:       Status:   Opposed Mark:   TULLY'S   Filing Date:   9/20/95   Reg Date:             Country:   United States of America   Class:   42   Renewal:             Goods/Services:   Retail coffee store services; cafe services.         -------------------------------------------------------------------------------- Docket No:   910114.202   Appln No:   74/732,538   Reg No:       Status:   Opposed Mark:   TULLY'S   Filing Date:   9/20/95   Reg Date:             Country:   United States of America   Class:   30   Renewal:             Goods/Services:   Coffee.         -------------------------------------------------------------------------------- Docket No:   910114.209   Appln No:   75/211,522   Reg No:       Status:   Suspended Mark:   TULLY'S AND DESIGN   Filing Date:   12/11/96   Reg Date:             Country:   United States of America   Class:   42   Renewal:             Goods/Services:   Retail coffee store services and cafe services.         -------------------------------------------------------------------------------- 24 -------------------------------------------------------------------------------- Docket No:   910114.212   Appln No:       Reg No:       Status:   Unfiled Mark:   TULLY'S AND DESIGN   Filing Date:       Reg Date:             Country:   United States of America   Class:   30   Renewal:             Goods/Services:             -------------------------------------------------------------------------------- Docket No:   910114.203   Appln No:   74/732,537   Reg No:       Status:   Abandoned Mark:   TULLY'S COFFEE AND DESIGN   Filing Date:   9/20/95   Reg Date:             Country:   United States of America   Class:   42   Renewal:             Goods/Services:   Retail coffee shop services.         -------------------------------------------------------------------------------- Docket No:   910114.204   Appln No:   74/732,536   Reg No:       Status:   Abandoned Mark:   TULLY'S COFFEE AND DESIGN   Filing Date:   9/20/95   Reg Date:             Country:   United States of America   Class:   30   Renewal:             Goods/Services:   Coffee.         -------------------------------------------------------------------------------- 25 -------------------------------------------------------------------------------- Docket No:   910114.207   Appln No:   75/211,363   Reg No:       Status:   Suspended Mark:   TULLY'S ROASTERS OF FINE COFFEE AND DESIGN   Filing Date:   12/11/96   Reg Date:             Country:   United States of America   Class:   42   Renewal:             Goods/Services:   Retail coffee store services and cafe services.         -------------------------------------------------------------------------------- Docket No:   910114.210   Appln No:   75/097,761   Reg No:       Status:   Suspended Mark:   TULLY'S ROASTERS OF FINE COFFEE AND DESIGN   Filing Date:   5/2/96   Reg Date:             Country:   United States of America   Class:   30   Renewal:             Goods/Services:   Coffee.         -------------------------------------------------------------------------------- 26 -------------------------------------------------------------------------------- SCHEDULE C TO TULLY'S COFFEE LICENSE AGREEMENT     DESCRIPTION OF TERRITORIES COVERED BY THE LICENSE AGREEMENT American Samoa Australia Cook Islands Guam New Zealand Palau Solomon Islands Saipan China Hong Kong Indonesia Laos Macao Malaysia Mongolia Nepal North Korea South Korea Phillipines Russia Singapore Sri Lanka Taiwan Thailand Vietnam 27 -------------------------------------------------------------------------------- QuickLinks TULLY'S COFFEE EXCLUSIVE LICENSE AGREEMENT RECITALS SCHEDULE A TO TULLY'S COFFEE LICENSE AGREEMENT SCHEDULE B TO TULLY'S COFFEE LICENSE AGREEMENT SCHEDULE C TO TULLY'S COFFEE LICENSE AGREEMENT

QuickLinks -- Click here to rapidly navigate through this document FIRST AMENDMENT TO THE EMPLOYMENT AGREEMENT THE FIRST AMENDMENT TO THE EMPLOYMENT AGREEMENT (the "Amendment") is made and entered into this 1st day of November, by Ross Stores, Inc. (the "Company") and James Peters (the "Executive"). The Executive and the Company previously entered into an Employment Agreement (the "Agreement") effective August 14, 2000 (attached hereto) and it is now the intention of the Executive and the Company to amend the Agreement as set forth below. Accordingly, the Executive and the Company now enter into this Amendment. I.The Executive and the Company hereby amend the Agreement by deleting Paragraph 9 (c) (i) of the Agreement in its entirety and by replacing it with the following new paragraph 9 (c) (i): (i)Lump Sum Payment. The Company shall pay to the Executive (or his designee or estate), immediately upon such termination, a lump sum amount equal to: (A) the sum of the Executive's then current salary and the greater of the most recent bonus paid to the Executive under the Management Incentive Plan or the target bonus for the fiscal year of the Company in which such termination occurs; times (B) the greater of two or the number of years (including partial years computed on a per day basis) remaining in the term of the Agreement under paragraph 1 (as extended pursuant to paragraphs 1 and 4(b)). The Executive will not receive the additional salary (i.e., $1,500,000 for two years) described in paragraph 4 (b) {Change of Control} as part of this lump sum payment. Rather, the additional salary provided in paragraph 4(b) will be paid over two years in accordance with the Company's normal payroll policies applicable to senior officers. II.The Executive and the Company further amend the Agreement by adding Paragraph 9 (c) (iv) to the Agreement: (iv)Estate Planning. In the event of the termination of Executive's employment following a Change of Control, then Executive shall also be entitled to the reimbursement of the Executive's estate planning expenses (including attorneys' fees) as to which and on the terms of which Executive was entitled prior to the termination for a period of two (2) years following the date of termination of employment.     Except for the amendments, as set forth above, the Agreement and all of its terms remain in force and in effect. IN WITNESS WHEREOF, the parties have executed this First Amendment to the Agreement as of            , effective            through             . ROSS STORES, INC.   EXECUTIVE /s/ Michael Balmuth --------------------------------------------------------------------------------   /s/ James Peters -------------------------------------------------------------------------------- Michael Balmuth, Vice Chairman and CEO   James Peters, President and COO 11/01/01 -------------------------------------------------------------------------------- Date   11/11/01 -------------------------------------------------------------------------------- Date -------------------------------------------------------------------------------- QuickLinks FIRST AMENDMENT TO THE EMPLOYMENT AGREEMENT

            LEASE of Premises at 200 Crossing Boulevard 9/90 Corporate Center Framingham, Massachusetts by and between NDNE 9/90 200 CROSSING BOULEVARD LLC or its assignee  and NATURAL MICROSYSTEMS CORPORATION Dated: As of April 1, 2000           Table of Contents     SECTION 1 - Reference Data Section 1.1 Reference Information Section 1.2 Exhibits     SECTION 2 - Premises and Term   Section 2.1 Premises Section 2.2 Term Section 2.3 Appurtenant Rights and Reservations Section 2.4 Option to Extend Term Section 2.5 Market Rent   SECTION 3 - Improvements   Section 3.1 Construction of Building Section 3.2 Tenant Improvements; Tenant’s Plans;   Pricing of Tenant’s Work; Landlord’s T.I Work Section 3.3 Preparation of Premises for Occupancy Section 3.4 General Provisions Applicable to Construction Section 3.5 Construction Representatives Section 3.6 Certain Landlord Obligations Section 3.7 Tenant’s Plans Section 3.8 Controlling Provisions Section 3.9 Changes in Building or Lot Section 3.10 Tenant’s Early Access   SECTION 4 - Fixed Rent     Section 4.1 Annual Fixed Rent Section 4.2 Nonterminability by Tenant Section 4.3 Reduced Rent Period     SECTION 5 - Operating Cost Escalation Real Estate Tax Escalation   Section 5.1 Operating Cost Escalation Section 5.2 Estimated Operating Cost Escalation Payments Section 5.3 Real Estate Tax Escalation Section 5.4 Estimated Real Estate Tax Escalation Payments Section 5.5 Right to Audit Records     SECTION 6 - Insurance   Section 6.1 Tenant's Insurance Section 6.2 Landlord's Insurance Section 6.3 Tenant Reimbursement of Insurance Taken   Out by Landlord Section 6.4 Requirements Applicable to Insurance Policies Section 6.5 Waiver of Subrogation       SECTION 7 - Utilities; Park Common Expenses; Payments on Account   Section 7.1 Utilities Section 7.2 Park Common Expenses;     SECTION 8 - Landlord’s Covenants   Section 8.1 Quiet Enjoyment Section 8.2 Maintenance and Repair Section 8.3 Electricity, Water and Gas Section 8.4 HVAC Section 8.5 Cleaning Section 8.6 Interruptions Section 8.7 Landlord's Indemnity Section 8.8 Representations and Warranties   SECTION 9 - Tenant's Covenants; Law   Section 9.1 Use Section 9.2 Repair and Maintenance Section 9.3 Compliance with Law and Insurance Requirements Section 9.4 Tenant's Work Section 9.5 Indemnity Section 9.6 Landlord's Right to Enter Section 9.7 Personal Property at Tenant's Risk Section 9.8 Payment of Cost of Enforcement Section 9.9 Yield Up Section 9.10 Estoppel Certificate Section 9.11 Rules and Regulations Section 9.12 Park Covenants and Restrictions Section 9.13 Holding Over Section 9.14 Assignment and Subletting Section 9.15 Overloading and Nuisance Section 9.16 Prevailing Party/Attorneys’ Fees     SECTION 10 - Casualty or Taking     Section 10.1 Abatement of Rent Section 10.2 Landlord’s Right of Termination Section 10.3 Restoration; Tenant’s Right of Termination Section 10.4 Award Section 10.5 Temporary Taking Section 10.6 No Liability On Account Of   Injury To Business, Etc.   SECTION 11 - Default   Section 11.1 Events of Default Section 11.2 Remedies Section 11.3 Remedies Cumulative Section 11.4 Landlord’s Right to Cure Defaults Section 11.5 Effect of Waivers of Default Section 11.6 No Accord and Satisfaction Section 11.7 Interest on Overdue Sums Section 11.8 Tenant’s Right to Cure Defaults SECTION 12 - Mortgages   Section 12.1 Rights of Mortgage Holders Section 12.2 Superiority of Lease; Option to   Subordinate SECTION 13 - Miscellaneous Provisions   Section 13.1 Notices from One Party to the Other Section 13.2 Quiet Enjoyment Section 13.3 Lease Not to be Recorded;   Notice of Lease Section 13.4 Bind and Inure;   Limitation of Landlord’s Liability Section 13.5 Acts of God Section 13.6 Landlord's Default Section 13.7 Brokerage Section 13.8 Miscellaneous Section 13.9 Financial Statements Section 13.10 Easements, Changes To Lot Lines;   Reciprocal Easement Section 13.11 Security Deposit Section 13.12 Signage Section 13.13 Non Disturbance Agreement   SECTION 14 – Intentionally Omitted     SECTION 15 – Right of First Offer     SECTION 16 – Intentionally Omitted SECTION 17 - Leasehold Lot     LEASE SECTION 1 Reference Data              Section 1.1       Reference Information.  Reference in this Lease to any of the following shall have the meaning set forth below:                Additional Rent:  Any sum or payment designated under this Lease as constituting "Additional Rent" including, without limitation, payments by Tenant on account of (i) Operating Cost Escalations and Real Estate Tax Escalations under Section 5 (ii) payments due under Section 9.2 and (iii) payments due under Section 9.3 on account of Subsequent Law-Related Changes.              Annual Fixed Rental Rate or Annual Fixed Rent: During Original Term: Commencement Date through end of Year 5 $1,250,425.00 per annum ($27.50 per rentable square foot contained in the Premises Rentable Area per annum) Beginning of Year 6 through end of Year 10: $1,341,365.00 per annum($29.50 per rentable square foot contained in the Premises Rentable Area per annum) Beginning of Year 11 through May 31, 2012: $1,432,305.00 per annum($31.50 per rentable square foot contained in the Premises Rentable Area per annum)              All such Annual Fixed Rent shall be payable as and when required by Section 4 of this Lease.              Broker: Trammell Crow Company              Building:  The building erected or to be erected on the Fee Lot by Landlord substantially in conformity with Exhibits A-3 and A-4 together with all alterations thereof and additions thereto and replacements thereof and known as or to be known as 200 Crossing Boulevard, Framingham, MA.              Business Days:  All days except Sunday and Legal Holidays in Boston, Massachusetts.              Business Hours:  8:00 a.m. to 6:00 p.m. on all Business Days except Saturday from 8:00 a.m. to 1:00 p.m.              Cross Easement:  That certain Cross-Easement Agreement dated September 30, 1996 and recorded in the Middlesex (South) Registry of Deeds in Book 26738, Page 315, as amended by First Amendment to Cross-Easement Agreement dated as of January 21, 1998 and recorded in Middlesex (South) Registry of Deeds in Book 28102, Page 272.              Date of this Lease: April 1, 2000.              Anticipated Term Commencement Date: December 1, 2000                Fee Lot:  Lot 3 as described on Exhibit A-1 attached hereto subject to adjustments in the Lot boundaries from time to time as provided in Section 13.10.              Annual Base Operating Costs:  Operating Costs for the calendar year January 1, 2001 through December 31, 2001.              Annual Base Real Estate Taxes:  Real Estate Taxes for the Fiscal Tax Year ending June 30, 2002.              Entire Leasehold Lot:  Lot B as shown on that certain Plan entitled “Subdivision Plan of Land in Framingham, Massachusetts dated June 5, 1996, revised June 13, 1996 and recorded in the Middlesex (South) District Registry of Deeds as Plan Number 1064 of 1996”.              Ground Lease:  The Indenture of Lease dated as of August 15, 1980, between the Inhabitants of The Town of Framingham ("Town") as landlord and The First National Bank of Boston (Bank of Boston) notice of which is recorded with the Middlesex South Registry of Deeds (The Registry) in Book 14306, Page 282 (the "Original Ground Lease").  The interest of The Bank of Boston as tenant under the Original Ground Lease was assigned to 9/90 Crossing Associates Limited Partnership ("9/90") pursuant to that certain lease assignment dated as of July 29, 1987, and recorded with the Registry in Book 18428, Page 050.  The interest of "9/90" as tenant under the Original Ground Lease was further assigned by "9/90" to Rose Holding, Inc. ("Rose") pursuant to that certain Lease Assignment dated as of June 10, 1994, recorded with the Registry in Book 24620, Page 63.  The Original Ground Lease was amended by Amendment to Lease dated August, 1996, by and between the Town and Rose.  All references herein to the Original Ground Lease shall mean the Original Lease as so assigned and amended.  The interest of Rose as tenant under the Ground Lease insofar as it relates to the Leasehold Lot was assigned to the Landlord hereunder by Rose (the "Rose Partial Assignment").  All references in this Lease to the Ground Lease shall mean the Original Ground Lease as it relates to the Leasehold Lot as assigned to Landlord by the Rose Partial Assignment as it may be further assigned or amended from time to time and, for purposes hereof, the premises thereunder shall be deemed to include only the Leasehold Lot and all obligations of Landlord as tenant thereunder related solely to the Leasehold Lot.              Landlord:  NDNE 9/90 200 Crossing Boulevard LLC, a Massachusetts limited liability company, its successors and assigns.              Landlord's Address: c/o National Development, 2310 Washington Street, Newton Lower Falls, Massachusetts 02162              Landlord's Construction Representative: John J. O’Neil, III or Mark L. Paris.              Leasehold Lot:  Parcel B-2 as described on Exhibit A-2 attached hereto, subject to adjustments in the Lot boundaries from time to time as provided in Section 13.10. The Leasehold Lot is a portion of the Entire Leasehold Lot.              Leasehold Parking Area:  The area identified on Exhibit A-2 as the Leasehold Parking Area as same may be modified from time to time.              Lot or Lots:  The Fee Lot and the Leasehold Lot as said Lots are modified from time to time pursuant to this Lease.              Lot's Allocable Share:  As defined in Section 7.2(b). Measurement Method:  The Modified New York BOMA Measurement Method, 1980, Reaffirmed 1989.              Original Term: As defined in Section 2.2 hereof.              Park: The term "Park" shall mean the land described in Exhibits A-1 and A-2 of the Park Covenants together with other land hereafter added thereto under the Park Covenants and together with the buildings, structures and other improvements as may, from time to time, be constructed thereon, and all of which are referred to in the Park Covenants as "9/90 Corporate Center".              Park Common Expenses:  As defined in Section 7.2(a)              Park Common Property:  As defined in Section 7.2(a)              Park Covenants:  The Amended and Restated Declaration of Covenants, Restrictions, Development Standards and Easements attached hereto as Exhibit A-14 together with any amendments thereto as are permitted thereunder.              Permitted Assignee:  As defined in Section 9.14.              Permitted Uses:  Office, research and development and light manufacturing.              Plan:  The Site Plan of the Building (proposed location) and Lot attached hereto as Exhibit A-3.              Property:  The Lot, the Leasehold Lot and the Leasehold Parking Area together with the Building and any improvements now or hereafter located thereon.              Premises:  That portion of the Building shown on Exhibit A-6 and located on the first and second floors of the Building.              Premises Rentable Area:  Approximately 45,470 rentable square feet of which approximately 22,355 rentable square feet are located on the first floor and approximately 23,115 rentable square feet are located on the second floor of the Building.  The Premises Rentable Area has been determined using the Measurement Method except as follows:    (i) measurements will be taken to the inside face of glass on exterior walls, even if the glass is not the dominant portion of the exterior wall, (ii)  measurements to common areas, halls, etc. will be to the center line of the partition, (iii) common areas such as the first floor lobby, elevator lobbies, cafeteria, locker room/shower facilities, common corridors, etc. will be included in rentable area, and (iv) any vertical penetrations dedicated solely to Tenant's use (i.e. in excess of vertical penetrations required to service a standard office building) shall be included in usable areas.  Rentable Area to be determined utilizing the following formula: Rentable Area to be Useable Area of Premises ÷ Efficiency Factor equals Premises Rentable Area.              Public Liability Insurance Limit:   Bodily Injury and Property Damage: Combined single limit of $2,000,000, or such greater amount as reasonably required by Landlord from time to time provided such greater amounts are comparable to the insurance limits carried by institutional owners of first class office buildings in the so-called Boston-Metro West area                    Building Rentable Area:  Approximately 123,750 rentable square feet. The Building Rentable Area has been determined using the Measurement Method except as follows:  (i) measurements will be taken to the inside face of glass on exterior walls, even if the glass is not the dominant portion of the exterior wall, (ii)  measurements to common areas, halls, etc. will be to the center line of the partition, (iii) common areas such as the first floor lobby, elevator lobbies, cafeteria, locker room/shower facilities, common corridors, etc. will be included in rentable area, and (iv) any vertical penetrations dedicated solely to Tenant's use (i.e. in excess of vertical penetrations required to service a standard office building) shall be included in usable areas.  Rentable Area to be determined utilizing the following formulation  Usable Square Footage of Building ÷ Efficiency Factor equals Building Rentable Area.              Security Deposit:  A cash deposit in the Required Amount of $500,000.00 to be held and applied pursuant to Section 13.11 of this Lease.              Tenant: Natural MicroSystems Corporation, a Delaware corporation              Tenant's Address: 100 Crossing Boulevard, Framingham, MA              Tenant's Construction Representative:  Jamie Toale              Tenant's Proportionate Share: Thirty Six and Seven Four One Hundredths (36.74%) Per Cent.              Title Exceptions:  The matters set forth on Exhibit A-5 together with (a) such other easements, rights, encumbrances, reservations and other matters of record title to the Property now or hereafter affecting the property so long as Tenant’s use of the Premises is not materially and adversely affected thereby and (b) subject to the provisions of Section 12 and Section 13.13 hereof,  all mortgages of record as of the date of execution and delivery of this Lease and any future mortgage hereafter placed upon the Property.              Term of this Lease:  The Original Term and any period through which the Original Term may be extended.              Tenant Plan Delivery Date:  June 1, 2000.              As used herein, the term "Year" shall mean each consecutive twelve (12) calendar month period immediately following the Term Commencement Date, but if the Term Commencement Date shall fall on other than the first day of a calendar month then, such term shall mean each consecutive twelve calendar month period commencing with the first day of the first full calendar month of the Original Term.  The first “Year” shall include any partial calendar month between the Term Commencement Date and the first day of the first full calendar month immediately following the Term Commencement Date.   Section 1.2 Exhibits.  The following Exhibits are attached to and incorporated in this Lease: EXHIBIT A-1: Description of Fee Lot EXHIBIT A-2: Description of Leasehold Lot  (showing Leasehold Parking Area) EXHIBIT A-3: Site Plan of Building and Lot (including both Fee and Leasehold Lot showing Leasehold Parking Area) EXHIBIT A-4: List of Base Building and Site Work Plans and Specifications EXHIBIT A-5: Title Exceptions EXHIBIT A-6: Plan of Premises EXHIBIT A-7: Janitorial Services EXHIBIT A-8: Tenant Plan Information EXHIBIT A-9: TI Construction Contract for Landlord's TI Work (includes Subcontractors BID List) EXHIBIT A-10 Rules and Regulations EXHIBIT A-11 Form of Estoppel Certificate EXHIBIT A-12 Form of Subordination Non-Disturbance and Attornment Agreement EXHIBIT A-13 Building Standard Improvements EXHIBIT A-14 Park Covenants     SECTION 2 Premises and Term              Section 2.1  Premises.  Landlord hereby leases and demises the Premises to Tenant and Tenant hereby leases the Premises from Landlord, subject, in all events, to (a) all rights reserved to Landlord under this Lease (including without limitation those set forth in Section 13.10), (b) the Title Exceptions and (c) the terms and provisions of this Lease.  Tenant shall not alter, or construct any improvements on, the driveways, parking areas, parking spaces, landscaped areas, open areas, entry ways, curb cuts, drainage facilities or utilities located in, on or under the Lot.  All rights of Tenant in and to the Lot and the Leasehold Parking Area are subject, in all events, to the Ground Lease, the Cross-Easement, the Park Covenants and all of the rights reserved to Landlord under this Lease including, without limitation, the rights under Section 13.10.              Section 2.2  Term.  TO HAVE AND TO HOLD for a term (the "Original Term") beginning on the earlier of (a) the date the Landlord's Work shall be deemed to be substantially complete pursuant to Section 3.3(b) and (b) the date on which Tenant shall occupy all or any part of the Premises for the conduct of business (whichever of said dates is appropriate being hereafter referred to as the Commencement Date or the “Term Commencement Date"), and continuing through May 31, 2012.              Section 2.3 Appurtenant Rights and Reservations.              (a)         Tenant shall have, as appurtenant to the Premises, the non-exclusive right to use, and permit its invitees to use in common with others, public or common toilets, the Leasehold Parking Area, (subject to the provisions hereof regarding Landlord's right to reserve and designate Covered Spaces for the exclusive use of tenants or occupants of the Building) the Covered Spaces (as hereafter defined) public or common lobbies, hallways, stairways, elevators and common walkways necessary for access to the Building, and if the portion of the Premises on any floor of the Building includes less than the entire floor, the common toilets, corridors and elevator lobby of such floor; but such rights shall always be subject to the rules and regulations set forth in Exhibit A-10 and such other reasonable rules and regulations as may be from time to time established by Landlord pursuant to this Lease which are of general application to all tenants and occupants of the Building and to the right of Landlord to designate and change from time to time areas and facilities so to be used (provided, however, that such substituted areas and facilities are substantially equivalent or better).  Tenant and its employees shall also have the non-exclusive right to use, in common with others entitled thereto, such other common areas and facilities in or appurtenant to the Building as Landlord may from time to time designate and provide. There shall be 436 unreserved non-exclusive parking spaces on the Lot and 45 spaces (the "Covered Spaces") in the covered parking area to be located on the Lot.  In no event shall Tenant or Tenant’s agents, servants, employees, guests or invitees be permitted to use any of the Covered Spaces which are designated by Landlord from time to time as being reserved for the exclusive use of any other person or entity.  Landlord hereby reserves the right, subject to Tenant's right to Lease up to, in the aggregate, 12 Covered Spaces as hereafter set forth, to reserve and designate any of the Covered Spaces (not leased to Tenant on an exclusive basis as hereafter set forth) to any other tenant or occupant of the Building. Notwithstanding the foregoing, at Tenant’s option, Tenant shall have the right to the exclusive use of up to twelve (12) designated and reserved Covered Spaces at a cost of $100.00 per month per Covered Space (such costs to be considered Additional Rent under this Lease).  In the event Tenant shall desire to use such Covered Spaces, Tenant shall provide Landlord with written notice and such spaces shall be leased to Tenant as an appurtenance to the Premises on a month to month basis with thirty (30) days notice of termination from Tenant required.  Provided, however, that notwithstanding the foregoing to the contrary, Tenant’s right to use the Covered Spaces and all other parking spaces on the Property (covered or uncovered) shall expire upon any expiration or earlier termination of this Lease without the requirement of any affirmative act by Landlord or Tenant.  It is agreed and understood that Landlord may at any time and from time to time designate any of the Covered Spaces not specifically reserved and dedicated to Tenant as aforesaid to any other tenant or occupant of the Building in Landlord's sole and absolute discretion.              (b)        Excepted and excluded from the Premises are exterior faces of exterior walls, the common stairways and stairwells, elevators and elevator shafts, fan rooms, mechanical, electric and telephone closets, janitor closets, freight elevator vestibules and pipes, ducts, conduits, wires and appurtenant fixtures serving exclusively or in common other parts of the Building, but included in the Premises are all entry doors to the Premises and all special installations of Tenant, such as interior stairs, special flues and special air conditioning facilities.  Landlord reserves the right from time to time, without unreasonable interference with Tenant's use:  (a) to install, use, maintain, repair, replace and relocate for service to the Premises and other parts of the Building, or either, pipes, ducts, conduits, shafts, wires and appurtenant fixtures, wherever located in the Premises or Building, and (b) to alter or relocate any other common facility, provided that substitutions are substantially equivalent or better.  Landlord reserves the exclusive use of all fan rooms, electric and telephone closets, janitor closets, freight elevator vestibules, pipes, ducts, conduits, wires and appurtenant fixtures located within the Premises which serve exclusively or in common other parts of the Building.              Section 2.4  Option to Extend Term.   Tenant shall have two (2) options to extend the Original Term of this Lease, each such option to be for a period of five (5) years (hereafter the "First Extension Term" and the “Second Extension Term” respectively) beginning upon expiration of the Original Term and as applicable, expiration of the First Extension Term in the case of the Second Extension Term provided that (a) no default beyond any applicable grace and cure periods in the obligations of Tenant to pay Annual Fixed Rent or Additional Rent under this Lease shall exist at the time each such option is exercised and no other payment default or material default beyond applicable notice and grace periods shall exist under this Lease either at the time of notice of exercise of the option or upon the day of commencement of any such Extension Term, (b) Tenant shall give notice to Landlord of its exercise of the applicable option not less than nine (9) full calendar months prior to expiration of (i) the Original Term in the case of the option with respect to the First Extension Term and (ii) the First Extension Term in the case of the option with respect to the Second Extension Term and (c) at the time such option is exercised and as of the first day of each such Extension Term, the original Tenant named in Section 1.1 of this Lease shall itself be in occupancy of 85% of the Premises Rentable Area. All of the terms and provisions of this Lease shall be applicable during the respective Extension Terms except that (a) Tenant shall have no additional option to extend the Term of this Lease beyond the Second Extension Term, (b) the Annual Fixed Rent for each year during each respective Extension Term shall be the greater of (i) 95% of the Market Rent provided in Section 2.5 as of the first day of the applicable Extension Term or (ii) the per annum Annual Fixed Rent in effect during the last year of (w) the Original Term in the case of the First Extension Term and (x) the First Extension Term in the case of the Second Extension Term and (c) none of the provisions of Article 3 shall apply nor shall Landlord be required to pay any inducement payments nor make any alterations of any kind or nature              Failure of Tenant to satisfy any of the foregoing conditions shall be deemed a waiver of Tenant’s rights under this Section 2.4.  Failure of Tenant to give a timely and proper notice of its exercise of the first such option to extend shall terminate and extinguish Tenant’s rights with respect to the second option to extend.              Section 2.5  Market Rent. "Market Rent" shall be computed as of the applicable date of Commencement of the applicable Extension Term at the then current rentals being charged to new tenants for comparable space located in the vicinity of the Building, taking into account and giving effect to, in determining comparability, without limitation, such considerations as size, location, lease term, rent concessions, free rent, tenant improvements and tenant build out allowances.              Market Rent shall be determined by agreement between Landlord and Tenant but if Landlord and Tenant are unable to agree upon the Market Rent at least seven (7) months prior to the date upon which the Market Rent is to take effect, then the Market Rent shall be determined by appraisal as follows:  Landlord and Tenant shall each appoint a Qualified Appraiser (as said term is hereinafter defined) at least six (6) months prior to the commencement of the Extension Term and shall designate the Qualified Appraiser so appointed by notice to the other party.  The two appraisers so appointed shall meet within ten (10) days after both appraisers are designated in an attempt to agree upon the Market Rent for the Extension Term and if, within fifteen (15) days after both appraisers are designated, the two appraisers do not agree upon the Market Rent, then each appraiser shall, not later than thirty (30) days after both appraisers have been chosen, deliver a written report to both the Landlord and Tenant setting forth the Market Rent as determined by each such appraiser taking into account the factors set forth in this Section 2.5.  If the lower of the two determinations of Market Rent as determined by such two appraisers is equal to or greater than 90% of the higher of the Market Rent as determined by such two appraisers, the Market Rent shall be deemed to be the average of such Market Rent as set forth in such two determinations.  If the lower determination of Market Rent is less than 90% of the higher determination of Market Rent, the two appraisers shall promptly appoint a third Qualified Appraiser and shall designate such third Qualified Appraiser by notice to Landlord and Tenant.  The cost and expenses of each appraiser appointed separately by Tenant and Landlord shall be borne by the party who appointed the appraiser.  The cost and expenses of the third appraiser shall be shared equally by Tenant and Landlord.   If the two appraisers cannot agree on the identity of the third Qualified Appraiser at least three (3) months prior to commencement of the Extension Term, then the third Qualified Appraiser shall be appointed by the American Arbitration Association ("AAA") sitting in Boston, Massachusetts and acting in accordance with its rules and regulations.  The costs and expenses of the AAA proceeding shall be borne equally by the Landlord and Tenant.  The third appraiser shall promptly make its own independent determination of Market Rent for the Premises taking into account the factors set forth in this Section 2.5 and shall promptly notify Landlord and Tenant of his determination.  If the determinations of the Market Rent of any two of the appraisers shall be identical in amount, said amount shall be deemed to be the Market Rent for the Premises.  If the determinations of all three appraisers shall be different in amount, the average of the two nearest in amount shall be deemed the Market Rent.  The Market Rent of the subject space determined in accordance with the provisions of this Section shall be binding and conclusive on Tenant and Landlord.  As used herein, the term "Qualified Appraiser" shall mean any disinterested person (a) who is employed by a real estate brokerage company or an appraisal firm of recognized competence in the greater Boston area, and (b) who has not less than ten (10) years experience in appraising and valuing properties of the general location, type and character as the Premises.  Notwithstanding the foregoing, if either party shall fail to appoint its appraiser within the period specified above (such party referred to hereinafter as the "Failing Party"), the other party may serve notice on the Failing Party requiring the Failing Party to appoint its appraiser within ten (10) days of the giving of such notice and if the Failing Party shall not respond by appointment of its appraiser within said ten (10) day period, then the appraiser appointed by the other party shall be the sole appraiser whose determination of Market Rent shall be binding and conclusive upon Tenant and Landlord.              If the dispute between the parties as to Market Rent has not been resolved before the commencement of the applicable Extension Term, then beginning on the first day of the Extension Term, Tenant shall pay rent under the Lease in respect of the Premises based upon the greater of (i) the Annual Fixed Rent in effect during the last year of the Original Term or (ii) 95% of the Market Rent designated by Landlord until either the agreement of the parties as to the Market Rent or the decision of the arbitrators, as the case may be, at which time Tenant shall pay any underpayment of rent to Landlord, or Landlord shall refund any overpayment of rent to Tenant.   SECTION 3 Improvements              Section 3.1  Construction of Building. Landlord, at its expense, shall diligently construct the Building and site improvements in accordance with Exhibits A-3 and A-4 (the "Landlord's Building Construction Work") and all laws, codes, ordinances and other applicable governmental requirements in effect on the date the building permit is obtained. Landlord and Tenant shall respond promptly to all communications from the other and shall cooperate with each other throughout the construction process.              Section 3.2  Tenant Improvements; Tenant’s Plans; Pricing of Tenant’s Work; Landlord’s TI Work.              (a)         Tenant agrees to deliver to Landlord not later than the Tenant Plan Delivery Date a detailed floor plan layout together with working drawings and written instructions and constituting full and complete construction documents (herein called "Tenant's Plans") in accordance with and containing at least the information detailed in Exhibit A-8 and reflecting all partitions, alterations and improvements desired by Tenant in the Premises.  Within fourteen (14) days of the receipt of Tenant's Plans, Landlord shall furnish to Tenant in writing a time schedule for the completion of the work shown on Tenant's Plans and an estimated Guaranteed Maximum Price for the work as shown on Tenant’s Plans calculated pursuant to the TI Construction Contract for the cost of construction work and material necessary to complete the work shown in Tenant’s Plans in accordance with Tenant's Plans, costs (which shall include the Landlord’s contractors fee of 8% based on the Cost of the Work as hereafter described) and upon agreement on the scope an cost of Landlord’s TI Work being hereinafter referred to as the Tenant Improvement Costs.  Tenant shall notify Landlord in writing, within four (4) Business Days of receipt by Tenant of the estimate of, and the time schedule for, the Tenant Improvement Costs, of either its approval thereof and its authorization to Landlord to proceed with construction in accordance with Tenant's Plans or any changes in Tenant's Plans.              In the event Tenant elects the latter alternative (namely, to change Tenant's Plans), Landlord shall within seven (7) days of receipt of said changes in Tenant's Plans quote to Tenant all estimated changes in Tenant Improvement Costs (the "First Revised Tenant Improvement Costs") resulting from said plan modifications.  Tenant shall, on or before the fourth (4th) Business Day (the "Outside Authorization to Proceed Date") following the receipt by Tenant of the First Revised Tenant Improvement Costs, give notice to Landlord of either (i) its approval thereof and its authorization to Landlord to proceed with the construction in accordance with Tenant's Plans as modified or (ii) of any further changes in Tenant's Plans.  If Tenant again elects the latter alternative (namely to change Tenant's Plans), the foregoing procedures and time periods for delivery of additional quotes to Tenant of all changes in Tenant Improvement Costs and for Tenant's either giving authorization to proceed or to make further changes on Tenant's Plans shall apply except that for all purposes under this Lease, (including without limitation Section 3.3 (c) hereof) the Outside Authorization to Proceed Date shall not be extended (or deemed extended) beyond July 5, 2000.  Tenant agrees to use good faith diligent efforts to finally approve all such changes in the Tenant Improvement Costs and in Tenant's Plans and to give its authorization to proceed with construction as aforesaid on or before the Outside Authorization to Proceed Date.  Tenant shall be charged with responsibility for all delays and increased costs and expenses related to any failure of Tenant to give Landlord full authorization to proceed with construction as shown on Tenant's Plans, as so changed by Tenant, on or before the Outside Authorization to Proceed Date (including, without limitation, loss of rent and reduction of the Reduced Rent Period to the extent so provided in Section 3.3(c) hereof) provided that, in the case of changes, Landlord identifies all such increased costs due to such change at the time Landlord quotes the cost of such change to Tenant.  Upon approval of the Tenant's Plans and the Tenant Improvement Costs, Landlord shall enter into the construction contract in the form attached to this Lease as Exhibit A-9 which shall be based on a guaranteed maximum price, subject to change orders in accordance with the terms of this Lease.              To the extent that the Tenant Improvement Costs exceed the amount of $22.00 per rentable square foot contained in the Premises Rentable Area (the "TI Allowance"), Tenant shall be responsible for such excess costs (the "Excess Costs") as hereinafter set forth. Tenant shall reimburse Landlord for Excess Costs as Additional Rent under this Lease as follows: during the performance of Landlord's TI Work, Landlord may, on or about the first day of each month, deliver to Tenant a statement showing that proportion of Excess Costs allocable to the previous month's work.  Tenant shall pay to Landlord the amount specified in each such statement within thirty days after receipt of such statement.  Any failure by Tenant to pay when due any amount required in this Section 3 shall entitle the Landlord to the same rights and remedies as a failure to pay Annual Fixed Rent when due.              (b)        Time is of the essence in connection with delivery of Tenant's Plans to Landlord, review of Tenant's Plans, furnishing of the Tenant Improvement Costs and time schedule by Landlord and authorization to Landlord to proceed with construction on or before the Outside Authorization to Proceed Date.  Should Tenant (i) fail to deliver Tenant's Plans as scheduled, or (ii) fully authorize Landlord to proceed with Landlord’s TI Work on or before the Outside Authorization to Proceed Date, the Anticipated Term Commencement Date shall be deferred one day for each day of delay caused by, or chargeable to, Tenant or Tenant's architect.              (c)         Tenant hereby agrees that the work shown in Tenant’s Plans (the "Landlord's TI Work") will be performed by Landlord's general contractor.  It is understood and agreed that the Tenant Improvement Costs shall include Landlord's contractor's fee in the total amount equal to eight (8%) percent of the Cost of the Work for Landlord's TI Work (as said term "Cost of the Work" is defined in the TI Construction Contract).  Tenant shall also pay the Landlord, within ten (10) days of billing therefor, for any increases in the Tenant Improvement Costs resulting from changes in the Tenant's Plans (which Tenant or its architect request or which result from errors, omissions or incompleteness of such Tenant Plans or which result from any failure of such Tenant Plans (or the work shown thereon) to comply with applicable laws, ordinances, rules and regulations), as finally approved, it being understood that such increased costs shall be equal to the aggregate of (a) the Cost of the Work, as defined in the TI Construction Contract, for such changes, (b) Landlord's contractor's overhead and profit in the total amount equal to eight (8%) percent of the Cost of the Work for such changes (c) all delay costs and expenses identified by Landlord in writing at the time of agreeing to any change, to the extent actually incurred or suffered and (d) loss of rent and reduction of the Reduced Rent Period to the extent so provided in Section 3.3(c).  Landlord agrees to cause its general contractor to solicit bids for the Landlord's TI Work from each of the subcontractors identified on the Subcontractor Bid List attached to the TI Construction Contract.  Although Landlord's general contractor will charge an eight (8%) percent fee as part of the Tenant Improvement Costs, Landlord shall not, itself, charge any separate construction administration fee.  Landlord will not be required to solicit bids for the general contract.              Landlord agrees to use due diligence to complete the work described in Tenant's Plans on or before the Anticipated Term Commencement Date.  Landlord shall not be required to install any improvements which are not in conformity or compatible with the matters shown on Exhibits A-3 and A-4 or which are not approved by Landlord's architect or which do not comply with applicable law, ordinances or codes.  Further, Landlord will not be responsible for any failure of the design (including, without limitation, errors, omissions and incompleteness of Tenant's Plans and instructions from Tenant's architect) of Landlord's TI Work (including without limitation, the plans, specifications, layouts or materials) to comply with applicable laws, ordinances or codes.  If Landlord determines that any portion of the Landlord's TI Work should be performed by a subcontractor on the Subcontractor Bid List who is not the lowest bidder for the applicable portion of the Landlord's TI Work, then the designation of the subcontractor who will be selected to perform such portion of the Landlord's TI Work shall be subject to the mutual agreement of Landlord and Tenant.  In case of delays in the Landlord’s Building Construction Work or Landlord’s TI Work due to governmental regulation, unusual scarcity or inability to obtain labor or materials, labor difficulties, casualty or other causes reasonably beyond Landlord's control, the Anticipated Term Commencement Date shall be extended for the period of such delays.              (d)        Tenant agrees that for any delay in performing work to prepare the Premises for occupancy caused by it, or anyone employed by it (including without limitation, Tenant's architect), the Anticipated Term Commencement Date will be adjusted one day for each such day of delay.              (e)        If Landlord shall be unable to give possession of the Premises on the Anticipated Term Commencement Date because the Premises (including both Landlord’s Building Construction Work and Landlord’s TI Work) are not substantially completed (as provided in Section 3.3), Landlord shall not be subject to any liability for failure to give possession on said date, nor shall such failure affect the validity of this Lease.              If the Substantial Completion Date (as hereafter defined in Section 3.3(b) hereof) has not occurred by the Anticipated Term Commencement Date (as it may be extended pursuant to this Section 3), Tenant shall have the right to terminate this Lease by giving notice to Landlord, not later than thirty (30) days after the Anticipated Term Commencement Date (as so extended), of Tenant's desire so to do; and this Lease shall cease and come to an end without further liability or obligation on the part of either party one hundred twenty (120) days after the giving of such notice, unless, within such 120-day period, Landlord substantially completes Landlord's Work to the extent required by Section 3.3(B), which substantial completion shall void Tenant's election to terminate; and such right of termination shall be Tenant's sole and exclusive remedy at law or in equity for Landlord's failure so to complete Landlord's Work within such time.              (f)         All of the Tenant's installation of furnishings and equipment shall be coordinated with any work being performed by Landlord and in such manner as to maintain harmonious labor relations and not damage the Building or Lot or the Leasehold Parking Area or materially interfere with Landlord’s Building Construction Work or Landlord’s TI Work.  Landlord agrees to use good faith efforts to cooperate with Tenant to maintain harmonious labor relations with workers performing work on behalf of Tenant to prepare the Premises for occupancy by Tenant.  Except for installation of furnishings and equipment, any construction work to be performed in the Premises shall be performed by Landlord's general contractor or subcontractors on the subcontractor Bid List or otherwise approved by Landlord and Tenant.              Section 3.3  Preparation of Premises for Occupancy.              (a)  Landlord agrees to use diligent efforts to substantially complete construction of Landlord's Building Construction Work and Landlord’s TI Work (collectively the “Landlord’s Work”) as provided in this Section 3 on or before the Anticipated Term Commencement Date.  The Anticipated Term Commencement Date shall also be extended by the duration of any delay referred to in Section 13.5.              (b)  Landlord's Work shall be deemed "substantially complete" on the date (the "Substantial Completion Date") on which (i) construction of the same shall have been substantially completed (with the exception of minor items which can be completed without material interference to Tenant's moving into or use of the Premises and landscaping and the final coat of paving for the parking areas, driveways and walkways which, because of the season or weather, are not practicable to do at the time), all as certified by Landlord's architect, and (ii) a certificate of occupancy (permanent or, provided it does not materially interfere with moving into or use of the Premises by Tenant, a temporary certificate of occupancy) shall have been issued by the Town of Framingham and (iii) Landlord has delivered Tenant a certificate from Landlord's architect that the condition required in clause (i) of this Section 3.3(b) has been satisfied.  It is agreed and understood that the condition set forth in clause (ii) of this Section 3.3(b) shall be deemed satisfied if Landlord's Work has been completed to the extent required by clause (i) of this Section 3.3(b) and Landlord is unable to obtain a Certificate of Occupancy due to work or improvements performed or not completed by Tenant.              (c)  If the Landlord is unable to give possession of the Premises on the originally stated Anticipated Term Commencement Date (namely December 1, 2000) because the Premises are not substantially complete or ready for occupancy due to delays caused by, or chargeable to, Tenant or Tenant's architect or anyone employed by Tenant (any of such delays being a “Tenant’s Delay”), including without limitation, change orders, lack of timely action with respect to plans or submission of information which Tenant is required to provide, failure of Tenant to give Landlord authorization to proceed with the Landlord’s TI Work on or before the Outside Authorization to Proceed Date (as determined pursuant to Section 3.2(a) hereof), errors, incompleteness or inaccuracy in Tenant's Plans or the failure of the design or layout of the Landlord's TI Work to comply with all applicable laws, ordinances, rules and regulations or any other actions or inactions by Tenant or Tenant's architect or anyone employed by Tenant, which prevents or delays Landlord in performing or completing any construction or work to be performed by Landlord or its contractors, including without limitation Landlord's Building Construction Work or Landlord's TI Work, Tenant shall pay to Landlord for each day of such delay an amount equal to one day's Annual Fixed Rent.  Any payments due Landlord under this clause shall be paid within five (5) Business Days of the invoice from Landlord stating the charge (but not sooner than the Term Commencement Date) and, in all such cases, the Anticipated Term Commencement Date will be adjusted one day for each day of such Tenant Delay. In addition, the Reduced Rent Period shall be reduced one day for each such day of Tenant Delay.              (d)  Landlord shall complete all incomplete items with due diligence and will use good faith efforts to complete all such incomplete items within thirty (30) days after the Term Commencement Date except for items which, because of the season or weather, or the nature of the item are not practical to complete within such thirty (30) day period (such as landscaping and the final surface coat of paving) and Landlord will use due diligence to complete such other items with due diligence when the season and weather permit or when it becomes practical to complete the same.              Section 3.4  General Provisions Applicable to Construction.  All construction work required or permitted by this Lease, whether by Landlord or by Tenant, shall be done in a good and workmanlike manner and in compliance with all applicable laws and all ordinances, regulations and orders of governmental authority and insurers of the Building. Either party may inspect the work of the other at reasonable times and shall give notice of observed defects. All of Landlord's obligations under Section 3 shall be deemed to have been performed when Premises are “substantially complete” within the meaning of Section 3.3(b), except for items which are incomplete or do not conform with the requirements of Section 3 and as to which Tenant shall in either case have given notice to Landlord within 30 days after receipt of such certificate (except for latent defects which cannot reasonably be discovered within such thirty (30) days), and Landlord's obligations with respect to the items included in such notice shall be deemed to have been performed five business days after Landlord shall have notified Tenant in writing that the same have been completed unless during such five day period Tenant shall give written notice to Landlord to the contrary.              In addition to the foregoing, prior to Tenant's taking occupancy, the Architect preparing Tenant’s Plans shall prepare a "punchlist" of items which are incomplete with respect to Landlord's TI Work.              Nothing in this Section 3.4 shall limit Landlord's obligations under Section 3.6.              Section 3.5  Construction Representatives.  Each party authorizes the other to rely in connection with plans and construction upon approval and other actions on the party's behalf by any Construction Representative of the party named in Section 1.1 or any person hereafter designated in substitution or addition by notice to the party relying thereon.              Section 3.6  Certain Landlord Obligations.  Landlord shall, as soon as practicable, remedy any defects in workmanship or materials performed or supplied by Landlord or its agents, employees, contractors or subcontractors at the Premises as to which Tenant shall give notice to Landlord within one (1) year following the Term Commencement Date. Landlord will afford Tenant the benefit of any warranties obtained by Landlord with respect to the Premises and systems therein and will, if requested by Tenant, enforce such warranties on Tenant’s behalf.  Nothing contain in this Section 3.6 shall limit Landlord's obligations pursuant to Section 8.2. The cost of enforcing warranties with respect to the Premises and systems thereon shall insofar as it relates to warranty claims made by Tenant hereunder to Landlord within one year of the Term Commencement Date, be borne by Landlord but otherwise all costs and expenses of enforcement of such warranties shall be paid by Tenant.              Section 3.7  Tenant's Plans.  Landlord shall directly contract for the architectural, space planning and engineering services related to the Landlord’s TI Work (the “Tenant’s Space Planning Services”) which services shall include space planning, space layout, reflected ceiling plan, fire protection, Building Standard HVAC, mechanical, plumbing and electrical design but exclusive of any such electrical, mechanical, plumbing and HVAC systems as are included in the Landlord’s Building Construction Work.  Except as herein provided, the cost of Tenant’s Space Planning Services shall be borne by Landlord and such amount shall be in addition to and not paid out of the TI Allowance.  Tenant shall coordinate with the architect in order to prepare and finalize Tenant's Plans.  Tenant shall be solely responsible for any errors, incompleteness, defects and deficiencies in the Tenant's Plans and for any failure of the Tenant's Plans or the work shown thereon to comply with all applicable laws rules and regulations applicable thereto. Notwithstanding the foregoing to the contrary, Landlord shall not be responsible for the cost of any aspect of Tenant’s Space Planning Services relating to the design and engineering for above Building Standard Work or Improvements (see Exhibit A-13) including, without limitation, “specialty rooms” or “specialty needs” such as computer rooms, specialty HVAC, supplemental HVAC, special millworking and the like, which costs shall be borne solely by Tenant.              Section 3.8  Controlling Provisions.  To the extent that there is any inconsistency between the Exhibits to this Lease and the provisions of Section 3, the provisions of Section 3 shall govern any such inconsistency.              Section 3.9  Changes In Building or Lot. Landlord shall have the right, prior to or during construction of the Building, to redesign the Building and/or floors within the Building to the extent made necessary by field conditions, by requirement of any applicable law, by-law, ordinance or municipal authority or otherwise.  In the event any such redesign shall be implemented, Landlord shall keep Tenant fully advised as to the changes made to Exhibits A-2, A-3, A-4 or A-6 and the parties shall enter promptly into an amendment to this Lease reflecting any increase or decrease in the area of the Premises Rentable Area or the Building Rentable Area, change in the Annual Fixed Rent and the like resulting from any such redesign.  Notwithstanding the foregoing provisions of this Section 3.9 to the contrary, in the event of any such redesign of the Building which (i) directly affects a floor of the Building on which the Premises is located and (ii) will materially and adversely affect Tenant's use of the Premises and Tenant's ability to conduct its normal operations therein then, Landlord shall not effect such redesign of the Building without the prior written consent of Tenant, which consent shall not be unreasonably withheld, delayed or conditioned.              Landlord also reserves the right to change its layout, design and plans for the Lot and Leasehold Parking Area and for parking and roadways thereon at any time and to add to or reduce the size of the Lot; provided that no reduction in the size of the Lot may adversely affect the Building or the number of parking spaces made available to Tenant under this Lease or access ways serving the Building.             In the event that Landlord shall exercise its right to redesign the Building and/or floors within the Building pursuant to the first grammatical paragraph of this Section 3.9, upon completion of Landlord's Work, Landlord shall have the Premises and Building measured using the Measurement Method and upon the written request of Landlord, Landlord and Tenant shall enter into an Amendment of this Lease reflecting any changes to terms defined in this Lease based upon the number of rentable square feet in the Building Rentable Area and the Premises Rentable Area.              Section 3.10 Tenant's Early Access.  At such time and to the extent that Landlord shall reasonably determine that Landlord's Work has progressed to the point that entry by Tenant or Tenant's contractors will not materially interfere with the performance and completion of Landlord's Work and in no event later than thirty (30) days prior to the Anticipated Term Commencement Date, Landlord shall permit Tenant, Tenant's employees and Tenant's contractors and vendors to enter the Premises prior to the Term Commencement Date ("Early Entry") in order to perform installations of telecommunications, voice and data systems, furniture and other equipment.  Such Early Entry shall be upon and subject to all of the terms, covenants and provisions of this Lease (except the obligation to pay Annual Fixed) notwithstanding that the Commencement Date shall not then have occurred.  In connection with an Early Entry, Tenant and Tenant's contractors and workmen shall (a) coordinate their work with the Landlord's Work being performed by Landlord's general contractor and its workmen and subcontractors (b) not interfere with the performance or completion of Landlord's Work. SECTION 4 Fixed Rent              Section 4.1  Annual Fixed Rent.  Tenant shall pay rent to Landlord at the Address of Landlord or at such other place or to such other person or entity as Landlord may by notice to Tenant from time to time direct, at the Annual Fixed Rental Rate set forth in Section 1, in equal installments equal to 1/12th of the Annual Fixed Rental Rate in advance on the first day of each calendar month included in the term, and for any portion of a calendar month at the beginning or end of the term, at that rate payable in advance for such portion.  See Section 4.3 with respect to the Reduced Rent Period.              Section 4.2  Nonterminability By Tenant.              (a)         The Annual Fixed Rent, the Additional Rent and all other sums payable hereunder to, by or on behalf of Landlord shall be paid without notice or demand and without setoff, abatement, suspension, deferment, reduction or deduction, except as otherwise expressly provided herein.              (b)        This Lease shall not terminate, nor shall Tenant have any right to terminate this Lease, nor shall the obligations and liabilities of Tenant set forth herein be otherwise affected, except as otherwise expressly provided herein or by operation of law or by final decree or final judgment of any court having jurisdiction.              (c)         Tenant waives all rights to (i) any abatement, suspension, deferment, reduction or deduction of or from the Annual Fixed Rent and the Additional Rent or (ii) quit, terminate or surrender this Lease or the Premises or any part thereof, except as expressly provided herein.              (d)        It is the intention of the parties hereto that the obligations of Tenant hereunder shall be separate and independent covenants and agreements, that the Annual Fixed Rent, the Additional Rent and all other sums payable by Tenant to or on behalf of Landlord shall continue to be payable in all events and that the obligations of Tenant hereunder shall continue unaffected, unless the requirement to pay or perform the same shall have been terminated pursuant to an express provision of this Lease.              (e)         Tenant covenants and agrees that it will remain obligated under this Lease in accordance with all of its terms and provisions, and that it will not take any action to terminate, rescind or avoid this Lease or any portion thereof, notwithstanding the bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution, winding-up or other proceeding affecting Landlord or any assignee of Landlord in any such proceeding.              Section 4.3  Reduced Rent Period.  Provided that no Event of Default shall exist and be continuing, the Annual Fixed Rent payable by Tenant during the 180 day period beginning on and immediately following the Term Commencement Date (the “Reduced Rent Period”) shall be in the monthly amount of $52,971.88 per month (the “Reduced Rent”), such Reduced Rent shall be due and payable as and when Annual Fixed Rent is to be paid in accordance with the provisions of this Lease.              Notwithstanding the foregoing, the Reduced Rent Period shall be reduced one day for each day (or portion of a day) of delay in completing Landlord’s Work caused by or resulting from a Tenant’s Delay. SECTION 5 Operating Cost Escalation Real Estate Tax Escalation              Section 5.1 Operating Cost Escalation. Tenant shall pay to Landlord, as Additional Rent, the Operating Cost Escalation (as defined below) on or before the 10th day following receipt by Tenant of Landlord's Operating Cost Statement (as defined below). After the end of each calendar year during the term and after Lease termination, Landlord shall render a statement ("Landlord's Operating Cost Statement") in reasonable detail, certified by Landlord, and showing for the preceding calendar year or fraction thereof, as the case may be, Landlord's Operating Costs (as defined below).  As used herein, the term "Landlord's Operating Costs" or "Operating Costs" will include, without limitation, premiums for insurance carried by Landlord with respect to the Property; compensation and all fringe benefits, worker's compensation, insurance premiums and payroll taxes paid by Landlord to, for or with respect to all persons engaged in the managing, operating, maintaining or cleaning of the Property (including the Premises); water and sewer use charges for the Property; all utility charges relating to the Property not billed directly to tenants by Landlord or the utility; payments to contractors and management companies under service or management contracts (or other costs incurred directly by Landlord or its agents) for operating, managing, cleaning, maintaining, replacing and repairing the Property, including, without limitation, management fees (provided such fees are consistent with those charged by management firms in the Framingham area for similar services in similar properties), Building cleaning, window cleaning, pest extermination, trash removal, landscaping, snow removal and repair, replacement and maintenance to elevators, the HVAC, electric and plumbing systems and the Leasehold Parking Area (which payments may be to affiliates of Landlord), and all other reasonable and necessary expenses paid in connection with the cleaning, operating, managing, maintaining, replacing and repairing of the Property or any component or aspect thereof; it being agreed that if Landlord shall install a new or replacement capital item for the purpose of complying with applicable laws or regulations or intended to reduce Landlord's Operating Costs, the annual amortization (determined by the useful life of the item as determined by Landlord's accountants utilizing generally accepted accounting principles) of the cost thereof (without interest) shall be included in Landlord's Operating Costs. Without limiting the generality of the foregoing, it is expressly understood and agreed that the Lots Allocable Share of Park Common Expenses shall be included as Operating Costs hereunder together with all costs, taxes, assessments and expenses allocated to the Property under the Park Covenants, as the same may be amended, restated, modified, changed, supplemented or substituted from time to time; Operating Costs shall also include, without limitation, all costs and expenses of operating, maintaining, lighting, plowing and repairing parking areas, sidewalks, driveways and roads, the Leasehold Parking Area and all costs and expenses allocated to the Property pursuant to the Cross-Easement.  If, during the Term of this Lease, Landlord shall incur capital expenses in connection with repairs or replacement of capital items, there shall be also be included in Landlord’s Operating Costs for that and each succeeding calendar year, the amount of the annual amortization (determined by the useful life of the item as determined by Landlord's accountants utilizing generally accepted accounting principles) of the cost thereof without interest.              Notwithstanding the foregoing provisions of Section 5.1 to the contrary, Landlord's Operating Costs shall not include:              (a)         the cost of the original construction of the Building or any additions or expansions to the common areas of the Building;              (b)        an y repairs or work performed to any portion of the Building intended to be occupied by individual tenants and for the exclusive benefit of such tenant and the cost of correcting any defects in the original construction of the Building;              (c)         any reserves for future expenditures not yet incurred;              (d)        fixed rent under any ground lease;              (e)         costs incurred by Landlord for repair or restoration related to casualties or condemnation to the extent that Landlord is reimbursed by insurance or condemnation proceeds or that the same is covered by warranty, except that the amount of any insurance deductible expended by Landlord in connection with repair or restoration following casualty shall be includable as an Operating Expense up to the Deductible Limit, as said term is hereinafter defined.  As used herein, the term “Deductible Limit” shall mean $25,000.00 subject to increase each year during the Lease by five (5%) percent;              (f)         costs, including permit, license and inspection costs incurred with respect to the installation of improvements made for tenants or other occupants or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants;              (g)        attorneys' fees, leasing commissions and other costs and expenses incurred in connection with negotiations or disputes with present or prospective tenants or other occupants of, or persons, firms or entities with respect to, the Building;              (h)        expenses in connection with services or benefits specially provided to other tenants or occupants which are not offered to Tenant;              (i)          costs incurred by Landlord due to the negligence or misconduct of Landlord or its agents, contractors, licensees and employees or the violation by Landlord or any tenants or other occupants (other than the Tenant under this Lease) of the terms and conditions of another lease of space or other agreements including this Lease;              (j)          overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for the cost of services included in Operating Costs to the extent the same is not comparable to the cost of such services rendered by other first-class unaffiliated third parties on a competitive basis;              (k)         interest, principal, points and fees on debts or amortization on any mortgage or mortgages or any other debt instrument encumbering all or any portion of the Building or the real property upon which the Building is located;              (l)          all items and services for which Tenant or any other tenant separately reimburses Landlord other than through its share of Landlord's Operating Costs or which Landlord provides exclusively to one or more tenants (other than Tenant) but not all tenants without reimbursement;              (m)        advertising and promotional expenditures in connection with leasing the Building, and costs of the installation of signs identifying the owner and/or manager of the Building;              (n)        electric power costs for which any tenant or occupant directly contracts with the local public service company;              (o)        any costs relating to hazardous materials, asbestos and the like not resulting from actions of Tenant;              (p)        charitable contributions;              (q)        off-site traffic lights;              (r)         any charges for depreciation of the Building or equipment (except as expressly permitted by this Lease in connection with amortization of capital costs for repairs, replacements or new capital items);              (s)         any charge for Landlord's income taxes, excess profit taxes, or franchise taxes;              (t)         there shall be no duplication in charges to Tenant by reason of the provision in this Lease setting forth Tenant's obligation to reimburse Landlord for common area expenses and any other provision herein;              (u)        an y compensation paid to clerks, attendants or other persons in commercial concessions owned and operated by the Landlord;              (v)        the cost of electrical current or other utility furnished to any leasable area of the Building if similar service and utilities are not provided to the Premises;              (w)        the annual amortization otherwise includable in Landlord’s Operating Costs for (i) the addition of a new capital improvement (except to the extent that such new capital improvement is made for the purpose of complying with applicable laws or regulations, including, without limitation, any laws and regulations relating to the so-called Americans With Disabilities Act in which event such annual amortization shall be included in Landlord’s Operating Costs) and (ii) the replacement of a capital improvement item with a new capital improvement (except if such replacement in fact reduces the Landlord’s Operating Costs which would have been incurred absent such replacement in which event such annual amortization shall be included in Landlord's Operating Costs to the extent of such savings);              (x)         the determination of whether a new or replacement improvement is or is not a capital expenditure shall be made by Landlord’s accountants utilizing generally accepted accounting principles.              In determining Landlord's Operating Costs, if less than 95% of the Building shall have been occupied by tenants and fully used by them, at any time during the year, Landlord's Operating Costs shall be extrapolated to an amount equal to the like Operating Costs that would normally be expected to be incurred had such occupancy been 95% and had such full utilization been made during the entire period.              "Operating Cost Escalation" shall be equal to Tenant's Proportionate Share of the excess, if any, of:              (a) Landlord's Operating Costs for each calendar year as indicated by Landlord's Operating Cost Statement; over              (b) The Annual Base Operating Costs.              Notwithstanding the above calculation, in no event shall the Operating Cost Escalation be less than zero.              Tenant acknowledges that Landlord's formula for sharing of Landlord’s Operating Costs stated in this Lease is based on the assumption that Landlord will be providing substantially similar services to all tenants in the Property from year to year.  If this assumption is not, in fact, correct, that is, if Landlord is not furnishing any particular work or service (the cost of which, if performed by Landlord, would be included in Landlord’s Operating Costs) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Landlord, Operating Costs shall be deemed, for purposes of this paragraph, to be increased by an amount equal to the additional Operating Costs which would reasonably have been incurred during such period by Landlord if it had, at its own expense, furnished such work or service to such tenant.              Operating Cost Escalations shall be apportioned for any calendar year in which the Term of this Lease commences or ends.  Notwithstanding any other provision of this Section 5.1, if the term expires or is terminated as of a date other than the last day of a calendar year, then for such fraction of a calendar year at the end of the term, Tenant's last payment to Landlord under this Section 5.1 shall be made on the basis of Landlord's best estimate of the items otherwise includable in Landlord's Operating Cost Statement and shall be made on or before the later of (a) 10 days after Landlord delivers such estimate to Tenant, or (b) the last day of the Term of this Lease, with an appropriate payment or refund to be made upon submission of Landlord's Operating Cost Statement.              Section 5.2 Estimated Operating Cost Escalation Payments. If, with respect to any calendar year or fraction thereof during the term, Landlord reasonably estimates that Tenant shall be obligated to pay Operating Cost Escalation, then Tenant shall pay, as Additional Rent, on the first day of each month of such calendar year and each ensuing calendar year thereafter, estimated monthly escalation payments equal to 1/12th of the estimated Operating Cost Escalation for the respective calendar year, with an appropriate additional payment or refund to be made within 30 days after Landlord's Operating Cost Statement is delivered to Tenant. Landlord may adjust such estimated monthly escalation payment from time to time and at any time during a calendar year, and Tenant shall pay, as Additional Rent, on the first day of each month following receipt of Landlord's notice thereof (which notice shall be accompanied by appropriate documentation supporting such adjustment), the adjusted estimated monthly escalation payment.              Section 5.3 Real Estate Tax Escalation. Tenant shall pay to Landlord, as Additional Rent, the Real Estate Tax Escalation (as defined below) on or before the thirtieth (30th) day following billing therefor by Landlord.              As used herein, the term "Real Estate Taxes" shall mean all taxes, assessments (special, betterment or otherwise), levies, fees, water and sewer rents and charges, and all other government levies and charges, general and special, ordinary and extraordinary, foreseen and unforeseen, which are allocable to the Term of this Lease and imposed or levied upon or assessed against the Property or any portion thereof or any rent or other sums payable by any tenants or occupants thereof. Nothing herein shall, however, require Tenant to pay any income taxes, excess profits taxes, excise taxes, franchise taxes, estate, succession, inheritance or transfer taxes, provided, however, that if at any time during the Term of this Lease the present system of ad valorem taxation of real property shall be changed so that in lieu of the whole or any part of the ad valorem tax on real property, or in lieu of increases therein, there shall be assessed on Landlord a capital levy or other tax on the gross rents received with respect to the Property or a federal, state, county, municipal, or other local income, franchise, excise or similar tax, assessment, levy or charge (distinct from any now in effect) measured by or based, in whole or in part, upon gross rents, then any and all of such taxes, assessments, levies or charges, to the extent so measured or based ("Substitute Taxes"), shall be included as real estate taxes hereunder, provided, however, that Substitute Taxes shall be limited to the amount thereof as computed at the rates that would be payable if the Property were the only property of Landlord.  The term “real estate taxes” shall also mean all real estate taxes and assessments (or any substitute therefor) which are allocated to the Property under the Park Covenants.              The term “Real Estate Taxes” shall also include the “Lot’s Pro Rata Share” (as said term is hereinafter defined) of all “Ground Lease Taxes” (as said term is hereinafter defined) on the Entire Leasehold Lot.  As used herein, the term “Ground Lease Taxes” shall mean all taxes, assessments (special, betterment or otherwise) levies, fees, water and sewer rents and charges and all other governmental levies and charges, general an special, ordinary and extraordinary, foreseen and unforeseen which are imposed upon, levied upon or assessed against the Entire Leasehold Lot or any payments made by the tenant under the Ground Lease in lieu thereof. If taxes and assessments should ever be assessed against the Leasehold Lot and the Leasehold Parking Area separate and apart from the Entire Leasehold Lot, then the term “Real Estate Taxes” during such period shall include 100% of such taxes and assessments or payments in lieu thereof allocable to the Leasehold Lot and the Leasehold Parking Area.  As used herein, the term “Lot’s Pro Rata Share” shall mean the quotient derived by dividing the square footage of the Leasehold Lot by the square footage of the Entire Leasehold Lot.              "Real Estate Tax Escalation" shall be equal to Tenant's Proportionate Share of the excess, if any, of:              (a) Real Estate Taxes for the applicable tax fiscal year occurring during the Term of this Lease; over              (b) the Annual Base Real Estate Taxes.              Notwithstanding the above calculation, in no event shall Real Estate Tax Escalation be less than zero.              Notwithstanding any other provision of this Section 5.3, if the Term of this Lease expires or is terminated as of a date other than the last date of a tax fiscal year, then for such fraction of a tax fiscal year at the end of the Term of this Lease, Tenant's last payment to Landlord under this Section 5.3 shall be made to reflect that only a portion of such tax fiscal year falls within the Term of this Lease and shall be made within 10 days after Landlord bills Tenant therefor.              Section 5.4 Estimated Real Estate Tax Escalation Payments. If, with respect to any tax fiscal year or fraction thereof during the term, Landlord reasonably estimates that Tenant shall be obligated to pay Real Estate Tax Escalation, Tenant shall pay, as Additional Rent, on the first day of each month of such tax fiscal year and each ensuing tax fiscal year thereafter, estimated monthly escalation payments equal to 1/12th of the estimated Real Estate Tax Escalation for the respective tax fiscal year, with an appropriate additional payment or refund to be made within 30 days after Landlord's delivery of the tax bills for such period to Tenant. Landlord may adjust such estimated monthly escalation payment from time to time and at any time during a tax fiscal year, and Tenant shall pay, as Additional Rent, on the first day of each month following receipt of Landlord's notice thereof, the adjusted estimated monthly escalation payment.              Notwithstanding anything to the contrary contained in this Lease, Landlord and Tenant hereby agree as follows:              (a)         provided that Tenant shall have timely paid all amounts due and payable by Tenant under this Article V, Tenant shall not be required to share in any penalties, interest, late payments or the like resulting from Landlord's late payment of taxes; (b) if Landlord shall obtain a refund or rebate of Real Estate Taxes for any fiscal tax year, Landlord shall promptly pay to Tenant Tenant's Proportionate Share of any Real Estate Tax Escalation paid by Tenant for such fiscal tax year after deducting therefrom Tenant’s Proportionate Share of all costs and expenses sustained or incurred by Landlord in connection with obtaining any such rebate or refund; (c) in the event any special assessments are assessed and payable in installments, for purposes of calculating the Real Estate Tax Escalation payable by Tenant hereunder, such assessments shall be included in Real Estate Taxes as if they were being paid by Landlord over the longest period of time permitted by applicable law; and (d) in no event shall Tenant be responsible to pay an inheritance, estate, succession, transfer, gross receipts, profits, taxes, gift or other tax which is measured in any manner by the income or profit of Landlord.              Section 5.5  Right to Audit Records.  Tenant shall have the right, at Tenant's sole cost and expense, to audit the applicable records of the Landlord to confirm that the taxes and Landlord’s Operating Costs billed to the Tenant are proper and conform to the provisions of this Section.  Such audit right shall be exercisable by Tenant within three (3) years of Tenant's receipt of Landlord's annual statement of such charges regarding Real Estate Taxes or Landlord’s Operating Costs, as the case may be. SECTION 6 Insurance              Section 6.1  Tenant's Insurance.  Tenant shall, as Additional Rent, maintain throughout the Term the following insurance (except that so long as Tenant maintains a net worth and liquidity of at least Ten Million ($10,000,000.00) Dollars as determined in accordance with generally accepted accounting principles consistently applied, Tenant shall not be required to carry the insurance required under Sections 6.1(a) or (c) hereof):              (a)         Comprehensive general liability insurance for any injury to person or property occurring on the Premises, naming as insureds Tenant, Landlord and Landlord's managing agent and Landlord's mortgagee(s), in amounts which shall, at the beginning of the term, be at least equal to the limits set forth in Section 1, and, from time to time during the term, shall be for such higher limits as are reasonably required by Landlord; and              (b)        Worker's compensation insurance with statutory limits covering all of Tenant's employees working at the Premises; and              (c)         A policy or policies of insurance covering Tenant's trade fixtures, equipment, signs, merchandise, inventory, personal property and leasehold improvements installed by Tenant, including, without limitation, floor covering and lighting equipment against loss or damage by fire, casualty, lightning, vandalism, malicious mischief, sprinkler leakage and the other risks from time to time included under all risk insurance and casualty available in the State in which the Premises are located, in amounts of the full replacement value of said items.              (d)        During any period when Tenant elects to self insure rather than carry the insurance required under clauses (a) and (c) hereof as permitted under this Section 6.1, Tenant shall defend, indemnify, protect and hold Landlord (and Landlord's managing agent) harmless from and against all claims, loss, costs, damages and liabilities to the same extent as the insurance otherwise required under clauses (a) and (c) would have protected or insured Landlord or its managing agent against such matters.              Section 6.2  Landlord's Insurance.  Landlord shall maintain throughout the Term:              (a)         all risk fire and casualty insurance on a full replacement value basis, exclusive of footings and foundations, together with rental loss coverage and, if Landlord so elects, flood coverage to the extent the same is available, insuring the Building and with such deductibles, if any, as Landlord shall consider reasonably appropriate; and              (b)        insurance against loss or damage from sprinklers and from leakage or explosions or cracking of boilers, pipes carrying steam or water, or both, pressure vessels or similar apparatus, in the so-called "broad form", in such amounts and with such deductibles as Landlord may consider reasonably appropriate, and insurance against such other hazards and in such amounts as may from time to time be required by any bank, insurance company or other lending institutions holding a mortgage on the Building; and              (c)         during the period of construction of the Building, in lieu of the insurance required under Sections 6.2(a) and (b) above, Landlord shall carry a so-called “builder’s risk” policy on the Building in such amounts and with such coverages and deductibles as the holder of the first mortgage on the Building and Lot may require; and              (d)        Comprehensive General Liability Insurance for injury to person or property of third person's occurring on the Premises in such amounts as Landlord may reasonably determine from time to time.              Landlord shall have no obligation to insure Tenant's personal property or chattels, including, without limitation, Tenant's trade fixtures.              Section 6.3  Tenant Reimbursement of Insurance Taken Out by Landlord. Landlord's costs incurred in providing the insurance provided pursuant to Section 6.2 and all other insurance which Landlord shall maintain on or with respect to the Premises from time to time (provided that any other insurance so carried by Landlord from time to time is comparable to the types of insurance carried by institutional owners of first class buildings in the so-called Boston-MetroWest area) but exclusive of the so-called builder's risk insurance maintained by Landlord under Section 6.2(c) shall be included in "Operating Costs" pursuant to Section 5 of this Lease for all purposes therein. If any policy of insurance carried by Landlord also covers properties in addition to the Property, then only the portion of the premium which is allocated to the Property shall be chargeable to Tenant as an Operating cost.              Section 6.4  Requirements Applicable to Insurance Policies. All policies for insurance required under the provisions of Section 6.1 and 6.2 shall be obtained from responsible companies qualified to do business in the Commonwealth of Massachusetts and in good standing therein, which companies shall be subject to Landlord's approval. Tenant agrees to furnish Landlord with insurance company certificates of all such insurance and copies of the policies therefor prior to the beginning of the Term of this Lease and of each renewal policy at least ten (10) days prior to the expiration of the policy it renews. Each such policy shall be noncancellable with respect to the interest of Landlord and such mortgagees without at least ten (10) days' prior written notice thereto, except that the ten (10) day periods referred to herein shall be thirty (30) days if any holder of a mortgage on the Property so requires.  Landlord may carry any such insurance in the form of umbrella insurance and through so called "master" or "package" policies which cover more than one location.              Section 6.5  Waiver of Subrogation. All insurance which is carried by either party with respect to the Premises or to furniture, furnishings, fixtures or equipment therein or alterations or improvements thereto, whether or not required, shall include provisions which either designate the other party as one of the insured or deny to the insurer acquisition by subrogation of rights of recovery against the other party to the extent such rights have been waived by the insured party prior to occurrence of loss or injury, insofar as, and to the extent that such provisions may be effective without making it impossible to obtain insurance coverage from responsible companies qualified to do business in the Commonwealth of Massachusetts (even though extra premium may result therefrom) and without voiding the insurance coverage in force between the insurer and the insured party. On reasonable request, each party shall be entitled to have duplicates or certificates of policies containing such provisions. Each party hereby waives all rights of recovery against the other for loss or injury against which the waiving party is protected by insurance containing said provisions, reserving, however, any rights with respect to any excess of loss or injury over the amount recovered by such insurance. SECTION 7 Utilities; Park Common Expenses                Section 7.1  Utilities. Tenant shall pay directly to the proper authorities charged with the collection thereof all charges for electricity, and (to the extent not otherwise included in Operating Costs) other utilities used or consumed on the Premises by Tenant or any party claiming by, through or under Tenant, whether called charge, tax, assessment, fee or otherwise, all such charges to be paid as the same from time to time become due. To the extent included in Landlord's Building Construction Work and Landlord's TI Work, Landlord shall install or arrange for the installation of utilities serving the Premises.  Tenant shall be responsible for all costs and expenses relating to installation, operation and maintenance voice data and telecommunications service to the Premises.  It is understood and agreed that Tenant shall make its own arrangements for obtaining service from such utilities and that Landlord shall not be liable for any interruption or failure in the supply of any such utilities to the Premises. If Tenant is not charged directly by the respective utility for any of such utilities or services, Tenant shall from time to time, within ten (10) days of Landlord's invoice therefor, pay to Landlord such charges and services from the utility company.              Section 7.2  Park Common Expenses.              (a)  The "Lot's Allocable Share" (as defined in Section 7.2(b))of the "Park Common Expenses" (as said term is hereinafter defined) shall be included in Operating Costs pursuant to Section 5 of this Lease.  As used herein, the term "Park Common Expenses" shall mean "Common Expenses" as said term is defined in the Park Covenants.  Landlord shall use diligent efforts to cause the owner of the Park Common Property to maintain and repair the Park Common Property insofar as it services the Property in good operating condition and repair.  As used herein, the term “Park Common Property” shall mean the "Infrastructure Easement Areas" and the "Common Land", as such terms are defined in the Park Covenants.              (b)        As used in this Lease (including, without limitation, Sections 7.2 and 7.3 hereof), the term "Lot's Allocable Share" shall mean a percentage equal to that percentage which is attributable to the Property under the Park Covenants in determining the Property's share of Common Expenses under the Park Covenants.   SECTION 8 Landlord’s Covenants                Section 8.1 Quiet Enjoyment. Tenant, on paying the rent and performing its obligations hereunder, shall peacefully and quietly have, hold and enjoy the Premises throughout the Term without any manner of hindrance or molestation from Landlord or anyone claiming under Landlord, subject, however, to all the terms and provisions hereof.              Section 8.2 Maintenance and Repair. Subject to the provisions of Section 10, Landlord shall (except as otherwise set forth in Article 9 of this Lease) maintain the roof, structure, foundation and exterior of the Building and all standard plumbing, electrical, mechanical, heating, ventilating and air conditioning systems installed by Landlord (but excluding all special or supplemental systems or equipment which is above Building Standard and installed by or for or used exclusively by Tenant, all systems serving the Premises exclusively and/or special systems installed by Tenant or by Landlord at Tenant's request, such as special computer room HVAC systems and the like), all insofar as they affect the Premises in good repair and tenantable condition and shall maintain and clean the common areas of the Property.  All costs and expenses sustained or incurred by Landlord in performing its obligations under this Section 8 shall be included in Operating Costs pursuant to Section 5 of this Lease.              In addition, Landlord shall make all interior repairs made necessary as a result of a structural fault or failure, or by Landlord's negligence, default or failure to repair any exterior or structural defect, and such repairs shall not be included in Operating Costs.  Landlord shall maintain and keep in safe repair all sidewalks, driveways and common service and parking areas in the Leasehold Lot, which obligation shall include, without limitation, snowplowing, common and parking area lighting, replacement of parking lot light bulbs or lamps, sanding and sand removal, salting and salt removal, patching and resurfacing of paved areas, repair and replacement of entrance and exit signs, restriping of parking areas as needed and removal and disposal of trash and debris.  Landlord shall keep said outside areas adequately lighted for one (1) hour after Business Hours.  Landlord shall maintain and keep in good repair the sprinkler system located in the Building.              Section 8.3 Electricity  Electricity used or consumed in the Premises shall be separately metered or check metered and all utility charges for lights and plugs serving the Premises shall be billed directly to, and paid by, Tenant.  If in Landlord's reasonable judgment, Tenant's use of electricity, water or sewer service in excess of normal office usage shall result in an additional burden on the Building's utility systems or additional cost on account thereof, as the case may be, Tenant shall upon demand, as Additional Rent under this Lease, reimburse Landlord for all additional costs related thereto.  Landlord, at Tenant's expense, shall replace and install all ballasts, lamps and bulbs (including, but not limited to, incandescent and fluorescent) used in the Premises. All such replacements shall be of a type, color and size as shall be designated by Landlord.  Landlord shall not in any way be liable or responsible to Tenant for any loss, damage or expense which Tenant may sustain or incur if the quantity, character, or supply of electricity or other utility services are changed or are no longer available or suitable for Tenant's requirements.              Section 8.4 HVAC.  All utility charges for any supplemental air conditioning, heating and ventilation systems servicing the Premises exclusively shall be billed directly to, and paid by Tenant.  Tenant shall pay for any and all charges, costs and expenses associated with the use, repair, maintenance and replacement of any supplemental air conditioning, heating and ventilation system servicing the Premises exclusively with the exception of Supplemental HVAC Service as set forth above.  Landlord shall, on Business Days and generally during Business Hours furnish heating and cooling as normal seasonal changes may require to provide reasonably comfortable space temperature and ventilation for common areas of the Building, and the costs and expenses sustained or incurred by Landlord in providing such services shall be included in Operating Costs.  If Tenant shall require heating, ventilation or air conditioning service on other than Business Days or during other than Business Hours, Tenant may request that Landlord provide such service and Tenant shall reimburse Landlord for all reasonable costs and expenses sustained or incurred by Landlord in connection with providing such additional service as Additional Rent under this Lease.  In the event Tenant introduces into the Premises personnel or equipment which overloads the capacity of the Building system or in any other way interferes with the system’s ability to perform adequately its proper functions, or which affects the temperature otherwise maintained by the air-conditioning system, supplementary systems may, if and as needed, at Landlord’s option, be provided by Landlord, at Tenant’s expense.              Section 8.5 Cleaning.  With respect to the common areas of the Building and the Premises, Landlord shall provide cleaning and janitorial services as more particularly described in Exhibit A-7 attached hereto for said portions of the Building (Monday through Friday on Business Days only) commensurate with industry standards for office buildings comparable to the Building located in Framingham, Massachusetts.              Section 8.6 Interruptions.              (a)         Landlord shall not be liable to Tenant for any compensation or reduction of rent by reason of inconvenience or annoyance or for loss of business arising from power losses or shortages or from interruption, suspension or stoppage of any utility (where necessary or deemed advisable by Landlord) or from the necessity of Landlord's entering the Premises for any of the purposes authorized by this Lease or for repairing the Premises or any portion of the Property (but in making any such entry or repair, Landlord  shall use good faith efforts to minimize interference with Tenant’s use of the Premises).  In case Landlord is prevented or delayed from making any repairs, alterations or improvements, or furnishing any service or performing any other obligation to be performed on Landlord's part, by reason of any cause, (i) Landlord shall not be liable to Tenant therefor (except that this clause (i) shall not operate to limit Landlord’s liability for such prevention or delay except where the cause therefor was beyond the reasonable control of Landlord and resulted from a default by Landlord under this Lease not cured within applicable notice and grace periods), (ii) nor (except as otherwise provided in Section 11.8 hereof) shall Tenant be entitled to any abatement or reduction of rent by reason thereof, (iii) nor shall the same give rise to any claim by Tenant that such failure constitutes actual or constructive, total or partial, eviction from the Premises provided, however, that nothing in this sentence shall be deemed to limit Tenant from making an independent claim against Landlord for damages on account of any default by Landlord under this Lease.  Landlord reserves the right to stop any service or utility system when necessary by reason of accident or emergency or until necessary repairs have been completed. Except in case of emergency repairs, Landlord will give Tenant reasonable advance notice of any contemplated stoppage and will use reasonable efforts to avoid unreasonable inconvenience to Tenant by reason thereof. Landlord also reserves the right to institute such policies, programs and measures as may be reasonably necessary, required or expedient for the conservation or preservation of energy or energy services or as may be reasonably necessary or required to comply with applicable codes, rules, regulations or standards. In so doing, Landlord shall make reasonable efforts to avoid unreasonable inconvenience to Tenant by reason thereof.  To the extent within its reasonable control, Landlord shall use good faith efforts to promptly restore any services or utilities curtailed or suspended pursuant to this Section 8.6.              Section 8.7 Landlord's Indemnity. Subject to the provisions of Sections 6.5, 9.7 and 13.4 of this Lease, Landlord shall defend, with counsel approved by Tenant, which approval will not be unreasonably withheld, conditioned or delayed, all actions against Tenant or any stockholder, officer, director or employee of Tenant ("Tenant's Indemnified Parties") with respect to, and shall pay, protect, indemnify and save harmless, to the extent permitted by Law, all of Tenant's Indemnified Parties from and against any and all liabilities, losses, damages, costs, expenses (including reasonable attorneys' fees and expenses), causes of action, suits, claims, demands or judgments of any nature arising from injury to or death of any person, or damage to or loss of any property of third persons caused by any misconduct or negligent act, fault or omission of Landlord or its partners, trustees, stockholders, officers, directors, members or beneficiaries or Landlord's agents, employees, contractors or subcontractors, except to the extent caused by the negligence, fault, acts or omissions of Tenant or the negligence, fault, acts or omissions of Tenant's employees, agents, directors, contractors or invitees.              Section 8.8 Representations and Warranties.  The following representations and warranties are made for the benefit of Tenant:              (a)         If Landlord is a corporation or limited liability company, Landlord represents and warrants that Landlord is duly organized, validly existing, in good standing in the Commonwealth of Massachusetts, and has all requisite power and authority to own and lease property and conduct business in the Commonwealth of Massachusetts where the Premises are located, and each individual executing this Lease on behalf of Landlord represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of Landlord;              (b)        Landlord represents and warrants that this Lease is binding on Landlord in accordance with its terms;              (c)         Landlord represents and warrants that as of the date of execution and delivery of this Lease by Landlord, Landlord is the owner and holder of the fee interest in the Fee Lot and the Lessee's interest under the Ground Lease with respect to the Leasehold Lot subject to the Title Exceptions. SECTION 9 Tenant's Covenants; Law              Section 9.1  Use. Tenant shall use the Premises only for the Permitted Uses and shall from time to time procure all licenses and permits necessary therefor at Tenant's sole expense but nothing contained herein shall limit or impair Landlord's obligations under Section 3.1 hereof.              Section 9.2  Repair and Maintenance. Except as otherwise provided in Sections 8 and 10, Tenant shall keep the Premises, including all plumbing, electrical, heating, air conditioning and other systems therein, in good order, condition and repair and in at least as good order, condition and repair as they are in on the Term Commencement Date or may be put in during the Term, reasonable use and wear and damage by fire or other casualty only excepted. Tenant shall make all repairs and replacements and do all other work necessary for the foregoing purposes whether the same may be ordinary or extraordinary, foreseen or unforeseen. Tenant shall keep in a safe, secure and sanitary condition all trash and rubbish temporarily stored at the Premises.              Tenant shall also make all repairs (whether interior, exterior, structural, non-structural, ordinary or extraordinary) to the Premises or any portion of the Property or the fixtures therein or appurtenances thereto made necessary by the negligence of Tenant or Tenant's agents, employees, customers or invitees, damage by fire or other casualty only excepted.              Section 9.3  Compliance with Law and Insurance Requirements. Tenant shall be required to make all repairs, alterations, additions or replacements to the Premises, whether structural or non-structural, and shall keep the Premises equipped with all safety appliances so required by any law, ordinance, order or regulation, whenever adopted, which is required due to (a) failure of the design of work or improvements shown on Tenant's Plans to comply with any such law, ordinance, order or regulation (including, without limitation, errors, omissions and incompleteness in or of Tenant's Plans or in the directions of Tenant's architect), (b) any particular use or particular manner of use of the Premises by Tenant, (c) any alteration, addition, repair or replacement made by Tenant or (d) the so-called Americans With Disabilities Act (the "ADA"), except insofar as such ADA noncompliance occurs due to a failure of Landlord's Building Construction Work to comply under the ADA as in effect at the time Landlord shall obtain the building permit applicable to Landlord’s Building Construction Work and except further that if (i) such ADA noncompliance occurs due to modifications of the ADA subsequent to the date of the building permit for Landlord's Building Construction Work, (ii) such ADA modifications, as then applied to circumstances in the Building, require that Landlord make such changes uniformly and generally throughout the entire Building at such time (as opposed to changes which, for example, might be required at a later date or changes which are unique to Tenant or the Premises), (iii) the need for such changes within the Premises is not otherwise triggered or caused by any matter otherwise described in clauses (a), (b) or (c) hereinabove of this Section 9.3, or due to the nature of Tenant’s business at the Premises and (iv) such ADA noncompliance does not relate to or include any failure of Tenant’s Plans to originally comply with the ADA, then Tenant shall not be responsible for such ADA noncompliance but all of the Landlord’s costs to make modifications to the Building or Property (including, without limitation, the Premises) as a result of such ADA noncompliance shall be included in Landlord’s Operating Costs under this Lease based on the annual amortization of such costs (determined by the useful life of the modifications as reasonably determined by Landlord’s accountants using generally accepted accounting principles).  In addition, to the extent that any law, ordinance, rules or regulation adopted after the date of Landlord's building permit for Landlord's TI Work, requires that any other repairs, alterations, additions or replacements to the Premises, whether structural or non-structural, be made, or that safety appliances be installed, in addition to those which, under the preceding provisions of this Section 9.3, are the responsibility of the Tenant (any such item being called a "Subsequent Law Related Changes"), Landlord shall be responsible for completion of the same and Tenant shall pay only a portion of the reasonable cost of making any such Subsequent Law Related Change equal to a fraction, the numerator of which shall be the number of years (including partial years) remaining in the term of this Lease (including any extension options which are available to be exercised) and the denominator of which is the useful life of the Subsequent Law Related Change as determined by Landlord's accountants in accordance with generally accepted accounting principles consistently applied.  Tenant shall not dump, flush, or in any way introduce any hazardous substances or any other toxic substances into the septic, sewage or other waste disposal system serving the Property, or generate or store (except for use and storage of limited quantities of hazardous substances in connection with the Permitted Uses but subject to and in compliance with applicable law) or dispose of hazardous substances in, on or under the Property or dispose of hazardous substances from the Property to any other location without the prior written consent of Landlord and then only in compliance with the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. § 6901 et seq., the Massachusetts Hazardous Waste Management Act, M.G.L.c.21C, as amended, the Massachusetts Oil and Hazardous Material Release Prevention and Response Act, M.G.L.c. 21E, as amended, and all other applicable codes, regulations, ordinances and laws. Tenant shall notify Landlord of any incident of which it has knowledge which would require the filing of a notice under Chapter 232 of the Acts of 1982 and shall conduct its business and use the Premises and Property so as to comply with the orders and regulations of all governmental authorities with respect to zoning, building, fire, health and other codes, regulations, ordinances or laws applicable to the Premises. "Hazardous Substances" as used in this Section shall mean "hazardous substances" as defined in the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601 and regulations adopted pursuant to said Act.  Landlord has disclosed to Tenant that the Leasehold Lot and also the Entire Leasehold Lot as well as portions of the Park were a part of the former Landfill of the Town of Framingham, Massachusetts (the "Town") and that the Town has been ordered to effect a closure of such Landfill Areas by the Executive Office of Environmental Affairs, Department of Environmental Protection (the "DEP").  Tenant agrees that Landlord, or others, shall be permitted to perform the work with respect to closure of the Landfill Areas on the Leasehold Lot and the Entire Leasehold Lot and any other work related to the closure of the Landfill Area as contemplated by the Agreement (the "Collateral Agreement") dated August 15, 1980 between the Town and Bank of Boston.  Landlord agrees to indemnify and hold Tenant harmless from and against claims, loss, cost or liability relating to the release, or threat of release, of Hazardous Substances located on or under the Property exclusive of Hazardous Substances which are released, or threatened to be released, upon the Property by Tenant or by any party claiming by, through or under Tenant.  As used herein, the term “Entire Leasehold Lot” shall mean the Land described in the Ground Lease.              Landlord may, if it so elects (and if Tenant fails to do so within thirty (30) days after notice thereof from Landlord), make any of the repairs, alterations, additions or replacements required of Tenant in this Section 9 which affect the Building structure or the Building systems, and as Additional Rent Tenant shall reimburse Landlord for the reasonable cost thereof on demand.              Tenant will provide Landlord, from time to time upon Landlord's request, with all records and information regarding any Hazardous Substance maintained on the Premises by Tenant.              Landlord shall have the right at reasonable times and upon reasonable prior notice (one (1) days notice being reasonable) to make such inspections as Landlord shall reasonably elect from time to time to determine if Tenant is complying with this Section.  The cost of such inspections shall be borne by Landlord except in those cases in which an inspection discloses a need to make any material repair, alteration, addition or replacement for which Tenant (or those claiming by, through or under Tenant) is responsible or discloses any material violation or threatened material violation of this Lease by Tenant or those claiming by, through or under Tenant.              Tenant shall comply promptly with the reasonable recommendations of any insurer, foreseen or unforeseen, ordinary as well as extraordinary, which may be applicable to the Premises, by reason of Tenant's use thereof. In no event shall any activity be conducted by Tenant on the Premises which may give rise to any cancellation of any insurance policy or make any insurance unobtainable.              Section 9.4  Tenant's Work. Tenant shall not make any structural, mechanical, electrical, plumbing, or HVAC installations, alterations, additions or improvements in or to the Premises or the Property, including, without limitation, any apertures in the walls, partitions, ceilings or floors, without on each occasion obtaining the prior written consent of Landlord, which consent will, not be unreasonably withheld or delayed with respect to non-structural, non-mechanical and non-electrical changes or alterations.  (Provided, however, that Tenant may make non-structural alterations having an aggregate cost of completion of less than $10,000.00 without first obtaining Landlord's consent). Under no circumstance shall Tenant be permitted to make any additions, improvements or installations on any portion of the Property (other than the Premises in accordance with the Provisions hereof). Any such work so approved by Landlord (and any other work performed by Tenant which does not require approval) shall be performed only in accordance with plans and specifications therefor approved by Landlord. Tenant shall procure at Tenant's sole expense all necessary permits and licenses before undertaking any work on the Premises and shall perform all such work in a good and workmanlike manner employing materials of good quality and so as to conform with all applicable zoning, building, fire, health and other codes, regulations, ordinances and laws and with all applicable insurance requirements. Tenant shall keep the Premises at all times free of liens for labor and materials and shall immediately remove and discharge (by bonding or otherwise) any mechanic’s lien or other lien filed against the Premises in any way related to any work by Tenant or its agents, sublessees, licensees, contractors, subcontractors, materialmen and the like. Tenant shall employ for such work only reputable, qualified contractors and shall require all contractors employed by Tenant to carry worker's compensation insurance in accordance with statutory requirements and comprehensive public liability insurance covering such contractors on or about the Premises in amounts that at least equal the limits set forth in Section 1 and to submit certificates evidencing such coverage to Landlord prior to the commencement of such work. Tenant shall save Landlord harmless and indemnified from all injury, loss, claims or damage to any person or property occasioned by or growing out of such work except if such injury, loss, claim or damage arose due to the negligence of Landlord or its contractors, employees or agents. Landlord may inspect the work of Tenant at reasonable times and give notice of observed defects.  Tenant shall not be required to, upon expiration or earlier termination of the Term of this Lease, remove any alteration, addition or improvement in the Premises if, and to the extent, that the original installation thereof did not require the consent of Landlord under the provisions of this Section 9.4; provided, however, that, in all events, Tenant shall remove all of its business equipment and trade fixtures upon expiration or termination of this Lease.  Tenant shall not be required to remove any alteration, addition or improvement which it makes in or to the Premises under the provisions of Section 9.4 and which require the prior consent of the Landlord unless at the time of such consent in writing Landlord also advises Tenant in writing that Tenant shall be required to remove such alteration, addition or improvement upon expiration or earlier termination of the Term.              Section 9.5  Indemnity. Tenant shall defend, with counsel approved by Landlord (which approval will not be unreasonably withheld), all actions against Landlord, any partner, trustee, member, stockholder, officer, director, employee or beneficiary of Landlord, holders of mortgages secured by the Building and any other party having an interest in the Property ("Landlord's Indemnified Parties") with respect to, and shall pay, protect, indemnify, defend and save harmless, to the extent permitted by law, all Landlord's Indemnified Parties from and against, any and all liabilities, losses, damages, costs, expenses (including reasonable attorneys' fees and expenses), causes of action, suits, claims, demands or judgments of any nature arising from (a) injury to or death of any person, or damage to or loss of property arising from the acts or omissions of Tenant or Tenant's agents, servants, employees or contractors, occurring in or about the Premises or the Property, or connected with the use, condition or occupancy of any portion thereof unless caused by the negligence or willful misconduct of Landlord's Indemnified Parties, or (b) any act, fault, omission, or other misconduct of Tenant or its agents, contractors, licensees, sublessees or invitees.  Landlord shall defend, with counsel approved by Tenant, which approval will not be unreasonably withheld, all actions against Tenant or any stockholder, officer, director or employee of Tenant (“Tenant’s Indemnified Parties”) with respect to, and shall pay, protect, indemnify and save harmless, to the extent permitted by Law, all of Tenant’s Indemnified Parties from and against any and all liabilities, losses, damages, costs, expenses (including reasonable attorneys’ fees and expenses), causes of action, suits, claims, demands or judgments of any nature arising from injury to or death of any person, or damage to or loss of any property of third persons caused by any misconduct or negligent act, fault or omission of Landlord or its partners, trustees, stockholders, officers, directors, members or beneficiaries or Landlord's agents, employees, contractors or subcontractors, except to the extent caused by the negligence of Tenant or Tenant's agents, servants, employees or invitees.              Section 9.6  Landlord's Right to Enter. Tenant shall permit Landlord and its agents to enter into the Premises at reasonable times and upon reasonable notice (one days notice being deemed reasonable, except in the case of emergency where no advance notice shall be necessary) to examine the Premises at reasonable intervals for reasonable purposes, make such repairs and replacements and perform such services as Landlord may be required to make under this Lease, without however, any obligation to do so, and show the Premises to prospective purchasers and lenders, and, during the last year of the term, to show the Premises to prospective tenants and to keep affixed in suitable places notices of availability of the Premises.              Section 9.7  Personal Property at Tenant's Risk. All furnishings, fixtures, equipment, effects and property of every kind of Tenant and of all subtenants and occupants of the Premises on the Property, shall be at the sole risk and hazard of Tenant and such subtenant or occupant and if the whole or any part thereof shall be destroyed or damaged by fire, water or otherwise, or by the leakage or bursting of water pipes, steam pipes, or other pipes, by theft or from any other cause, no part of said loss or damage shall be charged to or to be borne by Landlord. Tenant shall insure Tenant's personal property.              Section 9.8  Payment of Cost of Enforcement. Tenant shall pay, on demand, Landlord's reasonable expenses, including reasonable attorney's fees, incurred in enforcing any obligation of Tenant under this Lease or in curing any default by Tenant under this Lease as provided in Section 11.4.  Landlord shall pay, on demand, Tenant's reasonable expenses, including reasonable attorney's fees, incurred in enforcing any obligation of Landlord under this Lease or in curing any default of Landlord in accordance with Section 11.8 of this Lease.              Section 9.9  Yield Up. At the expiration of the term or earlier termination of this Lease, Tenant, any Subtenant or licensee of Tenant, or any person or entity claiming by, through or under Tenant shall surrender all keys to the Premises, remove all of its trade fixtures and personal property in the Premises, remove (except as otherwise provided in Section 9.4) such installations and improvements made by Tenant as Landlord may request and all Tenant's signs wherever located, repair all damage caused by such removal and yield up the Premises (including all installations and improvements made by Tenant except for trade fixtures and such installations or improvements made by Tenant as Landlord shall request Tenant to remove, subject, however, to Section 9.4) broom-clean and in the same good order and repair in which Tenant is obliged to keep and maintain the Premises under this Lease, ordinary wear and tear, damage by fire and casualty and damage caused by the negligent acts or omissions of Landlord, its agents, employees, contractors and subcontractors excepted (but Tenant shall nevertheless be required to make repairs and replacements and perform maintenance even where the need therefor due to ordinary wear and tear). Any property not so removed shall be deemed abandoned and may be removed and disposed of by Landlord in such manner as Landlord shall determine and Tenant shall pay Landlord the reasonable cost and expense incurred by it in effecting such removal and disposition and in making any incidental repairs and replacements to the Premises and for use and occupancy during the period after the expiration of the term and prior to Tenant's performance of its obligations under this Section 9.9.              Section 9.10  Estoppel Certificate. Upon not less than five (5) Business Days' prior notice by Landlord, which notice may be given from time to time, Tenant shall execute, acknowledge and deliver to Landlord a statement in writing certifying whether this Lease is unmodified and in full force and effect and whether, except as stated therein, Tenant has no knowledge of any defenses, offsets or counterclaims against its obligations to pay the Annual Fixed Rent and Additional Rent and any other charges and to perform its other covenants under this Lease (or, if there have been any modifications that the same is in full force and effect as modified and stating the modifications and, if there are any defenses, offsets or counterclaims, setting them forth in reasonable detail), the dates to which the Annual Fixed Rent and Additional Rent and other charges have been paid and a statement that Landlord is not in default hereunder (or if in default, the nature of such default, in reasonable detail) and such other data and information as may be required by Landlord or any proposed or existing mortgagee or purchaser of the Property in their customary form. Without limitation of the foregoing, Tenant shall, within five (5) Business Days after the written request of Landlord, execute and deliver to Landlord (or any purchaser or mortgagee) an Estoppel Certificate in the form of Exhibit A-11 (with all blanks completed as applicable). Any such statement delivered pursuant to this Section 9.10 may be relied upon by any prospective purchaser or any existing or future mortgagee of the Building.              Section 9.11  Rules and Regulations.  Tenant shall comply with all Rules and Regulations set forth in Exhibit A-10 and all amendments and modifications thereto and all other rules and regulations from time to time promulgated by Landlord with respect to the Property.              Section 9.12  Park Covenants and Restrictions.  Tenant shall comply with the Park Covenants attached hereto as Exhibit A-14 the Cross-Easement and any amendments to either of them.              Section 9.13  Holding Over. Tenant shall vacate the Premises immediately upon the expiration or sooner termination of this Lease. If Tenant retains possession of the Premises or any part thereof after the expiration or termination of the term without Landlord's express consent, Tenant shall pay Landlord monthly rent at 150% of the Annual Fixed Rent (which was in effect on the date of expiration or earlier termination of the Term) specified in Section 1 and 150% of all Additional Rent payable under this Lease in effect on the date of expiration or earlier termination of this Lease for the time Tenant thus remains in possession and, in addition thereto, Tenant shall, if Tenant holds over after the date of expiration or earlier termination of the Term of the Lease, pay Landlord for all damages, consequential as well as direct, sustained by reason of Tenant's retention of possession. The provisions of this Section do not exclude Landlord's rights of re-entry or any other right hereunder, including without limitation, the right to refuse 150% of the monthly rent and instead to remove Tenant through summary proceedings for holding over beyond the expiration of the Term of this Lease.              Section 9.14  Assignment and Subletting. Tenant shall not, except as otherwise expressly permitted under this Section 9.14) assign, transfer, mortgage or pledge this Lease or grant a security interest in Tenant's rights hereunder or sublease (which term shall be deemed to include the granting of concessions and licenses and the like) all or any part of the Premises or suffer or permit this Lease or the leasehold estate hereby created or any other rights arising under this Lease to be assigned, transferred or encumbered, in whole or in part, whether voluntarily, involuntarily or by operation of law, or permit the occupancy of the Premises by anyone other than Tenant, provided, however, that Landlord will not unreasonably withhold or delay its consent to any assignment of this Lease or any subletting of all or any part of the Premises subject, however, to all of the terms and conditions hereof and of the Lease. Any merger, consolidation or other similar reorganization (collectively, a "Merger") involving Tenant shall be deemed to be an assignment for purposes of this Section 9.14. Any attempted assignment, transfer, mortgage, pledge, grant of security interest, sublease or other encumbrance, except with prior written approval thereof from Landlord, shall be void (except that an assignment by virtue of a Merger shall not be void but shall, nevertheless, constitute a breach of this Section if Landlord does not consent thereto). No assignment, transfer, mortgage, grant of security interest, sublease or other encumbrance, whether or not approved, and no indulgence granted by Landlord to any assignee or sublessee, shall in any way impair the continuing primary liability (which after an assignment shall be joint and several with the assignee) of Tenant hereunder, and no approval in a particular instance shall be deemed to be a waiver of the obligation to obtain Landlord's approval in any other case.              If for any assignment or sublease Tenant shall receive rent or other consideration, either initially or over the term of the assignment or sublease, in excess of the Annual Fixed Rent and Additional Rent on account of Real Estate Tax Escalations and Operating Cost Escalations called for hereunder (or in the case of the sublease of part, in excess of such Annual Fixed Rent and Additional Rent on account of Real Estate Tax Escalations and Operating Cost Escalations allocable to the part) Tenant shall pay to Landlord, as Additional Rent, Fifty (50%) Percent of the Overages (as said term is hereinafter defined) received by Tenant, promptly after its receipt.  As used herein, the term “Overages” shall mean all amounts (“Gross Rents”) received by Tenant in excess of (a) Annual Fixed Rent plus (b) Additional Rent on account of Real Estate Tax Escalations and Operating Cost Escalations (and any other payments of Additional Rent due from Tenant hereunder exclusive of sums due Landlord under Sections 11.4, 11.7 and exclusive of all costs and expenses payable by Tenant related to Landlord's exercise of any rights or remedies under this Lease, including, without limitation, court costs and reasonable attorneys' fees) for the same period attributable to the space sublet or assigned, after deducting from such Gross Rents the following costs, amortized and spread over the balance of the Term of this Lease, in the case of an assignment, and over the term of the sublease, in the case of any sublease:  (i) the cost of any broker’s commission, advertising or marketing expense paid by Tenant with respect to the subletting or assignment; (ii) the cost of any improvements made to the subleased space by Tenant, at Tenant’s expense as special tenant improvements for the sublessee pursuant to the terms of such sublease; and (iii) Tenant’s reasonable legal fees incurred in negotiating and preparing the sublease or assignment in question.  Termination of this Lease shall terminate all right of Tenant to share in or receive any Overages and Landlord, alone, shall be entitled to receive and retain One Hundred (100%) Percent of all such Overages, sublease rents and other payments.              Landlord agrees that it will consent to an assignment of this Lease (i) by operation of law as a result of the merger or consolidation of Tenant into an entity which, after giving effect to such merger and consolidation, has a net worth and financial condition at least equal to the net worth and financial condition of Tenant immediately prior to such merger or consolidation and (ii) to any entity which simultaneously therewith acquires all of the assets of Tenant for the purpose of continuing Tenant’s business as a going concern engaged in the business that is being conducted on the Premises by Tenant immediately prior to such acquisition and which has a net worth and financial condition which, after giving effect to such acquisition, is at least equal to the net worth and financial condition of Tenant immediately prior to such acquisition, provided that any such assignee (whether by merger, consolidation or assignment) first assumes in full the obligations of Tenant under this Lease.              Any assignment or subletting, whether or not consented to by Landlord, shall only be for the Permitted Uses.  In no event shall any assignment be binding up Landlord unless Tenant shall deliver to Landlord an instrument, in recordable form, which contains a covenant of assumption by the assignee running to the Landlord and all persons claiming by through or under the Landlord.  Neither the approval of any such assignment or sublease nor the acceptance of any such assignment or sublease shall, in any way, release or discharge Tenant from its liability as Tenant hereunder notwithstanding such assignment or sublease.  Tenant shall promptly furnish to Landlord a conformed copy of any sublease effected under the terms of this Section 9.14. Tenant shall reimburse Landlord promptly on demand for all reasonable legal expenses incurred by Landlord in connection with any request by Tenant for approval of any assignment or sublease.              Landlord agrees to respond to any request by Tenant for approval of any assignment or subletting within twenty one (21) days after Tenant has furnished to Landlord in writing, (i) the name of the proposed assignee or subtenant, (ii) such information as to its financial responsibility and standing as Landlord may reasonably require and (iii) all terms and provisions relating to the Lease upon which the proposed assignment or subletting is to be made.              If Landlord fails to respond to such request within such twenty one day (21) period and such failure shall continue for more than five (5) business days after Landlord actually receives notice thereof from Tenant, then Landlord shall be deemed to have approved the sublease or assignment in question but, in all cases, Tenant shall remain fully and primarily liable under the Lease.              Any entity which receives an assignment of the Tenant's interest under this Lease which is either expressly permitted without Landlord's consent or to which Landlord, in fact, consents, is hereinafter referred to as a "Permitted Assignee".              Section 9.15  Overloading and Nuisance. Tenant shall not injure, overload, deface or otherwise harm the Premises, commit any nuisance, permit the emission of any objectionable noise, vibration or odor, make, allow or suffer any waste or make any use of the Premises which is improper, offensive or contrary to any law or ordinance or which will invalidate any of Landlord's insurance.              Section 9.16  Prevailing Party/Attorneys’ Fees.  In the event of any litigation or arbitration between Landlord and Tenant, the prevailing party shall be entitled to receive from the other, the amount of its reasonable out-of-pocket legal fees and expenses incurred in connection therewith.   SECTION 10 Casualty or Taking              Section 10.1  Abatement of Rent.  If the Premises shall be damaged by fire or casualty or by action of public or other authority in consequence thereof, Annual Fixed Rent and Additional Rent payable by Tenant shall abate proportionately for the period in which, by reason of such damage, there is material interference with Tenant's use of the Premises, having regard to the extent to which Tenant may be required to discontinue Tenant's use of all or a portion of the Premises, but such abatement or reduction shall end if and when Landlord shall have substantially restored the Premises to the condition in which they were prior to such damage.  If the Premises shall be affected by any exercise of the power of eminent domain, Annual Fixed Rent and Additional Rent payable by Tenant shall be justly and equitably abated and reduced according to the nature and extent of the loss of use thereof suffered by Tenant.              Section 10.2  Landlord's Right Of Termination.  If the Premises or the Building are damaged by fire or other casualty, Landlord shall cause an independent contractor selected by it to make a written estimate (the "Estimate") of the amount of time normally required in the ordinary course to perform and substantially complete the restoration of the damage in question, and a copy of the Estimate shall be furnished to both Landlord and Tenant within sixty (60) days after the date of such casualty.  If (a) the Premises or the Building are substantially damaged by fire or other casualty or by action of public or other authority in consequence thereof (the term "substantially damaged" meaning damage of such a character that the same cannot, in ordinary course and as set forth in the Estimate, reasonably be expected to be repaired within ninety (90) days from the time that repair work would commence), or (b) any mortgagee then holding a mortgage on the Property, or on any interest of Landlord therein, should require that insurance proceeds payable as a result of a casualty be applied to the payment of the mortgage debt or (c) a material uninsured fire or other casualty or loss to the Building should occur or (d) if any material part of the Building is taken by any exercise of the right of eminent domain or should be sold in lieu thereof or Landlord receives compensable damage by reason of anything lawfully done in pursuance of public or other authority, then Landlord shall have the right to terminate this Lease (even if Landlord's entire interest in the Premises may have been divested) by giving notice of Landlord's election so to do within 90 days after the occurrence of such casualty or the effective date of such taking, whereupon this Lease shall terminate 30 days after the date of such notice with the same force and effect as if such date were the date originally established as the expiration date hereof.              Section 10.3  Restoration; Tenant's Right of Termination.  (a) If the amount of time normally required to perform and substantially complete such restoration in the ordinary course as set forth in the Estimate exceeds 180 days from the time repair work would commence, then Tenant shall have the right to terminate this Lease effective as of the date of Tenant's Termination Notice, such right to be exercised, if at all, by written notice (a "Tenant's Termination Notice") to Landlord within fifteen (15) days after Tenant's receipt of the Estimate.  Failure of Tenant to exercise such right of termination within the time and manner herein provided shall constitute a waiver of such right by Tenant, time being of the essence.  Any termination of this Lease by Tenant pursuant to this Section 10.3(a) shall have the same force and effect as if such date were the date originally established as the date of expiration of the Lease.              (b) If this Lease shall not be terminated pursuant to Section 10.2 or 10.3(a), Landlord shall thereafter use due diligence to restore the Premises to proper condition for Tenant's use and occupation, provided that Landlord's obligation shall be limited to the amount of insurance proceeds or condemnation awards made available to Landlord therefor.  If, for any reason, such restoration shall not be substantially completed within six months after the expiration of the ninety (90) day period referred to in Section 10.2, Tenant shall have the right to terminate this Lease by giving notice to Landlord thereof within thirty (30) days after the expiration of such period (as so extended).  Upon the giving of such notice, this Lease shall cease and come to an end without further liability or obligation on the part of either party unless, within such thirty (30) day period, Landlord substantially completes such restoration.  Such right of termination shall be Tenant's sole and exclusive remedy at law or in equity for Landlord's failure to complete such restoration.              Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting in any way from damage from fire or other casualty or the repair thereof.  Tenant understands that Landlord will not carry insurance of any kind on Tenant's improvements, alterations, furniture or furnishings or on any fixtures or equipment removable by Tenant under the provisions of this Lease, and that Landlord shall not be obligated to repair any damage thereto or replace the same.  If Tenant desires any other or additional repairs for restoration and if Landlord consents thereto, the same shall be done at Tenant's expense.  Tenant acknowledges that Landlord shall be entitled to the full proceeds of any insurance coverage, whether carried by Landlord or Tenant, for damage to alterations, additions, improvements or decorations provided by Landlord either directly or through an allowance to Tenant.              Section 10.4  Award.  Landlord shall have and hereby reserves and excepts, and Tenant hereby grants and assigns to Landlord, all rights to recover for damages to the Property and the leasehold interest hereby created, and to compensation accrued or hereafter to accrue by reason of any taking by exercise of the power of eminent domain or any sale in lieu thereof or by reason of anything done in pursuance of public or other authority, and by way of confirming the foregoing, Tenant hereby grants and assigns, and covenants with Landlord to grant and assign to Landlord, all rights to such damages or compensation. Nothing contained herein shall be construed to prevent Tenant from prosecuting in any separate condemnation proceedings a claim for the value of any of Tenant's Removable Property installed in the Premises by Tenant at Tenant's expense and for relocation expenses; provided, that such action shall not affect the amount of compensation otherwise recoverable by Landlord from the taking authority and shall be prosecuted in a proceeding separate and apart from Landlord.              Section 10.5  Temporary Taking.  In the event of taking of the Premises or Property or any part thereof for temporary use by the exercise of any governmental power, (i) this Lease shall be and remain unaffected thereby and rent shall not abate, and (ii) Tenant shall be entitled to receive for itself such portion or portions of any award made for such use with respect to the period of the taking which is within the Term, provided that if such taking shall remain in force at the expiration or earlier termination of this Lease, Tenant shall then pay to Landlord a sum equal to the reasonable cost of performing Tenant's obligations under this Lease with respect to surrender of the Premises and upon such payment shall be excused from such obligations.              Section 10.6  No Liability On Account Of Injury To Business, Etc.  Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant or resulting in any way from damage from fire or other casualty or the repair thereof and Tenant understands and agrees that Landlord shall in no event be responsible for the repair or replacement of any furniture or furnishings or any fixtures or equipment removable by Tenant under the provisions of this Lease.  If Tenant desires any other or additional repairs or restoration and if Landlord consents thereto, the same shall be done at Tenant's expense.  Tenant acknowledges that Landlord shall be entitled to the full proceeds of any insurance coverage whether carried by Landlord or Tenant, for damage to the Premises and any alterations or improvements thereto.  Upon any expiration or earlier termination of this Lease, any insurance proceeds not theretofore applied to the cost of restoration shall be paid to Landlord.  Tenant acknowledges that the fire and extended coverage insurance carried by Landlord shall not extend to Tenant's personal property, including inventory, trade fixtures, floor coverings, furniture and other property removable by Tenant and that Tenant shall be responsible for carrying all risk insurance on all such personal property, trade fixtures, floor coverings, furniture and other property removable by it.   SECTION 11 Default              Section 11.1  Events of Default. If any of the following events (“Event or Events of Default”):              (a)         Tenant shall default in the performance of any of its obligations to pay the Annual Fixed Rent, Additional Rent or any other sum payable hereunder and if such default shall continue for five (5) days after notice thereof;              (b)        Tenant shall neglect or fail to perform or observe any other covenant herein contained on Tenant's part to be performed or observed and Tenant shall fail to remedy the same within thirty (30) days after notice to Tenant specifying such neglect or failure, or if such failure is of such a nature that Tenant cannot reasonably remedy the same within such thirty (30) day period, Tenant shall fail to commence promptly to remedy the same and to prosecute such remedy to completion with diligence and continuity;              (c)         If any assignment for the benefit of creditors shall be made by Tenant;              (d)        If Tenant's leasehold interest shall be taken on execution or other process of law in any action against Tenant;              (e)         If a lien or other involuntary encumbrance is filed against Tenant's leasehold interest, and is not discharged within thirty (30) days thereafter (or within such shorter period within which the same must be discharged under the terms of any first mortgage on the Premises);              (f)         If a petition is filed by Tenant for liquidation, or for reorganization or an arrangement or any other relief under any provision of the Bankruptcy Code as then in force and effect; or              (g)        If an involuntary petition under any of the provisions of said Bankruptcy Code is filed against Tenant and such involuntary petition is not dismissed within sixty (60) days thereafter, then, and in any of such cases, Landlord and the agents and servants of Landlord lawfully may, in addition to and not in derogation of any remedies for any preceding breach of covenant, immediately or at any time thereafter and without demand or notice and with or without process of law (forcibly, if necessary) enter into and upon the Premises or any part thereof in the name of the whole, or mail a notice of termination addressed to Tenant, and repossess the same as of Landlord's former estate and expel Tenant and those claiming through or under Tenant and remove its and their effects without being deemed guilty of any manner of trespass and without prejudice to any remedies which might otherwise be used for arrears of rent or prior breach of covenant, and upon such entry or mailing as aforesaid this Lease shall terminate, Tenant hereby waiving all statutory rights (including, without limitation, rights of redemption, if any) to the extent such rights may be lawfully waived. Landlord, without notice to Tenant, may store Tenant's effects, and those of any person claiming through or under Tenant at the expense and risk of Tenant, and, if Landlord so elects, may sell such effects at public auction or private sale and apply the net proceeds to the payment of all sums due to Landlord from Tenant, if any, and pay over the balance, if any, to Tenant.              Section 11.2  Remedies.              (a)         In the event of any termination under any of the provisions in Section 11.1, as additional and cumulative obligations after any such termination, Tenant shall also pay punctually to Landlord as current charges all the sums and shall perform all the obligations which Tenant covenants in this Lease to pay and to perform in the same manner and to the same extent and at the same time as if this Lease had not been terminated. In calculating the amounts to be paid by Tenant pursuant to the preceding sentence, Tenant shall be credited with the net proceeds of any rent obtained by Landlord by reletting the Premises, after deducting all Landlord's reasonable expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, fees for legal services and expenses of preparing the Premises for such reletting, it being agreed by Tenant that Landlord may (i) relet the Premises or any part or parts thereof for a term or terms which may at Landlord's option be equal to or less than or exceed the period which would otherwise have constituted the balance of the term hereof and may grant such concessions and free rent as Landlord in its reasonable judgment considers advisable or necessary to relet the same and (ii) make such alterations, repairs and decorations in the Premises as Landlord in its reasonable judgment considers advisable or necessary to relet the same, and no action of Landlord in accordance with the foregoing or failure to relet or to collect rent under reletting shall operate or be construed to release or reduce Tenant's liability as aforesaid.              (b)        At any time after this Lease is terminated under any of the provisions contained in this Section 11, whether or not Landlord shall have collected any current damages under Section 11.2(a), as liquidated final damages and in lieu of all such current damages under Section 11.2(a) beyond the date of any demand under this Section 11.2(b) by Landlord, Tenant shall pay to Landlord, upon demand, an amount equal to the present value (using a discount rate of 11%) of the excess, if any, of the total Annual Fixed Rent, Additional Rent and other sums which would be payable under this Lease from the date of such demand (assuming that, for purposes of this paragraph, annual payments by Tenant on account of taxes, insurance premiums, Park Common Expenses and expenses under Section 8.2 would be the same as the payments required in the immediately preceding twelve (12) month period) for what would be the then unexpired term of the Lease if the same had remained in effect, over the fair market rental value of the Premises for the same period. In calculating the amount to be paid by Tenant pursuant to this Section 11.2(b), Tenant shall be credited with any rental payments made by Tenant allocable to the period after the date of demand made by Landlord under this Section 11.2(b) but such credit shall be allowed only after all sums due under this Lease for the period prior to such demand have been paid in full.                            Landlord agrees that following any termination of this Lease under this Section 11, it will use good faith efforts to re-let the Premises.              Section 11.3  Remedies Cumulative. Except as otherwise expressly provided herein, any and all rights and remedies which Landlord may have under this Lease and at law and equity shall be cumulative and shall not be deemed inconsistent with each other, and any two or more of all such rights and remedies may be exercised at the same time to the greatest extent permitted by law.              Section 11.4  Landlord's Right to Cure Defaults. At any time following thirty (30) days' prior notice to Tenant (except in cases of emergency when no notice shall be required), Landlord may (but shall not be obligated to) cure any default by Tenant under this Lease, and whenever Landlord so elects, all reasonable costs and expenses incurred by Landlord, including reasonable attorneys' fees, in curing a default shall be paid by Tenant to Landlord as additional rent on demand, together with interest thereon at the rate provided in Section 11.7 from the date of payment by Landlord to the date of payment by Tenant.              Section 11.5  Effect of Waivers of Default. Any consent or permission by Landlord to any act or omission which otherwise would be a breach of any covenant or condition herein, or any waiver by Landlord of the breach of any covenant or condition herein, shall not in any way be held or construed (unless expressly so declared) to operate so as to impair the continuing obligation of any covenant or condition herein, or otherwise operate to permit the same or similar acts or omissions except as to the specific instance. The failure of Landlord to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of this Lease shall not be deemed a waiver of such violation nor prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. The receipt by Landlord of rent with knowledge of the breach of any covenant of this Lease shall not be deemed to have been a waiver of such breach by Landlord or of any of Landlord's remedies on account thereof, including its right of termination for such default.              Section 11.6  No Accord and Satisfaction. No acceptance by Landlord of a lesser sum than the Annual Fixed Rent, Additional Rent or any other charge then due shall be deemed to be other than on account of the earliest installment of such rent or charge due, unless Landlord elects by notice to Tenant to credit such sum against the most recent installment due. Any endorsement or statement on any check or any letter accompanying any check or payment as rent or other charge shall not be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such installment or pursue any other remedy under this Lease or otherwise.              Section 11.7  Interest on Overdue Sums. If Tenant fails to pay Annual Fixed Rent, Additional Rent or any other sum payable by Tenant to Landlord by the due date thereof (i.e., the due date disregarding any requirement of notice from Landlord or an period of grace allowed to Tenant), the amount so unpaid shall bear interest at a variable rate (the "Delinquency Rate") equal to five percent (5%) in excess of the base rate (prime rate) of Fleet Bank (or any other commercial banking institution in Boston, Massachusetts designated by Landlord if Fleet Bank shall cease to exist or publish a prime rate) from time to time in effect commencing with the due date and continuing through the day on which payment of such delinquent payment with interest thereon is paid. If such rate is in excess of any maximum interest rate permissible under applicable law, the Delinquency Rate shall be the maximum interest rate permissible under applicable law.              Section 11.8  Tenant’s Right to Cure Defaults.  If (a) Landlord should default in performing or complying with any of its obligations under Section 8 of this Lease entitled “Landlord Covenants” or Sections 6.2(a) or (b), (b) as a result thereof, Tenant’s use and enjoyment of the Premises is materially adversely affected thereby and (c) within thirty (30) days after receipt of notice of such default, Landlord fails to remedy such default or if such default reasonably requires more than 30 days to cure, Landlord fails to promptly commence such cure and thereafter, fails to diligently pursue the curing of such default to completion, Tenant shall, during and so long as Landlord’s failure to commence or continue to cure such default is continuing, have the right to perform such work as is reasonably necessary to cure such default on Landlord’s behalf and Landlord shall, within ten (10) days after demand, reimburse Tenant for the cost of performing such work together with interest thereon at the rate provided in Section 11.7.  If Landlord should fail to reimburse Tenant for the cost referred to herein within ten (10) days after written demand therefor and such failure continues for more than ten (10) days after receipt of notice thereof, Tenant shall have the further right to offset and deduct any such costs and interest against annual fixed rent and other charges payable by Tenant under this Lease provided, further, however, that if Landlord has disputed the existence of any such default or the need for any such action on the part of Tenant hereunder or the amount claimed due by Tenant hereunder (collectively "Section 11.8 Disputes"), then, and in any such event, Tenant may only offset and deduct the amounts not in dispute.  Either Landlord or Tenant shall have the right to refer Section 11.8 Disputes to arbitration in accordance herewith; provided, however, that the party so desiring arbitration gives written notice thereof to the other party within five (5) days after knowledge of the dispute and proceeds to file an arbitration proceeding within fifteen (15) days after the giving of such notice.  Any such arbitration shall be conducted by the American Arbitration Association sitting in Boston, Massachusetts and shall be conducted in accordance with the rules in obtaining of the American Arbitration Association.  The judgment upon any arbitration decision rendered hereunder may be entered by any court having jurisdiction thereof and shall be binding and conclusive upon the parties.  Upon receipt of a final non-appealable judgment (or decision in arbitration) in favor of Tenant with respect to any disputed amounts, Tenant may then also offset and deduct the amount set forth in such final non-appealable judgment which is awarded to Tenant if, within ten (10) days after written notice thereof, Landlord fails to make payment thereof.  Notwithstanding the foregoing to the contrary, (i) in no event may Tenant offset or deduct an amount in excess of $50,000.00 during any consecutive twelve (12) month period, (b) no offset or deduction right afforded Tenant hereunder shall be effective as against the holder of any first mortgage from time to time on the Property and (c) the holder of any first mortgage which acquires directly (or through an affiliated entity) the Property as a result of foreclosure of its mortgage (including foreclosure by power of sale) or by deed in lieu of foreclosure, shall not have any obligation to Tenant for any unpaid sums under this Section 11.8.   SECTION 12 Mortgages              Section 12.1  Rights of Mortgage Holders. No Annual Fixed Rent, Additional Rent or any other charge shall be paid more than ten (10) days prior to the due date thereof and payments made in violation of this provision shall (except to the extent that such payments are actually received by a mortgagee in possession or in the process of foreclosing its mortgage) be a nullity as against such mortgagee and Tenant shall be liable for the amount of such payments to such mortgagee.              In the event of any act or omission by Landlord which would give Tenant the right to terminate this Lease or to claim a partial or total eviction, Tenant shall not exercise any such right (a) until it shall have given notice, in the manner provided in Section 13.1, of such act or omission to the holder of any mortgage encumbering the Property whose name and address shall have been furnished to Tenant in writing, at the last address so furnished, and (b) until a reasonable period of time for remedying such act or omission shall have elapsed following the giving of such notice, provided that following the giving of such notice, Landlord or such holder shall, with reasonable diligence, have commenced and continued to remedy such act or omission or to cause the same to be rendered.              In the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under, any mortgage now or hereafter encumbering the Property, Tenant shall attorn to the purchaser upon such foreclosure or sale or upon any grant of a deed in lieu of foreclosure and recognize such purchaser as Landlord under this Lease.              Section 12.2  Superiority of Lease: Option to Subordinate. Unless Landlord exercises the option set forth below in this Section 12.2, this Lease shall be superior to and shall not be subordinate to any mortgage on the Property. Landlord shall have the option to subordinate this Lease to any mortgage of the Property provided that the holder of record thereof enters into an agreement with Tenant, in such holder's customary form, by the terms of which such holder will agree to (a) recognize the rights of Tenant under this Lease,  (b) perform Landlord's obligations hereunder arising after the date of such holder's acquisition of title and (c) accept Tenant as tenant of the Premises under the terms and conditions of this Lease in the event of acquisition of title by such holder through foreclosure proceedings or otherwise and Tenant will agree to recognize the holder of such mortgage as Landlord in such event, which agreement shall be made expressly to bind and inure to the benefit of the successors and assigns of Tenant and of the holder and upon anyone purchasing the Property at any foreclosure sale. Tenant agrees to execute and deliver any such customary form of agreement required by the holder or proposed holder of any mortgage on the Property and any other reasonable instruments necessary to carry out the agreements contained in this Section 12.2.   SECTION 13 Miscellaneous Provisions              Section 13.1  Notices from One Party to the Other. All notices required or permitted hereunder shall be in writing and addressed, if to Tenant, at the Address of Tenant or such other address as Tenant shall have last designated by notice in writing to Landlord and, if to Landlord, at the Address of Landlord or such other address as Landlord shall have last designated by notice in writing to Tenant. Any notice shall be deemed duly given when delivered or tendered for delivery at such address.              Section 13.2  Quiet Enjoyment. See Section 8.1.              Section 13.3  Lease Not to be Recorded; Notice of Lease. Tenant agrees that it will not record this Lease. If the term of this Lease, including options, exceeds seven years, Landlord and Tenant agree that, on the request of either, they will enter and record a notice of lease in form reasonably acceptable to Landlord.              Section 13.4  Bind and Inure; Limitation of Landlord's Liability. The obligations of this Lease shall run with the land, and this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. No owner of the Property shall be liable under this Lease except for breaches of Landlord's obligations occurring while owner of the Premises. The obligations of Landlord shall be binding upon the assets of Landlord which comprise the Property but not upon other assets of Landlord. No individual partner, trustee, stockholder, officer, director, employee or beneficiary of Landlord shall be personally liable under this Lease and Tenant shall look solely to Landlord's interest in the Property in pursuit of its remedies upon an event of default hereunder, and the general assets of Landlord and its partners, trustees, stockholders, officers, employees or beneficiaries of Landlord shall not be subject to levy, execution or other enforcement procedure for the satisfaction of the remedies of Tenant.              Section 13.5  Acts of God. In any case where either party hereto is required to do any act, delays caused by or resulting from acts of God, war, civil commotion, fire, flood or other casualty, strikes, work stoppages, shortages of labor, materials or equipment, government regulations, unusually severe weather, or other causes beyond such party's reasonable control shall not be counted in determining the time during which work shall be completed, whether such time be designated by a fixed date, a fixed time or a "reasonable time", and such time shall be deemed to be extended by the period of such delay.  The provisions of this Section 13.5 shall not apply to payment of Annual Fixed Rent, Additional Rent or other sums and charges payable by Tenant or Landlord under this Lease.              Section 13.6  Landlord's Default. Landlord shall not be deemed to be in default in the performance of any of its obligations hereunder unless (a) in the case of a failure by Landlord to pay Tenant any sum due Tenant under this Lease, such failure shall continue for more than five (5) days after written notice from Tenant to Landlord specifying such default and (b) in the case of any other failure to perform obligations of Landlord under this Lease, it shall fail to perform such other obligations, such failure has not been remedied within thirty (30) days after notice from Tenant to Landlord specifying such default or if such default reasonably requires more than 30 days to cure, Landlord fails to promptly commence such cure and thereafter fails to diligently pursue such cure to completion. Tenant shall have no right, for any default by Landlord, to offset or counterclaim against any rent due hereunder, except as otherwise expressly provided in Section 11.8 hereof.              Section 13.7  Brokerage. Tenant warrant and represent to Landlord that it has had no dealings with any broker or agent in connection with this Lease except Trammell Crow Company (the “Broker”) and covenants to defend with counsel approved by Landlord, hold harmless and indemnify Landlord from and against any and all cost, expense or liability for any compensation, commissions and charges claimed by any broker or agent with whom Tenant has had dealings with, except for the Broker.  Landlord warrants and represents to Tenant that it has had no dealings with any broker or agent in connection with this Lease except for the Broker and covenants to defend with counsel approved by Tenant, hold harmless and indemnify Tenant from and against any and all cost, expense or liability for any compensation, commissions and charges claimed by any broker or agent with whom Landlord has had dealings with.  Landlord shall be solely responsible for payment of any leasing commission due Broker for the leasing of the Premises.              Section 13.8  Miscellaneous. This Lease shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. There are no prior oral or written agreements between Landlord and Tenant affecting this Lease.              Section 13.9  Financial Statements. Throughout the term of this Lease, Tenant shall deliver to Landlord audited current financial statements of Tenant within ninety (90) days of the close of each fiscal year of Tenant and also within forty five (45) days of the close of each quarterly fiscal period, with current unaudited financial statements, including, in each case, a balance sheet and profit and loss statement for the most recent prior year, all prepared in accordance with generally accepted accounting principles consistently applied.              Section 13.10  Easements, Changes to Lot Lines; Reciprocal Easement. Landlord reserves the right, from time to time, to (i) grant or relocate easements affecting the Property or Premises and to change or alter existing boundaries of the Lot for purposes of developing and using other properties owned by Landlord or affiliates thereof, so long as such easements or such changes or alterations to existing boundaries of the Lot do not unreasonably interfere with or unreasonably affect Tenant's use of the Premises, and (ii) to enter upon the Property and Premises at reasonable times for purposes of performing its obligations under this Lease and for constructing and maintaining any signs, sprinkler lines, pipes, wires and other facilities serving the Premises, the other portions of the Building or any such other property.  Landlord agrees to use good faith efforts to minimize interference with Tenant’s use of the Premises in connection with the exercise of rights under Section 13.10(ii). If Landlord grants any easement in, upon, over or under the Property after the date of this Lease (exclusive of the Park Covenants and the Cross Easement), then Tenant shall not be responsible for any taxes and assessments which are separately assessed for the easement areas or related improvements thereunder except to the extent that such future easement is for the benefit of the Property.  This Lease shall be subject and subordinate to the Park Covenants whenever the same are granted and recorded and as the same shall be amended from time to time.              Section 13.11  Security Deposit. (a)  Concurrently with execution of this Lease, Tenant shall deposit the Security Deposit in the amount specified in Section 1.1 of this Lease with the Escrow Agent (as hereafter defined) hereinafter specified as security for the faithful performance and observance by Tenant of the terms, provisions and conditions of this Lease.  It is agreed that in the event Tenant defaults in respect of any of the terms, provisions and conditions of this Lease, including, but not limited to, the payment of Annual Fixed Rent, Additional Rent or any sums payable by Tenant under Section 3 or any payments or obligations of the Tenant pursuant to Section 11.2 of this Lease, Landlord may, subject to Section 13.11(c) hereof (but only to the extent Section 13.11(c) is applicable), use, apply or retain the whole or any part of the Security Deposit to the extent required for the payment of any Annual Fixed Rent and Additional Rent, any sums payable by Tenant under Section 3 of the Lease or any other sum or charge due from Tenant under this Lease including, without limitation, amounts payable by Tenant pursuant to Section 11.2 of this Lease.  If Landlord applies any part of said Security Deposit to cure any default of Tenant, Tenant shall upon demand deposit with Landlord the amount so applied so that Landlord shall have the full Required Amount of the Security Deposit from time to time required to be available to Landlord at all times during the Term of this Lease.  The Security Deposit will, if such holder is willing to act as Escrow Agent hereunder, be deposited with any holder of a first mortgage on the Property and may be pledged to such first mortgagee by Landlord in connection with such first mortgage, and such first mortgagee shall have the right to draw upon the Security Deposit in accordance with the provisions of this Section 13.11.  If the first mortgage holder is not a bank or trust company, a savings bank, a savings and loan association, an insurance company, a college or university, a pension or retirement fund, a credit company, a real estate investment trust or company, a so-called securitization lender or other institutional lender (collectively an "Institutional Lender") or if the first mortgage holder is an Institutional Lender but does not agree to hold the Security Deposit, the Security Deposit will be deposited in an interest-bearing account with another Institutional Lender selected by Landlord or another Escrow Agent mutually approved by Landlord and Tenant. If Tenant so requests and the holder of the first mortgage on the Premises (or the other Escrow Agent which holds the Security Deposit) so agrees, the Security Deposit will be invested in so-called certificates of deposit having such maturity dates as Landlord, Tenant, the holder of such first mortgage or other Escrow Agent may approve, but until such approval is obtained, the Security Deposit shall be placed in an interest bearing account. So long as no Event of Default for non-payment of Annual Fixed Rent, Additional Rent or other sums or charges due from Tenant under this Lease has occurred under this Lease and is continuing, interest (and other earnings, if any) earned on the Security Deposit will be disbursed to Tenant annually in arrears but, upon the curing of any such Event of Default and provided the Lease has not been terminated and any sum drawn against the Security Deposit has been restored, then payments of interest or other earnings on such Security Deposit shall be resumed subject to all other provisions of this Section 13.11(a).  Landlord shall have no risk liability or responsibility with respect to the adequacy or safety of any investment of the Security Deposit nor the investment results with respect thereto nor for the acts, omissions, insolvency or failure of any Escrow Agent or first mortgagee which holds or invests such Security Deposit.  In no event shall Tenant ever be entitled to interest or other earnings on any portion of the Security Deposit which Landlord has drawn down or as to which Landlord has given notice to the Escrow Agent to pay Landlord (provided, in this latter case, such payment is ultimately made).  The Institutional Lender or other Escrow Agent which holds the Security Deposit pursuant hereto is herein called the "Escrow Agent".              (b)        At all times during the Term of this Lease, the "Required Amount" of the Security Deposit shall be $500,000.00.              (c)         Prior to using or applying the Security Deposit on account of an Event of Default under this Section 13.11 other than an Event of Default arising out of Tenant's failure to pay Annual Fixed Rent, Additional Rent or any sums due and owing pursuant to Section 11.2 of this Lease (in which cases, the provisions of this Section 13.11(c) shall not apply) Landlord shall give Tenant written notice (the "Draw Notice") of its intention to draw upon the Security Deposit in connection with such Event of Default.  It is agreed and understood that the provisions of this Section 13.11(c) shall not apply to and Landlord shall not be required to provide Tenant with a Draw Notice in connection with Events of Default arising out of Tenant's failure to pay Annual Fixed Rent, Additional Rent or any sums due and owing pursuant to Section 11.2 of this Lease.  Tenant shall have ten (10) days after the giving of such Draw Notice within which to notify Landlord and Escrow Agent in writing that it disputes Landlord's right to draw upon the Security Deposit as set forth in Landlord's notice and setting forth the basis for such dispute (the "Security Deposit Dispute Notice").  If the Security Deposit Dispute Notice is received by Landlord and Escrow Agent within such ten (10) day period, then Landlord shall not have the right to draw upon the Security Deposit for the purposes set forth in the Draw Notice until the first to occur of the date (a) Landlord and Tenant have mutually approved such draw in writing, or (b) Landlord shall have received either a final non-appealable judgment or final arbitration decision which either authorizes Landlord to make a draw upon the Security Deposit (in which case the draw may be for the amount so authorized) or awards Landlord a money judgment or money decision (in which case Landlord shall have the right to draw the amount of such money judgment or money decision or Landlord is otherwise authorized to proceed against the Security Deposit in which event Landlord shall have the right to proceed against the Security Deposit as so authorized).  Landlord shall have the right to, at any time, submit any dispute or claims relating to the Security Deposit pursuant to this Section 13.11(c) to arbitration by written notice to Tenant or commence an action in any court of competent jurisdiction in order to collect amounts from said Security Deposit.  Any arbitration under this Section 13.11(c) shall be conducted by the American Arbitration Association sitting in Boston, Massachusetts and shall be conducted in accordance with the rules then obtaining of the American Arbitration Association judgment upon any arbitration decision rendered may be entered by any court having jurisdiction thereof and shall be binding and conclusive upon the parties.              (d)        In the event of a sale or lease of the Property, Landlord shall have the right to transfer its rights in the Security Deposit to the vendee or lessee and Landlord shall thereupon be released by Tenant from all liability for the return of such Security Deposit thereafter arising, and Tenant agrees to look solely to the new landlord for the return of said Security Deposit to the extent so transferred, and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the Security Deposit to a new landlord.  Tenant further covenants that it will not assign or encumber or attempt to assign or encumber the Security Deposit and that neither Landlord nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance.              Section 13.12  Signage.  Tenant shall not install or affix any signs to the Building or upon the Lot except signs which (a) have been approved by Landlord, which approval may be granted or denied by Landlord in its sole and absolute discretion, (b) comply with all applicable laws, ordinances, rules and regulations relating thereto, and (c) for which all permits and approvals from all applicable governmental authorities have first been obtained.  Tenant shall be responsible for purchase, installation, maintenance, repair, removal and permitting of all signage, all at Tenant’s sole cost and expense.  Tenant shall not affix any signs to the Premises except pursuant to plans and specifications and in accordance with construction procedures first approval by Landlord and Tenant shall be responsible for the cost of repairing any damage to the Building caused by the installation, maintenance or removal of any such signage from the Building.  In addition, Tenant shall, promptly after expiration or earlier termination of this Lease, remove all signage from the Building and the Premises.  Landlord will install a monument sign at the entrance to the Property identifying the original Tenant by name and address, which sign shall have dimensions that are equal to the largest sign for any other tenant of the Building.  In addition, Landlord shall maintain (i) a tenant directory in the lobby of the Building on which Tenant's name and the location of the Premises in the Building will be placed and (ii) signage at the entrance of the suite that Tenant occupies in the Building identifying Tenant using Building Standard Signage.                Section 13.13  Non Disturbance Agreement.  Landlord will obtain a non disturbance agreement in favor of Tenant from the holder or proposed holder of any mortgage on the Property, all on such terms and conditions as are acceptable to the holder of such first mortgage in its usual and customary form.  Without limitation of the foregoing or of Section 12 hereof, within five (5) Business Days after the request of Landlord, Tenant shall execute and deliver a form of Subordination, Non-disturbance and Attornment Agreement in the form attached hereto as Exhibit A-12 (such form to be completed and blanks filled in order to conform to the applicable mortgage transaction). SECTION 14 Intentionally Omitted. SECTION 15 Right of First Offer                Section 15.1     In the event that during the Term of this Lease, any space in the Building shall become "available for leasing" (as said term is hereafter defined), as determined by Landlord and provided that the "Offer Conditions" (as hereafter defined) are then satisfied, Landlord shall first offer (the "Offer") to lease all of the such available portion of the Building to Tenant upon terms and conditions specified by Landlord.  If (a) within ten (10) days after Landlord provides the Offer to Tenant, Tenant does not unconditionally accept the Offer as to all of such space described in the Offer in writing or (b) if Tenant accepts the Offer as aforesaid but does not execute and deliver a final fully executed Amendment to this Lease Agreement in form and substance satisfactory to Landlord within 14 days after acceptance of the Offer as aforesaid, Landlord shall be free to rent all or any part of such space to any party upon substantially similar terms and conditions as were set forth in the Offer and Tenant's Right ofFirst Offer shall terminate as to all of the space described in such Offer.  For purposes hereof, "substantially similar terms" shall include annual fixed rent which is not less than 92 1/2% of the annual fixed rent specified in Landlord's Offer to Tenant.              As used herein the term "Offer Conditions" shall mean (i) that no Event of Default by Tenant shall exist and be continuing either at the time Landlord provides Tenant with the Offer or at the time of acceptance of the Offer by Tenant and (ii) that the original Tenant named in this Lease (Natural MicroSystems Corporation) is itself occupying the entire Premises demised under the Lease, both at the time of the Offer and upon Tenant’s acceptance of the Offer.              As used herein, space shall be deemed "available for leasing" by Landlord when, as determined by Landlord in its sole but reasonable discretion, any tenant leasing or occupying the subject space shall fail or refuse to exercise any option to extend or renew its lease or shall fail to negotiate and enter into a renewal or extension of its lease (in the absence of an option to extend or renew  or a proper exercise thereof) with Landlord for such portion of the Building.              In no event shall space being sublet by others be deemed "available for Leasing" unless Landlord shall recapture and control such space. SECTION 16 Intentionally Omitted SECTION 17 Leasehold Lot              Section 17.1  It is expressly understood and agreed by and between Landlord and Tenant that this Lease, as and to the extent that it grants Tenant the appurtenant right to use the Leasehold Parking Area, is a sublease and is subject and subordinate to the Ground Lease with respect to the Leasehold Lot and that no right, power or privilege granted to Tenant hereunder with respect to the Leasehold Lot may be exercised or enjoyed by Tenant and no term, covenant or condition of this Lease insofar as it relates to the Leasehold Lot benefiting Tenant shall be operative if and to the extent that such exercise, enjoyment or operation would not be permitted by or would violate or be in conflict with any term, covenant or condition of the Ground Lease.  Without limiting the generality of the foregoing, it is expressly understood and agreed that all rights of Tenant in and to any eminent domain awards in any way related to the Leasehold Lot shall be, and is hereby expressly made, subject and subordinate to the rights of the Landlord under the Ground Lease.  Landlord covenants and agrees that Landlord will not violate any of the terms, covenants or conditions of the Ground Lease.  The cost of any and all insurance required to be carried by Landlord under the Ground Lease or which Landlord carries in connection with the Ground Lease shall be included in the Operating costs payable as Additional Rent under Section 5 of the Lease.  From and after the Term Commencement Date and to the maximum extent, this agreement may be made effective according to law, Tenant agrees to indemnify and save harmless the Town of Framingham, as landlord under the Ground Lease (the "Ground Lease Landlord") from and against all claims of whatever nature arising from any act, omission or negligence of Tenant, Tenant's contractors, licensees, agents, servants, employees or customers, or anyone claiming by, through or under Tenant so long as Tenant or any occupant claiming under Tenant is using any part of the Leasehold Lot where such accident, injury or damage results or is claimed to have resulted from any act, omission or negligence on the part of Tenant or Tenant's contractors, licensees, agents, servants, employees or customers or anyone claming by, through or under Tenant.  The foregoing indemnity and hold harmless agreement shall include indemnity against all costs and expenses and liabilities incurred in or in connection with any claim or proceeding brought thereon and the defense thereof with counsel acceptable to the Ground Lease Landlord.  To the maximum extent, this agreement may be made effective according to law, Tenant agrees to use and occupy the part of the entire Leasehold Lot which the Tenant is permitted to use hereunder at Tenant's own risk and the terms of the Ground Lease and Landlord shall have no responsibility or liability for any loss or damage to fixtures or other personal property of Tenant or any person claiming by, through or under Tenant.                            IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly executed, under seal, by persons hereunto duly authorized, in multiple copies, each to be considered an original hereof, as of the date first set forth above.     LANDLORD:       NDNE 9/90 200 CROSSING BOULEVARD LLC       By:      NDNE 9/90, Inc.   Its:      Managing Member       By:     _______________________________               John J. O'Neil, III   Its:      Executive Vice President           NATURAL MICROSYSTEMS CORPORATION       By:     _______________________________   Its      

EXHIBIT 10.1 MANATRON, INC., 1989 STOCK OPTION PLAN           1.          Purpose. The purpose of the Manatron, Inc., 1989 Stock Option Plan is to provide a continuing, long-term incentive to selected eligible directors, officers and key employees of Manatron, Inc. (the "Corporation"), and of any subsidiary corporation of the Corporation (the "Subsidiary"), as herein defined; to provide a means of rewarding outstanding performance and to enable the Corporation to maintain a competitive position to attract and retain key personnel necessary for continued growth and profitability.           2.          Definitions. The following words and phrases as used herein shall have the meanings set forth below:               2.1          "Board" shall mean the Board of Directors of the Corporation.               2.2          "Change in Control" shall mean the time at which any entity, person or group (other than the Corporation, any subsidiary of the Corporation or any savings, pension or other benefit plan for the benefit of any employees of the Corporation or its subsidiaries) which prior to such time beneficially owned less than 20 percent of the then-outstanding Common Stock acquires such additional shares of Common Stock in one or more transactions, or a series of transactions, such that following such transaction or transactions such entity, person or group beneficially owns, directly or indirectly, 20 percent, or more, of the outstanding Common Stock.               2.3          "Code" shall mean the Internal Revenue Code of 1986, as amended.               2.4          "Committee" shall mean the Human Resources Committee of the Board, or such other committee of the Board as may be designated by the Board, from time to time, for the purpose of administering this plan as contemplated by Section 4 hereof.               2.5          "Common Stock" shall mean the common stock, no par value, of the Corporation.               2.6          "Corporation" shall mean Manatron, Inc., a Michigan corporation.               2.7          "Fair Market Value" of any security on any given date shall be determined by the Committee as follows: (a) if the security is listed for trading on one or more national securities exchanges (including the NASDAQ National Market System), the last reported sales price on the principal such exchange on the date in question, or if such security shall not have been traded on such principal exchange on such date, the last reported sales price on principal such exchange on the date in question, or if such security shall not have been traded on principal such exchange on such date, the last reported sales price on such principal exchange on the lst day prior thereto on which such security was so traded; or (b) if the security is not listed for trading on a national securities exchange (including the NASDAQ National Market System) but is traded in the over-the-counter market, the mean of the highest and lowest bid prices for such security on the date in question, or if there are no such bid prices for such security on such date, the mean of the highest and lowest bid prices on the lst day prior thereto on which such prices existed; or (c) if neither (a) nor (b) is applicable, by any means deemed fair and reasonable by the Committee, which determination shall be final and binding on all parties.               2.8          "ISO" shall mean any stock option granted pursuant to this Plan as an "incentive stock option" within the meaning of Section 422A of the Code.               2.9          "NQO" shall mean any stock option granted pursuant to this Plan which is not an ISO.               2.10          "Option" shall mean any stock option granted pursuant to this Plan, whether an ISO or a NQO.               2.11          "Optionee" shall mean any person who is the holder of an Option granted pursuant to this Plan.               2.12          "Plan" shall mean this 1989 Stock Option Plan of the Corporation.               2.13          "Subsidiary" shall mean any corporation which at the time qualifies as a subsidiary of the Corporation under Section 425(f) of the Code.           3.          Shares Available Under Plan. A maximum of 100,000 shares of the Common Stock of the Corporation (subject to adjustment in accordance with Paragraph 8 below) may be subject to the exercise of Options granted under the Plan. Such shares shall be authorized shares and may be either unissued shares or shares previously acquired or to be acquired by the Corporation. If an Option is canceled, surrendered, modified, exchanged for a substitute option, or expires or terminates during the term of the Plan but prior to the exercise of the Option in full, the shares subject to but not delivered under such Option shall be available for Options subsequently granted.           4.          Administration.               4.1          The Plan will be administered by a Committee of at least three members selected by the Board, and who have not at any time during the 12-month period before service on the Committee, been eligible to receive any Option under the Plan or under any other benefit plan of the Corporation or any of its affiliates entitling the participants therein to acquire stock or stock options of the Corporation or any of its Subsidiaries. No Options shall be granted to any Committee member during his tenure on the Committee.               4.2          The Committee will have plenary authority, subject to provision of the Plan, to determine when and to whom Options will be granted, the term of each Option, the number of shares covered by it, and any other terms or conditions of each Option. The Committee may also amend outstanding Options, consistent with the Plan, provided that no such amendment may be effective without the consent of the Optionee except to the extent that such amendment operates solely to the benefit of the Optionee. The Committee shall determine with respect to each grant of an Option whether a participant shall receive an ISO or a NQO. The number of shares, the term and the other terms and conditions of a particular kind of Option need not be the same, even as to options granted at the same time. The Committee's recommendations regarding option grants and terms and conditions thereof will be conclusive.               4.3          The Committee will have the sole responsibility for construing and interpreting the Plan, for establishing and amending any rules and regulations as it deems necessary or desirable for the proper administration of the Plan and for resolving all questions arising under the Plan. Any decision or action taken by the Committee arising out of or about the construction, administration, interpretation and effect of the Plan and of its rules and regulations will, to the extent permitted by law, be within its absolute discretion, except as otherwise specifically provided herein, and will be conclusive and binding on all Optionees, all successors, and any other person, whether that person is claiming under or through any Optionee or otherwise.               4.4          The Committee will designate one of its members as chairman. It will hold its meetings at the times and places as it may determine. A majority of its members will constitute a quorum, and all determinations of the Committee will be made by a majority of its members. Any determination reduced to writing and signed by all members will be fully as effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary, who need not be a member of the Committee, and may make such rules and regulations for the conduct of its business as it may deem advisable.               4.5          No member of the Committee will be liable, in the absence of bad faith, for any act or omission with respect to his services on the Committee. Members of the Committee will be entitled to indemnification and reimbursement as Board members pursuant to its Bylaws.               4.6          The Committee will regularly inform the Board as to its actions with respect to all Options granted under the Plan and the terms and conditions of any such Options in any manner, at any times and in any form as the Board may reasonably request.               4.7          Any other provision of the Plan to the contrary notwithstanding, the Committee is authorized to take such action as it, in its discretion, may deem necessary or advisable and fair and equitable to Optionees in the event of: a Change in Control of the Corporation; a tender, exchange or similar offer for all or any part of the Common Stock made by any entity, person or group (other than the Corporation, any Subsidiary of the Corporation or any savings, pension or other benefit plan for the benefit of employees of the Corporation or its Subsidiaries); a merger of the Corporation into, a consolidation of the Corporation with or an acquisition of the Corporation by another corporation or a sale or transfer of all or substantially all of the Corporation's assets. Such action, in the Committee's discretion, may include (but shall not be deemed limited to): establishing, amending or waiving the forms, terms, conditions or duration of Options so as to provide for earlier, later, extended or additional terms for exercise of the whole, or any installment, thereof; alternate forms of payment or other modifications. The Committee may take any such actions pursuant to this Section 4.7 by adopting rules or regulations of general applicability to all Optionees, or to certain categories of Optionees; by amending or waiving terms and conditions in stock option agreements; or by taking action with respect to individual Optionees. The Committee may take any such actions before or after the public announcement of any such Change in Control, tender offer, exchange offer, merger, consolidation, acquisition or sale or transfer of assets.           5.          Participants.               5.1          Participation in this Plan shall be limited to directors, corporate officers and other key personnel of the Corporation or of a Subsidiary. The Committee shall determine whether or not a given individual is eligible to participate in this Plan.               5.2          Subject to other provisions of this Plan, Options may be granted to the same participants on more than one occasion.               5.3          The Committee's determinations under the Plan (including, without limitation, determination of the persons to receive Options, the form, amount and type of such Options, and the terms and provisions of Options) need not be uniform and may be made selectively among otherwise eligible participants, whether or not the participants are similarly situated.           6.          Terms and Conditions.               6.1          Each Option granted under the Plan shall be evidenced by a written agreement, which shall be subject to the provisions of this Plan and to such other terms and conditions as the Corporation may deem appropriate.               6.2          Each Option agreement shall specify the period for which the Option thereunder is granted (which in no event shall exceed ten years from the date of the grant for options granted pursuant to Sections 6.3(a) and 6.3(c) hereof and five years from the date of grant for Options granted pursuant to 6.3(b) hereof) and shall provide that the Option shall expire at the end of such period; provided, however, the term of each Option shall be subject to the power of the Committee, among other things, to accelerate or otherwise adjust the terms for exercise of Options pursuant to Section 4.7 hereof in the event of the occurrence of any of the events set forth therein.               6.3          The exercise price per share shall be determined by the Committee at the time any Option is granted and shall be determined as follows:                     (a)          For employees who do not own stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Corporation or of any Subsidiary, the ISO exercise price per share shall not be less than 100 percent of Fair Market Value of the Common Stock of the Corporation on the date the Option is granted, as determined by the Committee.                     (b)          For employees who own stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Corporation or of any Subsidiary, the ISO exercise price per share shall not be less than 110 percent of the Fair Market Value of the Common Stock of the Corporation on the date the Option is granted, as determined by the Committee.                     (c)          For all directors and employees, the NQO exercise price per share shall not be less than 100 percent of the Fair Market Value of the Common Stock of the Corporation on the date the Option is granted, as determined by the Committee.               6.4          The aggregate Fair Market Value (determined as of the time the Option is granted) of the Common Stock with respect to which an ISO under this Plan or any other plan of the Corporation or its Subsidiaries is exercisable for the first time by an Optionee during any calendar year shall not exceed $100,000.               6.5          An Option shall be exercisable at such time or times, and with respect to such minimum number of shares, as may be determined by the Committee at the time of the grant. The Option agreement may require, if so determined by the Committee, that no part of the Option may be exercised until the Optionee shall have remained in the employ of the Corporation or of a Subsidiary for such period after the date of the Option as the Committee may specify.               6.6          The Corporation may prescribe the form of legend which shall be affixed to the stock certificate representing shares to be issued and the shares shall be subject to the provisions of any repurchase agreement or other agreement restricting the sale or transfer thereof. Such agreements or restrictions shall be noted on the certificate representing the shares to be issued.           7.          Exercise of Option.               7.1          Each exercise of an Option granted hereunder, whether in whole or in part, shall be by written notice thereof, delivered to the Secretary of the Corporation (or such other person as he may designate). The notice shall state the number of shares with respect to which the Option is being exercised and shall be accompanied by payment in full for the number of shares so designated. Shares shall be registered in the name of the Optionee unless the Optionee otherwise directs in his or her notice of election.               7.2          Payment shall be made to the Corporation either (i) in cash, including certified check, bank draft or money order; (ii) at the discretion of the Corporation, by delivering Corporation Common Stock already owned by the participant or a combination of Common Stock and cash or (iii) at the discretion of the Corporation, by delivering a promissory note, containing such terms and conditions as are acceptable to the Corporation, for all or a portion of the purchase price of the shares so purchased. With respect to (ii), the Fair Market Value of stock so delivered shall be determined as of the date immediately preceding the date of exercise.               7.3          Upon notification of the amount due and prior to, or concurrently with, the delivery to the Optionee of a certificate representing any shares purchased pursuant to the exercise of an Option, the Optionee shall promptly pay to the Corporation any amount necessary to satisfy applicable federal, state or local tax requirements.           8.          Adjustments of Option Stock. If the number of shares of Common Stock outstanding changes by reason of a stock dividend, stock split, recapitalization, merger, reorganization, consolidation, combination, or exchange of shares, the aggregate number and class of shares available under the Plan, and subject to each Option, together with the Option prices, shall be appropriately adjusted. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such subdivision or combination retroactive to the record date, if any, for such subdivision or combination. No fractional shares shall be issued pursuant to the Plan, and any fractional shares resulting from adjustments shall be eliminated from the respective Options.           9.          Assignments. Any Option granted under this Plan shall be exercisable only by the Optionee to whom granted during his or her lifetime and shall not be assignable or transferable otherwise than by will or by the laws of descent and distribution.           10.          Severance; Death; Disability. An Option shall terminate, and no rights thereunder may be exercised, if the person to whom it is granted ceases to be employed by the Corporation or by a Subsidiary except that:               10.1          If the Employment of the Optionee is terminated by any reason other than his or her death or disability, the Optionee may, at any time within not more than three months after termination of his or her employment, exercise his or her Option rights, but only to the extent they were exercisable by the Optionee on the date of termination of his or her employment; provided, however, that if the employment is terminated by deliberate, willful or gross misconduct as determined by the Committee, all rights under the Option shall terminate and expire upon such termination of employment.               10.2          If the Optionee dies while in the employ of the Corporation or a Subsidiary, or within not more than three months after termination of his or her employment, the Optionee's rights under the Option may be exercised at any time within three months following such death by his or her personal representative or by the person or persons to whom such rights under the Option shall pass by will or by the laws of descent and distribution.               10.3          If the employment of the Optionee is terminated because of permanent disability, the Optionee, or his or her legal representative, may at any time within not more than one year after termination of his or her employment, exercise his or her Option rights but only to the extent they were exercisable by the Optionee on the date of termination of his or her employment.               10.4          Notwithstanding anything contained in Sections 10.1, 10.2 and 10.3 to the contrary, no Option rights shall be exercisable by anyone after the expiration of the term of the Option.               10.5          Transfers of employment between the Corporation and a Subsidiary, or between Subsidiaries, or termination of employment with continued service as a director, will not constitute termination of employment for purposes of any Option granted under this Plan. The Committee may specify in the terms and conditions of an Option whether any authorized leave of absence or absence for military or government service or for any other reasons will constitute a termination of employment for purposes of the Option and the Plan.           11.          Rights of Participants. Neither a participant nor the personal representatives, heirs or legatees of such participant shall be or have any of the rights or privileges of a shareholder of the Corporation in respect of any of the shares issuable upon the exercise of an Option granted under this Plan, unless and until certificates representing such shares shall have been issued and delivered to the participant or to such personal representatives, heirs or legatees.           12.          Securities Registration. If any law or regulation of the Securities and Exchange Commission or of any other body having jurisdiction shall require the Corporation or the participant to take any action in connection with the exercise of an Option, then notwithstanding any contrary provision of an Option agreement or this Plan, the date for exercise of such Option and the delivery of the shares purchased thereunder shall be deferred until the completion of the necessary action. In the event that the Corporation shall deem it necessary, the Corporation may condition the grant or exercise of an Option granted under this Plan upon the receipt of a satisfactory certificate that the Optionee is acquiring the Option or the shares obtained by exercise of the Option for investment purposes and not with the view or intent to resell or otherwise distribute such Option or shares. In such event, the stock certificate evidencing such shares shall bear a legend referring to applicable laws restricting transfer of such shares. In the event that the Corporation shall deem it necessary to register under the Securities Act of 1933, as amended, or any other applicable statute, any Options or any shares with respect to which an Option shall have been granted or exercised, then the participant shall cooperate with the Corporation and take such action as is necessary to permit registration or qualification of such Options or shares.           13.          Duration and Amendment.               13.1          There is no express limitation upon the duration of the Plan, except for the requirement of the Code that all ISO's must be granted within ten years from the date the Plan is adopted by the Board.               13.2          The Board may terminate or may amend the Plan at any time, provided, however, that the Board may not, without approval of the stockholders of the Corporation, (i) increase the maximum number of shares as to which Options may be granted under the Plan, (ii) permit the granting of Options at less than 100 percent of Fair Market Value at time of grant or (iii) change the class of participants eligible to receive Options under the Plan.           14.          Approval of Shareholders. This plan was adopted by the Board of Directors on July 19, 1989. This Plan is expressly subject to approval of the holders of a majority of the outstanding shares of Common Stock of the Corporation, and if it is not so approved on or before one year after the date of adoption of this Plan by the Board, this Plan shall not come into effect, and any Options granted pursuant to this Plan shall be deemed canceled.           15.          No Obligation. The granting of an Option to a participant under this Plan shall impose no obligation on the Corporation to continue the employment or directorship of any participant and shall not lessen or affect the right of the Corporation to terminate the employment or directorship of the participant.           16.          Other Options. Nothing in the Plan will be construed to limit the authority of the Corporation to exercise its corporate rights and powers, including, by way of illustration and not by way of limitation, the right to grant options for proper corporate purposes otherwise than under the Plan to any employee or any other person, firm, corporation, association or other entity, or to grant options to, or assume options of, any person for the acquisition by purchase, lease, merger, consolidation or otherwise, of all or any part of the business and assets of any person, firm, corporation, association or other entity.

LEASE AGREEMENT This LEASE AGREEMENT is made this ___ day of June, 2001 (the "Lease Date"), between ARE-11025/11075 ROSELLE STREET, LLC, a Delaware limited liability company ("Landlord"), and CELL GENESYS, INC., a Delaware corporation ("Tenant"). RECITALS A. As of the Lease Date, the Premises (as defined in the Basic Lease Provisions) are subject to the following (collectively, the "Prior Lease"): (i) a certain Standard Industrial Lease - Net dated December 10, 1993, between Trust Company of the West, as Trustee of the ATF Dow Chemical Employees Retirement Trust, as lessor (the "ATF Dow Trust"), and Viagene, Inc., as lessee ("Viagene"); and (ii) a certain First Amendment To Standard Industrial Lease dated March 20, 1996, between the ATF Dow Trust and Chiron Corporation ("Chiron") (who succeeded to Viagene's interest in the Prior Lease in or about September, 1995, pursuant to a plan of merger in which Viagene was merged into a wholly owned subsidiary of Chiron). B. Pursuant to a certain Assignment and Assumption Agreement dated January 8, 2001, between Tenant and Chiron, Tenant acquired Chiron's right, title, and interest in and to, and assumed Chiron's obligations and liabilities under, the Prior Lease. The foregoing Assignment and Assumption Agreement was part of Tenant's acquisition of Chiron's gene therapy assets located at the Premises, at the building within the Project (as defined in the Basic Lease Provisions) commonly known as 11075 Roselle Street, San Diego, California (the "11075 Building"), and at a building adjacent to the Project commonly known as 11080 Roselle Street, San Diego, California. C. The term of the Prior Lease expires on June 30, 2001, subject to 3 options to extend for a period of 1 year each (the "Prior Lease Extension Options"). Tenant desires to extend its right to occupy the Premises beyond the period possible under the Prior Lease, and Landlord is willing to permit Tenant to do so, but only if: (i) Landlord and Tenant enter into this Lease, (ii) Landlord and Tenant terminate the Prior Lease effective as of June 30, 2001, and (iii) Landlord and Tenant concurrently enter into a separate Lease Agreement for the 11075 Building (the "11075 Lease"). BASIC LEASE PROVISIONS Address: 11055 Roselle Street, San Diego, California. Premises: That portion of the Project, containing approximately 22,577 rentable square feet, as determined by Landlord in accordance with this Lease, as shown on Exhibit A. Project: The real property on which the building in which the Premises are located (the "Building") is situated, together with all improvements thereon and appurtenances thereto. as shown on Exhibit B. Building: The specific building in the Project in which the Premises are located, as shown on Exhibit B. Rentable Area of Premises: 22,577 sq. ft. Rentable Area of Building: 22,577 sq. ft. Tenant's Share of Operating Expenses: 100%   Building's Share of Project : 20.0581% Rentable Area of Project: 112,558 sq. ft. Base Rent: $49,669.40 per month. Security Deposit: $149,008.20 Commencement Date: July 1, 2001   Rent Commencement Date: Commencement Date Rent Adjustment Percentage: Greater of 3.5% or the CPI Adjustment Percentage (as defined in Section 4 hereof), not to exceed 6.0% Base Term: Beginning on the Commencement Date and ending on June 30, 2006. Permitted Use: Research and development laboratory, related office and other related uses consistent with the character of the Project and otherwise in compliance with the provisions of Section 7 hereof. Address for Rent Payment: 135 N. Los Robles Avenue, Suite 250 Pasadena, CA 91101 Attention: Accounts Receivable Landlord's Notice Address: 135 N. Los Robles Avenue, Suite 250 Pasadena, CA 91101 Attention: General Counsel Tenants Notice Address: Cell Genesys, Inc. 342 Lakeside Drive Foster City, CA 94404 Attention: Mr. Richard Campbell   The following Exhibits and Addenda are attached hereto and incorporated herein by this reference: [X] EXHIBIT A - PREMISES DESCRIPTION [X] EXHIBIT B - DESCRIPTION OF PROJECT [--] EXHIBIT C - INTENTIONALLY OMITTED [--] EXHIBIT D - INTENTIONALLY OMITTED [X] EXHIBIT E - RULES AND REGULATIONS [X] EXHIBIT F - TENANT'S PERSONAL PROPERTY [X] EXHIBIT G - ESTOPPEL CERTIFICATE [X] EXHIBIT H - NONDISTURBANCE AGREEMENT AGREEMENT Lease of Premises . Upon and subject to all of the terms and conditions hereof, Landlord hereby leases the Premises to Tenant and Tenant hereby leases the Premises from Landlord. The portions of the Project that are for the non-exclusive use of tenants of the Project are collectively referred to herein as the "Common Areas". Landlord reserves the right to modify Common Areas, provided that such modifications do not materially adversely affect Tenant's use of the Premises for the Permitted Use. Termination of Prior Lease; Commencement Date; Term; Acceptance of Premises. Termination of Prior Lease. Landlord and Tenant hereby acknowledge and agree that, as of the Lease Date, the Prior Lease contains the complete agreement between Landlord and Tenant with respect to the Premises. Tenant hereby certifies to Landlord (and its successors and assigns) that, as of the Lease Date, (A) Tenant has no right, title, or interest in or to the Premises or the Project other than as a lessee of the Premises under the Prior Lease, (B) Tenant has no option, right of first refusal, right of first offer, or other right to acquire or purchase all or any portion of, or interest in, the Premises or the Project, (C) Tenant has not sublet any portion of the Premises or assigned any portion of the Prior Lease to any sublessee or assignee, and no one except Tenant and its employees currently occupy the Premises, (D) Tenant has not prepaid any of the rent due under the Prior Lease, (E) the security deposit given to Landlord under the Prior Lease was $36,800.51 in cash (the "Prior Lease Deposit"), and (F) Landlord has performed all obligations required of Landlord pursuant to the Prior Lease, and Tenant is not entitled to any refunds or rebates of rent or to any other payments or services from Landlord upon the termination of the Prior Lease. The matters described in the foregoing certification shall remain and be true and correct, in all material respects, as of the Commencement Date. Landlord and Tenant hereby terminate the Prior Lease effective as of June 30, 2001 (including, without limitation, all Prior Lease Extension Options, whether or not timely exercised prior to such date). As of the time such termination becomes effective (the "Prior Lease Termination Date"), the Prior Lease shall be of no further force or effect and Tenant shall have no other right, title, or interest, of any kind, direct or indirect, in any portion of the Premises or the Project, except as expressly provided in this Lease. All obligations of Tenant under the Prior Lease not fully performed as of the Prior Lease Termination Date (including, without limitation, indemnity obligations and obligations concerning the condition and repair of the Premises and/or the Project) (the "Prior Lease Obligations") shall survive such termination of the Prior Lease for the benefit of Landlord (and its successors and assigns) and thereafter shall constitute obligations under this Lease. Landlord hereby reserves all rights and claims that Landlord may have against Tenant for any such Prior Lease Obligations. Commencement Date; Term. The "Commencement Date" shall be July 1, 2001, and the "Term" of this Lease shall be the Base Term and the Extension Term, if Tenant so elects pursuant to Section 39 hereof. Acceptance of Premises. Tenant has been in possession of, and conducting business in, the Premises under the Prior Lease and intends to continue conducting business in the Premises, without interruption, from and after the Lease Date. As a result, Tenant is the party most familiar with the condition of the Premises as of the Lease Date and, as conclusively evidenced by Tenant's execution and delivery of this Lease, Tenant accepts the Premises "as is", in their condition as of the Lease Date, without any qualifications, restrictions, or limitations, subject to all applicable Legal Requirements (as defined in Section 7 hereof). Further, since the Premises will not be empty and/or unoccupied at any time prior to the Commencement Date and Landlord will have no opportunity to inspect, examine, and/or audit the Premises in order to establish the condition of the Premises as of the Commencement Date, Landlord shall have no liability for any defects in the Premises (whether latent or patent) and shall have no obligation to perform any work or to refurbish, finish, or otherwise alter the Premises in order to prepare the Premises for Tenant's use or occupancy. Tenant agrees and acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the condition of all or any portion of the Premises or the Project, and/or the suitability of the Premises or the Project for the conduct of Tenant's business, and Tenant waives any implied warranty that the Premises or the Project are suitable for the Permitted Use. This Lease constitutes the complete agreement of Landlord and Tenant with respect to the subject matter hereof and supersedes any and all prior representations, inducements, promises, agreements, understandings, and negotiations that are not contained herein. Landlord, in executing this Lease, does so in reliance upon Tenant's representations, warranties, acknowledgments, and agreements contained herein. Rent. Base Rent. The first month's Base Rent and the security required to be deposited with Landlord pursuant to Section 6 hereof shall be due and payable on delivery of an executed copy of this Lease to Landlord. Tenant shall pay to Landlord in advance, without demand, abatement, deduction, or set-off, monthly installments of Base Rent on or before the first day of each calendar month during the Term hereof, in lawful money of the United States of America, at the office of Landlord for payment of Rent set forth above, or to such other person or at such other place as Landlord may from time to time designate in writing. Payments of Base Rent for any fractional calendar month shall be prorated. The obligation of Tenant to pay Base Rent and other sums to Landlord and the obligations of Landlord under this Lease are independent obligations. Tenant shall have no right at any time to abate, reduce, or set-off any Rent due hereunder except for any abatement as may be expressly provided in this Lease. Additional Rent. In addition to Base Rent, Tenant agrees to pay to Landlord as additional rent ("Additional Rent"): (i) Tenant's Share of Operating Expenses (as defined in Section 5), and (ii) any and all other amounts Tenant assumes or agrees to pay under the provisions of this Lease, including, without limitation, any and all other sums that may become due by reason of any default of Tenant or failure to comply with the agreements, terms, covenants and conditions of this Lease to be performed by Tenant, after any applicable notice and cure period. Base Rent Adjustments. Base Rent shall be increased on each annual anniversary of the first day of the first full month during the Term of this Lease (each an "Adjustment Date") by multiplying the Base Rent payable immediately before such Adjustment Date by the Rent Adjustment Percentage and adding the resulting amount to the Base Rent payable immediately before such Adjustment Date. Base Rent, as so adjusted, shall thereafter be due as provided herein. Base Rent adjustments for any fractional calendar month shall be prorated. "CPI Adjustment Percentage" means (i) a fraction, stated as a percentage, the numerator of which shall be the Index (as defined below) for the calendar month 3 months before the month in which the Adjustment Date occurs, and the denominator of which shall be the Index for the calendar month 3 months before the last Adjustment Date or, if no prior Base Rent adjustment has been made, 3 months before the first day of the first full month during the Term of this Lease, less (ii) 1.00. "Index" means the "Consumer Price Index - All Urban Consumers - San Diego, California Metropolitan Area, All Items" compiled by the U.S. Department of Labor, Bureau of Labor Statistics, (1982-84 = 100). If a substantial change is made in the Index, the revised Index shall be used, subject to such adjustments as reasonably appropriate in order to make the revised Index comparable to the prior Index. If the Bureau of Labor Statistics ceases to publish the Index, then the successor or most nearly comparable index, as reasonably determined by Landlord, shall be used, subject to such adjustments as reasonably appropriate in order to make the new index comparable to the Index. Landlord shall give Tenant written notice indicating the Base Rent, as adjusted pursuant to this Section, and the method of computation. Failure to deliver such notice shall not reduce, abate, waive, or diminish Tenant's obligation to pay the adjusted Base Rent. If such notice is delivered to Tenant on or after an Adjustment Date, Tenant shall pay to Landlord an amount equal to any underpayment of Base Rent by Tenant within 15 days of Landlord's notice to Tenant. Operating Expense Payments. Landlord shall deliver to Tenant a written estimate of Operating Expenses for each calendar year during the Term (the "Annual Estimate"), which may be revised by Landlord from time to time during such calendar year. During each month of the Term, on the same date that Base Rent is due, Tenant shall pay Landlord an amount equal to 1/12 of Tenant's Share of the Annual Estimate. Payments for any fractional calendar month shall be prorated. The term "Operating Expenses" means all costs and expenses of any kind or description whatsoever incurred or accrued each calendar year by Landlord with respect to the Building (including the Building's Share of all costs and expenses of any kind or description incurred or accrued by Landlord with respect to the Project which are not specific to the Building or any other building located in the Project) (including, without duplication, Taxes (as defined in Section 9), Utilities (as defined in Section 11 below), insurance premiums (for the insurance described in Section 17 below), reasonable reserves consistent with good business practice for future repairs and replacements ("Repair Reserves"), capital repairs and improvements amortized over the lesser of 7 years and the useful life of such capital items, and the costs of Landlord's third party property manager or, if there is no third party property manager, administration rent in the amount of 4.0% of Base Rent), excluding only: the construction costs of the Project and renovation prior to the date of the Lease and costs of correcting defects in such construction or renovation; capital expenditures for expansion of the Project; interest, principal payments of Mortgage (as defined in Section 27) debts of Landlord, financing costs and amortization of funds borrowed by Landlord, whether secured or unsecured and all payments of base rent (but not taxes or operating expenses) under any ground lease or other underlying lease of all or any portion of the Project; depreciation of the Project (except for capital improvements, the costs of which are to be amortized and included in Operating Expenses); advertising, legal, and space planning expenses and leasing commissions and other costs and expenses incurred in procuring and leasing space to other tenants of the Project, including any leasing office maintained in the Project and any free rent and construction allowances for other tenants of the Project; legal and other expenses incurred in the negotiation or enforcement of leases for other tenants of the Project; completing, fixturing, improving, renovating, painting, redecorating, or other work, which Landlord pays for or performs for other specific tenants of the Project within their premises, and costs of correcting defects in such work; costs of utilities outside normal business hours sold to other tenants of the Project; costs to be reimbursed by other tenants of the Project or Taxes to be paid directly by Tenant or other tenants of the Project, whether or not actually paid; salaries, wages, benefits, and other compensation paid to officers and employees of Landlord who are not assigned in whole or in part to the operation, management, maintenance, or repair of the Project; general organizational, administrative, and overhead costs relating to maintaining Landlord's existence, either as a corporation, partnership, or other entity, including general corporate, legal, and accounting expenses; costs (including attorneys' fees and costs of settlement, judgments and payments in lieu thereof) incurred in connection with disputes with other tenants of the Project, other occupants of the Project, or prospective tenants of the Project, and costs and expenses, including legal fees, incurred in connection with negotiations or disputes with employees, consultants, management agents, leasing agents, purchasers (including through the exercise or threat of eminent domain), or mortgagees of all or any portion of the Project; costs incurred by Landlord due to the violation by Landlord or its employees, agents, or contractors or by any other tenant of the Project of the terms and conditions of any lease of any other space in the Project or of any Legal Requirement; tax penalties, fines, or interest incurred as a result of Landlord's negligence, inability, or unwillingness to make payment and/or to file any tax or informational returns when due, or from Landlord's failure to make any payment required to be made by Landlord hereunder before delinquency; overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for goods and/or services in or to the Project to the extent the same exceed the costs of such goods and/or services rendered by unaffiliated third pates on a competitive basis; costs arising from Landlord's charitable or political contributions or fine art maintained at the Project; costs in connection with services (including electricity), items, or other benefits of a type that are not standard for the Project and that are not available to Tenant without specific charges therefor, but that are provided to another tenant or occupant of the Project, whether or not such other tenant or occupant is specifically charged therefor by Landlord; costs incurred in the sale or refinancing of the Project; costs arising from the presence of Hazardous Materials (as defined in Section 30(g)) in, on, under, or about the Premises, the Building, the Project, or any property adjacent to the Property for which Tenant is not liable or responsible as part of the Prior Lease Obligations or pursuant to the terms and conditions of Section 30 hereof; costs for (i) insurance coverages not typically passed through to tenants as an operating expense in the properties of Landlord and Landlord's affiliates in the greater San Diego, California area, and (ii) insurance deductibles or co-insurance payments in excess of $25,000.00 per occurrence; costs of repairs or replacements for which Repair Reserves have been previously accrued as an Operating Expense, but only to the extent of such accrual; net income taxes of Landlord or the owner of any interest in the Project, franchise, capital stock, gift, estate, or inheritance taxes or any federal, state, or local documentary taxes imposed against any portion of or interest in the Project; and any expenses otherwise includable within Operating Expenses to the extent actually reimbursed by persons other than tenants of the Project under leases for space in the Project. Within 90 days after the end of each calendar year (or such longer period as may be reasonably required), Landlord shall furnish to Tenant a statement (an "Annual Statement") showing in reasonable detail: (a) the total and Tenant's Share of actual Operating Expenses for the previous calendar year, and (b) the total of Tenant's payments in respect of Operating Expenses for such year. If Tenant's Share of actual Operating Expenses for such year exceeds Tenant's payments of Operating Expenses for such year, the excess shall be due and payable by Tenant as Rent within 30 days after delivery of such Annual Statement to Tenant. If Tenant's payments of Operating Expenses for such year exceed Tenant's Share of actual Operating Expenses for such year Landlord shall pay the excess to Tenant within 30 days after delivery of such Annual Statement, except that after the expiration. or earlier termination of the Term or if Tenant is delinquent in its obligation to pay Rent, Landlord shall pay the excess to Tenant after deducting all other amounts due Landlord. The Annual Statement shall be final and binding upon Tenant unless Tenant, within 30 days after Tenant's receipt thereof, shall contest any item therein by giving written notice to Landlord, specifying each item contested and the reason therefor. If, during such 30-day period, Tenant reasonably and in good faith questions or contests the correctness of Landlord's statement of Tenant's Share of Operating Expenses, Landlord will provide Tenant with access to Landlord's books and records relating to the operation of the Project and such information as Landlord reasonably determines to be responsive to Tenant's questions (the "Expense Information"). If after Tenant's review of such Expense Information, Landlord and Tenant cannot agree upon the amount of Tenant's Share of Operating Expenses, then Tenant shall have the right to have an independent public accounting firm selected by Tenant from among the 5 largest in the United States audit and/or review the Expense Information for the year in question (the "Independent Review"). The independent public accounting firm selected by Tenant shall be retained pursuant to a fee arrangement other than a contingent fee, which fee arrangement shall be subject to Landlord's approval (which approval shall not be unreasonably withheld or delayed), and, except as may be expressly provided later in this paragraph, all fees due to such accounting firm in performing the Independent Review shall be payable by Tenant (at Tenant's sole cost and expense). The results of any such Independent Review shall be binding on Landlord and Tenant. If the Independent Review shows that the payments actually made by Tenant with respect to Operating Expenses for the calendar year in question exceeded Tenant's Share of Operating Expenses for such calendar year, Landlord shall pay the excess to Tenant within 30 days after delivery of such statement, except that after the expiration or earlier termination of the Term or if Tenant is delinquent in its obligation to pay Rent, Landlord shall pay the excess to Tenant after deducting all other amounts due Landlord. If the Independent Review shows that Tenant's payments with respect to Operating Expenses for such calendar year were less than Tenant's Share of Operating Expenses for the calendar year, Tenant shall pay the deficiency to Landlord within 30 days after delivery of such statement. If the Independent Review shows that Tenant has overpaid with respect to Operating Expenses by more than 5.0% then Landlord shall reimburse Tenant for all costs incurred by Tenant for the Independent Review. Operating Expenses for the calendar years in which Tenant's obligation to share therein begins and ends shall be prorated. Notwithstanding anything set forth herein to the contrary, if the Project is not at least 95.0% occupied on average during any year of the Term, Tenant's Share of Operating Expenses for such year shall be computed as though the Project had been 95.0% occupied on average during such year. "Tenant's Share" shall be the percentage set forth in the Basic Lease Provisions as Tenant's Share of Operating Expenses. The "Building's Share of Project" set forth in the Basic Lease Provisions may be adjusted by Landlord for changes in the physical size of the Premises or the Project occurring after the Commencement Date. Any such measurement shall be performed in accordance with the 1996 Standard Method of Measuring Floor Area in Office Buildings as adopted by the Building Owners and Managers Association (ANSI/BOMA Z65.1-1996). Landlord may equitably increase Tenant's Share for any item of expense or cost reimbursable by Tenant that relates to a repair, replacement, or service that benefits only the Premises or only a portion of the Project that includes the Premises or that varies with occupancy or use. Base Rent, Tenant's Share of Operating Expenses, and all other amounts payable by Tenant to Landlord hereunder are collectively referred to herein as "Rent". Security Deposit. Concurrently with Tenant's delivery to Landlord of an executed copy of this Lease, Tenant shall deposit with Landlord security for the performance of all of Tenant's obligations in an amount that when added to the amount of the Prior Lease Deposit, will equal the aggregate amount of the Security Deposit set forth in the Basic Lease Provisions (in the aggregate, the "Security Deposit"). The security deposited by Tenant shall be in the form of either cash or an unconditional and irrevocable letter of credit (the "Letter of Credit"): (i) in form and substance reasonably satisfactory to Landlord, (ii) naming Landlord as beneficiary, (iii) expressly allowing Landlord to draw upon it at any time from time to time by delivering to the issuer notice that Landlord is entitled to draw thereunder, (iv) drawable on an FDIC- insured financial institution satisfactory to Landlord, and (v) redeemable in the state of California. Within 10 days after the Prior Lease Termination Date, Landlord shall notify Tenant of the amount (if any) of the Prior Lease Deposit used by Landlord to pay or perform any obligation of Tenant under the Prior Lease or to compensate Landlord for any loss or damage resulting from any default by Tenant under the Prior Lease and, within 10 days after such notice, Tenant shall deposit with Landlord the amount necessary to restore the Security Deposit to its required aggregate amount. Further, if the security initially deposited by Tenant under this Lease is in the form of a Letter of Credit, Tenant may, at any time during the first 3 months of the Base Term, deliver to Landlord a substitute Letter of Credit complying with all of the requirements hereof in an amount equal to the required aggregate amount of the Security Deposit and, within 10 days after Landlord's receipt of such substitute Letter of Credit, Landlord shall return to Tenant the portion of the Security Deposit then in the form of cash (after deducting therefrom all amounts to which Landlord is then entitled under the provisions of this Lease). As to any Letter of Credit serving as security hereunder, if Tenant does not provide Landlord with a substitute Letter of Credit complying with all of the requirements hereof at least 30 days before the stated expiration date of such Letter of Credit, Landlord shall have the right to draw upon such Letter of Credit and hold the funds drawn as the Security Deposit; provided, however, that (x) Tenant's failure to timely provide a satisfactory substitute Letter of Credit shall not be a Default (as defined in Section 20), and (y) Tenant, not more than once during the Term, may subsequently provide Landlord with a substitute Letter of Credit complying with all of the requirements hereof, at which time Landlord shall return to Tenant the funds drawn by Landlord under the previous Letter of Credit (after deducting therefrom all amounts to which Landlord is then entitled under the provisions of this Lease). The Security Deposit shall be held by Landlord as security for the performance of Tenant's obligations under this Lease. The Security Deposit is not an advance rental deposit or a measure of Landlord's damages in case of a Default. Upon each occurrence of a Default, Landlord may use all or any part of the Security Deposit to pay delinquent payments due under this Lease, and the cost of any damage, injury, expense, or liability caused by such Default, without prejudice to any other remedy provided herein or provided by law; provided, however, that (A) notwithstanding the amount that Landlord may actually draw on any Letter of Credit serving as security hereunder, Landlord's damages upon the occurrence of each Default shall be determined in accordance with Section 21 hereof, and (B) it shall not be a default by Landlord under this Lease if, upon the occurrence of a Default, Landlord actually draws more on any such Letter of Credit than Landlord may be entitled to pursuant to Section 21 hereof, it being understood and agreed that any funds so drawn by Landlord in excess of Landlord's damages pursuant to Section 21 hereof shall be deemed held by Landlord as part of the Security Deposit and, upon Tenant's restoration of the Security Deposit to its required amount, shall be returned to Tenant (after deducting therefrom all amounts to which Landlord is then entitled under the provisions of this Lease). Tenant hereby waives the provisions of any law, now or hereafter in force, that provide that Landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of Rent, to repair damage caused by Tenant or to clean the Premises, it being agreed that Landlord may, in addition, claim those sums reasonably necessary to compensate Landlord for any other loss or damage, foreseeable or unforeseeable, caused by the act or omission of Tenant or any officer, employee, agent, or invitee of Tenant. Upon bankruptcy or other debtor-creditor proceedings against Tenant, the Security Deposit shall be deemed to be applied first to the payment of Rent and other charges due Landlord for periods prior to the filing of such proceedings. Upon any use of all or any portion of the Security Deposit, Tenant shall, within 5 days after demand from Landlord, restore the Security Deposit to its required amount. The Security Deposit, or any balance thereof (i.e., after deducting therefrom all amounts to which Landlord is entitled under the provisions of this Lease), shall be returned to Tenant (or, at Landlord's option, to the last assignee of Tenant's interest hereunder) within 90 days after the expiration or earlier termination of this Lease. If Landlord transfers its interest in the Project or this Lease, Landlord shall either (a) transfer any Security Deposit then held by Landlord to a person or entity assuming Landlord's obligations under this Section 6, or (b) return to Tenant any Security Deposit then held by Landlord and remaining after the deductions permitted herein. Upon such transfer to such transferee or the return of the Security Deposit to Tenant, Landlord shall have no further obligation with respect to the Security Deposit, and Tenant's right to the return of the Security Deposit shall apply solely against Landlord's transferee. Landlord's obligation respecting the Security Deposit is that of a debtor, not a trustee and; no interest shall accrue thereon. Use . The Premises shall be used solely for the Permitted Use set forth in the Basic Lease Provisions, in compliance with all laws, orders, judgments, ordinances, regulations, codes, directives, permits, licenses, covenants, and restrictions now or hereafter applicable to the Premises, and the use and occupancy thereof, including, without limitation, the Americans With Disabilities Act, 42 U.S.C.  12101, et seq. (together with the regulations promulgated pursuant thereto, "ADA") (collectively, "Legal Requirements"). Tenant shall, upon 5 days' written notice from Landlord, discontinue any use of the Premises that is declared to be a violation of any Legal Requirement by any Governmental Authority (as defined in Section 9) having jurisdiction. Tenant will not use or permit the Premises to be used for any purpose or in any manner that would void Tenant's or Landlord's insurance, increase the insurance risk, or cause the disallowance of any sprinkler or other credits. Tenant shall reimburse Landlord promptly upon demand for any additional premium charged for any such insurance policy by reason of Tenant's failure to comply with the provisions of this Section or otherwise caused by Tenant's use and/or occupancy of the Premises. Tenant will use the Premises in a careful, safe, and proper manner and will not commit waste, overload the floor or structure of the Premises, subject the Premises to use that would damage the Premises, or obstruct or interfere with the rights of Landlord or other tenants or occupants of the Project, including conducting or giving notice of any auction, liquidation, or going out of business sale on the Premises, or using or allowing the Premises to be used for any unlawful purpose. Tenant shall cause any equipment or machinery to be installed in the Premises so as to reasonably prevent sounds or vibrations from the Premises from extending into Common Areas or other space in the Project. Tenant shall not place any machinery or equipment weighing 500 pounds or more in or upon the Premises or transport or move such items through the Common Areas of the Project or in the Project elevators without the prior written consent of Landlord. Tenant shall not, without the prior written consent of Landlord, use the Premises in any manner that will require ventilation, air exchange, heating, gas, steam, electricity, or water beyond the existing capacity of the Project as proportionately allocated to the Premises based upon Tenant's Share as usually furnished for the Permitted Use. Tenant, at its sole expense, shall make any alterations or modifications to the interior or the exterior of the Premises that may be required by Legal Requirements (including, without limitation, compliance of the Premises with the ADA) related to Tenant's use or occupancy of the Premises. Notwithstanding any other provision herein to the contrary, Tenant shall be responsible for any and all demands, claims, liabilities, losses, costs, expenses, actions, causes of action, damages, or judgments, and all reasonable expenses incurred in investigating or resisting the same (including, without limitation, reasonable attorneys' fees, charges, and disbursements and costs of suit) (collectively, "Claims") arising out of or in connection with Legal Requirements, and Tenant shall indemnify, defend, hold, and save Landlord harmless from and against any and all Claims arising out of or in connection with any failure of the Premises to comply with any Legal Requirement. Holding Over . If, with Landlord's express written consent, Tenant retains possession of the Premises after the termination of the Term, (i) unless otherwise agreed in such written consent, such possession shall be subject to immediate termination by Landlord at any time, (ii) all of the other terms and provisions of this Lease (including, without limitation, the adjustment of Base Rent pursuant to Section 4 hereof) shall remain in full force and effect (excluding any expansion or renewal option or other similar right or option) during such holdover period, (iii) Tenant shall continue to pay Base Rent in an amount equal to 150% of the Rent in effect during the last 30 days of the Term (the "Holdover Rent Amount"), and (iv) all other payments shall continue under the terms of this Lease. If Tenant remains in possession of the Premises after the expiration or earlier termination of the Term without the express written consent of Landlord, (A) Tenant shall become a tenant at sufferance upon the terms of this Lease except that the monthly rental shall be equal to the Holdover Rent Amount or such other amount as Landlord may indicate, in Landlord's sole and absolute discretion, by written notice to Tenant, and (B) Tenant shall be responsible for all damages suffered by Landlord resulting from or occasioned by Tenant's holding over, including consequential damages. No holding over by Tenant, whether with or without consent of Landlord, shall operate to extend this Lease except as otherwise expressly provided, and this Section 8 shall not be construed as consent for Tenant to retain possession of the Premises. Acceptance by Landlord of Rent after the expiration of the Term or earlier termination of this Lease shall not result in a renewal or reinstatement of this Lease. Taxes . Landlord shall pay, as part of Operating Expenses, all taxes, levies, assessments, and governmental charges of any kind (collectively referred to as "Taxes") imposed by any federal, state, regional, municipal, local, or other governmental authority or agency, including, without limitation, quasi-public agencies (collectively, "Governmental Authority") during the Term, including, without limitation, all Taxes: (i) imposed on or measured by or based, in whole or in part, on rent payable to Landlord under this Lease and/or from the rental by Landlord of the Project or any portion thereof, or (ii) based on the square footage, assessed value, or other measure or evaluation of any kind of the Premises or the Project, or (iii) assessed or imposed by or on the operation or maintenance of any portion of the Premises or the Project, including parking, or (iv) assessed or imposed by, or at the direction of, or resulting from statutes or regulations, or interpretations thereof, promulgated by, any Governmental Authority, or (v) imposed as a license or other fee on Landlord's business of leasing space in the Project. Landlord may contest by appropriate legal proceedings the amount, validity, or application of any Taxes or liens securing Taxes. Taxes shall not include any net income taxes imposed on Landlord unless such net income taxes are in substitution for any Taxes payable hereunder. If any such Tax is levied or assessed directly against Tenant, then Tenant shall be responsible for and shall pay the same at such times and in such manner as the taxing authority shall require. Tenant shall pay, prior to delinquency, any and all Taxes levied or assessed against any personal property or trade fixtures placed by Tenant in the Premises, whether levied or assessed against Landlord or Tenant. If any Taxes on Tenant's personal property or trade fixtures are levied against Landlord or Landlord's property, or if the assessed valuation of the Project is increased by a value attributable to improvements in or alterations to the Premises, whether owned by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, higher than the base valuation on which Landlord from time-to-time allocates Taxes to all tenants in the Project, Landlord shall have the right, but not the obligation, to pay such Taxes. Landlord's determination of any excess assessed valuation shall be binding and conclusive, absent manifest error. The amount of any such payment by Landlord shall constitute Additional Rent due from Tenant to Landlord immediately upon demand. Parking . Subject to Force Majeure (as defined in Section 34 hereof), a Taking (as defined in Section 19 hereof), and the exercise by Landlord of its rights hereunder, Tenant shall have the right to park in common with other tenants of the Project pro rata in accordance with the rentable area of the Premises and the rentable areas of the Project occupied by such other tenants in those areas designated for non-reserved parking, subject in each case to Landlord's reasonable rules and regulations (as provided in Section 26 hereof). Landlord may allocate parking spaces among Tenant and other tenants in the Project pro rata as described above if Landlord determines that such parking facilities are becoming crowded. Landlord shall not be responsible for enforcing Tenant's parking rights against any third parties, including other tenants of the Project. Utilities, Services . Landlord shall provide, subject to the terms of this Section 11, water, electricity, heat, light, power, telephone, sewer, and other utilities (including gas and fire sprinklers to the extent the Project is plumbed for such services), refuse and trash collection and janitorial services (collectively, "Utilities"). Landlord shall pay, as Operating Expenses or subject to Tenant's reimbursement obligation, for all Utilities used on the Premises, all maintenance charges for Utilities, and any storm sewer charges or other similar charges for Utilities imposed by any Governmental Authority or Utility provider, and any taxes, penalties, surcharges or similar charges thereon. Landlord may cause, at Tenant's expense, any Utilities to be separately metered or charged directly to Tenant by the provider. Tenant shall pay directly to the Utility provider, prior to delinquency, any separately metered Utilities and services which may be furnished to Tenant or the Premises during the Term. Tenant shall pay, as part of Operating Expenses, its share of all charges for jointly metered Utilities based upon consumption, as reasonably determined by Landlord. No interruption or failure of Utilities, from any cause whatsoever other than Landlord's willful misconduct, shall result in eviction or constructive eviction of Tenant, termination of this Lease or the abatement of Rent. Tenant agrees to limit use of water and sewer with respect to Common Areas to normal restroom use. Alterations and Tenant's Property . Any alterations, additions, or improvements made to the Premises by or on behalf of Tenant, including additional locks or bolts of any kind or nature upon any doors or windows in the Premises, but excluding installation, removal, or realignment of furniture systems (other than removal of furniture systems owned or paid for by Landlord) not involving any modifications to the structure or connections (other then by ordinary plugs or jacks) to Building Systems (as defined in Section 14) ("Alterations") shall be subject to Landlord's prior written consent, which may be given or withheld in Landlord's sole discretion if any such Alteration affects the structure or Building Systems. Tenant may construct nonstructural Alterations in the Premises without Landlord's prior approval if the aggregate cost of all such work in any 12 month period does not exceed $25,000.00 (a "Notice-Only Alteration"), provided Tenant notifies Landlord in writing of such intended Notice-Only Alteration, and such notice shall be accompanied by plans, specifications, work contracts, and such other information concerning the nature and cost of the Notice-Only Alteration as may be reasonably requested by Landlord, which notice and accompanying materials shall be delivered to Landlord not less than 15 business days in advance of any proposed construction. If Landlord approves any Alterations, Landlord may impose such conditions on Tenant in connection with the commencement, performance and completion of such Alterations as Landlord may reasonably deem appropriate. Any request for approval shall be in writing, delivered not less than 15 business days in advance of any proposed construction, and accompanied by plans, specifications, bid proposals, work contracts and such other information concerning the nature and cost of the alterations as may be reasonably requested by Landlord, including the identities and mailing addresses of all persons performing work or supplying materials. Landlord's right to review plans and specifications and to monitor construction shall be solely for its own benefit, and Landlord shall have no duty to ensure that such plans and specifications or construction comply with applicable Legal Requirements. Tenant shall cause, at its sole cost and expense, all Alterations to comply with insurance requirements and with Legal Requirements and shall implement at its sole cost and expense any alteration or modification required by Legal Requirements as a result of any Alterations. Tenant shall pay to Landlord on demand, as Additional Rent, an amount equal to 3.0% of all charges incurred by Tenant or its contractors or agents in connection with any Alteration or series of related Alterations (but not less than $1,000.00 nor more than $50,000.00 per Alteration or series of related Alterations) in order to cover Landlord's overhead and expenses for plan review, coordination, scheduling, and supervision. Before Tenant begins any Alteration, Landlord may post on and about the Premises notices of non-responsibility pursuant to applicable law. Tenant shall reimburse Landlord for, and indemnify and hold Landlord harmless from, any expense incurred by Landlord by reason of faulty work done by Tenant or its contractors, delays caused by such work, or inadequate cleanup. Tenant shall furnish security or make other arrangements reasonably satisfactory to Landlord to assure payment for the completion of all Alterations work free and clear of liens, and shall provide (and cause each contractor or subcontractor to provide) certificates of insurance for workers' compensation and other coverage in amounts and from an insurance company satisfactory to Landlord protecting Landlord against liability for personal injury or property damage during construction. Upon completion of any Alterations, Tenant shall deliver to Landlord: (i) sworn statements setting forth the names of all contractors and subcontractors who did the work and final lien waivers from all such contractors and subcontractors; and (ii) "as built" plans for any such Alteration. Other than (a) the items, if any, listed on Exhibit F attached hereto, (b) any items agreed by Landlord in writing to be included on Exhibit F in the future, and (c) any trade fixtures, machinery, equipment, and other personal property not paid for by Landlord that may be removed without material damage to the Premises, which damage shall be repaired (including capping or terminating utility hook-ups behind walls) by Tenant during the Term (collectively, "Tenant's Property"), all Alterations, real property fixtures, built-in machinery and equipment, built-in casework and cabinets, and other similar additions and improvements built into the Premises that are or become an integral part of the Building Systems or of the floors, walls, ceiling, roof, glazing, built-in cabinetry, or structural components of the Building (such as fume hoods that penetrate the roof or plenum area, built-in cold rooms, built-in warm rooms, walk-in cold rooms, walk-in warm rooms, deionized water systems, glass washing equipment, autoclaves, chillers, built-in plumbing, electrical and mechanical equipment and systems, and any power generator and transfer switch) (collectively, "Installations"), shall be and shall remain the property of Landlord during the Term and following the expiration or earlier termination of the Term, shall not be removed by Tenant at any time during the Term, and shall remain upon and be surrendered with the Premises as a part thereof in accordance with Section 28 following the expiration or earlier termination of this Lease. Notwithstanding the foregoing, (x) any property that is placed in the Premises by Tenant after the Commencement Date that: (A) is not an Installation, (B) is used for the production of Tenant's products and may be removed without material damage to the Premises, and (C) is not paid for by Landlord, together with (y) any item listed on Exhibit F, shall be and shall remain the property of Tenant during the Term and following the expiration or earlier termination of the Term and shall be removed by Tenant upon the expiration or earlier termination of the Term, so long as the same are removed without material damage to the Premises (and any immaterial damage caused by their removal is repaired by Tenant (including capping or terminating utility hook-ups behind walls) during the Term). Landlord shall, at the time its approval of any Installation under this Lease is requested or at the time it receives notice of a Notice-Only Alteration under this Lease, notify Tenant if Landlord has elected to cause Tenant to remove any such Installation upon the expiration or earlier termination of this Lease. If Landlord so elects, Tenant shall remove the designated Installation upon the expiration or earlier termination of this Lease and repair any damage caused by or occasioned as a result of such removal, including, when removing any Installation that was plumbed, wired, or otherwise connected to any of the Building Systems, capping off all such connections behind the walls of the Premises and repairing any holes. During any such restoration period, Tenant shall pay Rent to Landlord as provided herein as if said space were otherwise occupied by Tenant. In addition to the foregoing, Landlord may elect to have any or all improvements located within the portion of the Premises designated or described on Exhibit A as "manufacturing space" ("Manufacturing Space Improvements") to be removed upon the expiration or earlier termination of this Lease. Landlord may make such election by giving written notice to Tenant of such election no later than 30 days prior to the scheduled expiration of this Lease or within 15 days after the early termination of this Lease, as the case may be. Such notice shall include a written estimate of all Removal Costs (as defined below) and, within 30 days after such notice, Tenant shall pay to Landlord an amount equal to the lesser of 50.0% of all estimated Removal Costs and $110,000.00. For purposes of this Lease, the term "Removal Costs" shall include all reasonable costs to remove completely the designated Manufacturing Space Improvements and to repair any damage to the Premises caused by or occasioned as a result of such removal. Landlord shall use commercially reasonable efforts to cause such removal and repair to be performed within 120 days after the expiration or earlier termination of this Lease, subject to delays caused by Force Majeure and delays needed to obtain any Hazardous Materials Clearances required to perform such removal and repair. All removal and repair work shall be performed by duly licensed, insured, and bonded contractors. Within 30 days after the completion of such removal and repair work (or such longer period as may be reasonably required), Landlord shall furnish to Tenant a statement showing in reasonable detail the total, actual Removal Costs. If the amount previously paid to Landlord by Tenant hereunder was less than the lesser of 50.0% of the total, actual Removal Costs and $110,000.00, Tenant shall pay the difference to Landlord within 30 days after delivery of such statement to Tenant. If the amount previously paid to Landlord by Tenant hereunder was more than the lesser of 50.0% of the total, actual Removal Costs and $110,000.00, Landlord shall pay the excess to Tenant (after deducting any other amounts that may be due Landlord) within 30 days after delivery of such statement. Landlord's Repairs . Landlord shall maintain all of the structural, exterior, parking, and other Common Areas of the Project in good repair, reasonable wear and tear and uninsured losses and damages caused by Tenant or by any of Tenant's agents, servants, employees, invitees and contractors (collectively, "Tenant Parties") excluded. Losses and damages caused by Tenant or any Tenant Party shall be repaired by Landlord, to the extent not covered by insurance, at Tenant's sole cost and expense. Landlord reserves the right to stop Building System services when necessary (i) by reason of accident or emergency, or (ii) for planned repairs, alterations, or improvements that are, in the reasonable judgment of Landlord, desirable or necessary to be made, until said repairs, alterations, or improvements shall have been completed. Landlord shall have no responsibility or liability for failure to supply Building System services during any such period of interruption; provided, however, that Landlord shall give Tenant 24 hours advance notice of any stoppage of Building System services for any planned repairs, alterations, or improvements. Tenant shall promptly give Landlord written notice of any repair required by Landlord pursuant to this Section, or with respect to any emergency, oral notice followed immediately by written notice, after which Landlord shall have a reasonable opportunity to effect such repair. Landlord shall not be liable for any failure to make any repairs or to perform any maintenance unless such failure shall persist for an unreasonable time after Tenant's written notice of the need for such repairs or maintenance. Tenant waives its rights under any state or local law to terminate this Lease or to make such repairs at Landlord's expense and agrees that the parties' respective rights with respect to such matters shall be solely as set forth herein. Repairs required as the result of fire, earthquake, flood, vandalism, war, or similar cause of damage or destruction shall be controlled by Section 18. Tenant's Repairs . Subject to Sections 13, 17 and 18 hereof, Tenant, at its expense, shall repair, replace, and maintain in good condition all portions of the Premises, including, without limitation, gas, electrical, water, HVAC, sanitary sewer, plumbing, fire protection (including, without limitation, sprinklers), elevators, and all other building systems serving the Premises ("Building Systems"), entries, doors, ceilings, interior windows, interior walls, and the interior side of demising walls. Such repair and replacements may include capital expenditures and repairs whose benefit may extend beyond the Term. Should Tenant fail to make any such repair or replacement or fail to maintain the Premises, Landlord shall give Tenant notice of such failure. If Tenant fails to commence cure of such default within 10 days of Landlord's notice, and thereafter diligently prosecute such cure to completion, Landlord may perform such work and shall be reimbursed by Tenant within 10 days after demand therefor; provided, however, that if such default by Tenant creates or could create an emergency, Landlord may immediately commence cure of such default and shall thereafter be entitled to recover the costs of such cure from Tenant. Subject to Sections 17 and 18, Tenant shall bear the full uninsured cost of any repair or replacement to any part of the Project that results from damage caused by Tenant or any Tenant Party and any repair that benefits only the Premises. At all times during the Term, Tenant shall either (i) keep in place a contract for the maintenance of the Building Systems, with a contractor and using maintenance schedules and procedures reasonably acceptable to, and previously approved by, Landlord, or (ii) make other arrangements for such maintenance work, which arrangements shall be reasonably acceptable to, and previously approved by, Landlord. Mechanic's Liens . Tenant shall discharge, by bond or otherwise, any mechanic's lien filed against the Premises or against the Project for work claimed to have been done for, or materials claimed to have been furnished to, Tenant within 20 days after the filing thereof, at Tenant's sole cost and shall otherwise keep the Premises and the Project free from any liens arising out of work performed, materials furnished, or obligations incurred by Tenant. Should Tenant fail to discharge any lien described herein, Landlord shall have the right, but not the obligation, to pay such claim or post a bond or otherwise provide security to eliminate the lien as a claim against title to the Project and the cost thereof shall be immediately due from Tenant as Additional Rent. If Tenant shall lease or finance the acquisition of office equipment, furnishings, or other personal property of a removable nature utilized by Tenant in the operation of Tenant's business, Tenant warrants that any Uniform Commercial Code Financing Statement executed by Tenant will upon its face or by exhibit thereto indicate that such Financing Statement is applicable only to removable personal property of Tenant located within the Premises. In no event shall the address of the Premises or the Project be furnished on any such Financing Statement without such qualifying language. Indemnification . Tenant hereby indemnifies and agrees to defend, save and hold Landlord harmless from and against any and all Claims for injury or death to persons or damage to property occurring within or about the Premises, arising directly or indirectly out of use or occupancy of the Premises or a breach or default by Tenant in the performance of any of its obligations hereunder, unless caused solely by the willful misconduct or gross negligence of Landlord. Landlord shall not be liable to Tenant for, and Tenant assumes all risk of damage to, personal property (including, without limitation, loss of records kept within the Premises). Tenant further waives any and all Claims for injury to Tenant's business or loss of income relating to any such damage or destruction of personal property (including, without limitation, any loss of records). Landlord shall not be liable for any damages arising from any act, omission or neglect of any tenant in the Project or of any other third party. Insurance . Landlord shall maintain all risk property and, if applicable, sprinkler damage insurance covering the full replacement cost of the Project. Landlord shall further procure and maintain commercial general liability insurance with a single loss limit of not less than $2,000,000 for bodily injury and property damage with respect to the Project. Landlord may maintain, but is not obligated to maintain, such other insurance and additional coverages as Landlord may reasonably deem necessary or prudent, including, but not limited to, flood, environmental hazard and earthquake, loss or failure of building equipment, errors and omissions, rental loss during the period of repair or rebuilding, workers' compensation insurance and fidelity bonds for employees employed to perform services, and insurance for any improvements installed by Tenant or that are in addition to the standard improvements customarily furnished by Landlord without regard to whether or not such are made a part of the Project. The premiums for all such insurance shall be included as part of the Operating Expenses. The Project may be included in a blanket policy (in which case the cost of such insurance allocable to the Project will be determined by Landlord based upon the insurers cost calculations). Tenant, at its sole cost and expense, shall maintain during the Term: all risk property insurance with business interruption and extra expense coverage, covering the full replacement cost of all property and improvements installed or placed in the Premises by Tenant at Tenant's expense; workers' compensation insurance with no less than the minimum limits required by law; employers liability insurance with such limits as required by law; and commercial general liability insurance, with a minimum limit of not less than $2,000,000 per occurrence for bodily injury and property damage with respect to the Premises. The commercial general liability insurance policies shall name Landlord, its officers, directors, employees, managers, agents, invitees and contractors (collectively, "Landlord Parties"), as additional unsureds; insure on an occurrence and not a claims-made basis; be issued by insurance companies which have a rating of not less than policyholder rating of A and financial category rating of at least Class X in "Best's Insurance Guide"; shall not be cancelable for nonpayment of premium unless 30 days prior written notice shall have been given to Landlord from the insurer; contain a hostile fire endorsement and a contractual liability endorsement; and provide primary coverage to Landlord (any policy issued to Landlord providing duplicate or similar coverage shall be deemed excess over Tenant's policies). Such policies or certificates thereof shall be delivered to Landlord by Tenant upon commencement of the Term and upon each renewal of said insurance. Tenant's policy may be a "blanket policy" with an aggregate per location endorsement which specifically provides that the amount of insurance shall not be prejudiced by other losses covered by the policy. Tenant shall, at least 5 days prior to the expiration of such policies, furnish Landlord with renewal certificates. In each instance where insurance is to name Landlord as an additional insured, Tenant shall upon written request of Landlord also designate and furnish certificates so evidencing Landlord as additional insured to: (i) any lender of Landlord holding a security interest in the Project or any portion thereof, (ii) the landlord under any lease wherein Landlord is tenant of the real property on which the Project is located, if the interest of Landlord is or shall become that of a tenant under a ground or other underlying lease rather than that of a fee owner, and/or (iii) any management company retained by Landlord to manage the Project. The property insurance obtained by Landlord and Tenant shall include a waiver of subrogation by the insurers and all rights based upon an assignment from its insured, against Landlord or Tenant, and their respective officers, directors, employees, managers, agents, invitees and contractors ("Related Parties"), in connection with any loss or damage thereby insured against. Neither party nor its respective Related Parties shall be liable to the other for loss or damage caused by any risk insured against under property insurance required to be maintained hereunder, each party waives any claims against the other party and its respective Related Parties for such loss or damage, and Tenant shall not be required to indemnify Landlord under Section 16 hereof for such loss or damage. The failure of a party to insure its property shall not void this waiver. Landlord and its respective Related Parties shall not be liable for, and Tenant hereby waives all claims against such parties for, business interruption and losses occasioned thereby sustained by Tenant or any person claiming through Tenant resulting from any accident or occurrence in or upon the Premises or the Project from any cause whatsoever. If the foregoing waivers shall contravene any law with respect to exculpatory agreements, the liability of Landlord or Tenant shall be deemed not released but shall be secondary to the other's insurer. Landlord may require insurance policy limits to be raised to conform with the reasonable requirements of Landlord's lender and/or to bring coverage limits to levels then being generally required of new tenants in the properties of Landlord and Landlord's affiliates in the greater San Diego, California area. Restoration . If at any time during the Term the Premises are damaged or destroyed by a fire or other insured casualty, Landlord shall give Tenant written notice (a "Restoration Notice") of the amount of time Landlord reasonably estimates it will take to restore the Premises (the "Restoration Period"), which Restoration Notice shall be given within 60 days after the date Landlord discovers such damage or destruction (the "Discovery Date"). If the Restoration Period is estimated to exceed 18 months (the "Maximum Restoration Period"), Landlord may, in such Restoration Notice, elect to terminate this Lease as of the date that is 75 days after the Discovery Date; provided, however, that notwithstanding Landlord's election to restore the Premises, Tenant may elect to terminate this Lease by written notice to Landlord delivered within 5 business days of receipt of a Restoration Notice estimating a Restoration Period longer than the Maximum Restoration Period. Further, if Landlord elects to restore the Premises and Tenant either has no right to terminate this Lease pursuant to the foregoing or does not elect to terminate this Lease, Tenant, by written notice to Landlord delivered within 5 business days of receipt of a Restoration Notice, shall notify Landlord whether Tenant will timely perform Tenant's Restoration Obligations (as defined below). If Tenant elects not to perform Tenant's Restoration Obligations (or fails to timely deliver to Landlord a written notice expressly undertaking Tenant's Restoration Obligations) and the Restoration Period is estimated to exceed 12 months, Landlord may, by written notice to Tenant delivered within 5 business days of receipt of Tenant's notice regarding Tenant's Restoration Obligations, elect to terminate this Lease as of the date that is 75 days after the Discovery Date. Unless either Landlord or Tenant elects to terminate this Lease as provided above, Landlord shall, subject to receipt of sufficient insurance proceeds (with any deductible to be treated as a current Operating Expense), promptly restore the Premises (excluding the improvements installed by Tenant or by Landlord and paid for by Tenant), subject to delays arising from the collection of insurance proceeds, from Force Majeure events, or as needed to obtain any license, clearance, or other authorization of any kind required to enter into and restore the Premises issued by any Governmental Authority having jurisdiction over the use, storage, handling, treatment, generation, release, disposal, removal, or remediation of Hazardous Materials in, on, or about the Premises (collectively referred to herein as "Hazardous Materials Clearances"); provided, however, that if repair or restoration of the Premises is not substantially complete as of the end of the Maximum Restoration Period or, if longer, the Restoration Period, Landlord may, in its sole and absolute discretion, elect not to proceed with such repair and restoration, or Tenant may, by written notice to Landlord delivered within 5 business days of the expiration of the Maximum Restoration Period or, if longer, the Restoration Period, elect to terminate this Lease, in which event Landlord shall be relieved of its obligation to make such repairs or restoration and this Lease shall terminate as of the date that is 75 days after the later of: (i) the Discovery Date, or (ii) the date all required Hazardous Materials Clearances are obtained, but Landlord shall retain any Rent paid and the right to any Rent payable by Tenant prior to such election by Landlord or Tenant. Unless Tenant timely and expressly elects otherwise as provided above, Tenant, at its expense, shall promptly perform, subject to delays arising from the collection of insurance proceeds, from Force Majeure events or to obtain Hazardous Material Clearances, all repairs or restoration not required to be done by Landlord and shall promptly re-enter the Premises and commence doing business in accordance with this Lease (collectively, "Tenant's Restoration Obligations"). Notwithstanding any of the foregoing, Landlord may terminate this Lease by written notice to Tenant if (a) the Premises are damaged during the last 6 months of the Base Term, Tenant has not timely exercised the Extension Right (as defined in Section 39 hereof)), and Landlord reasonably estimates that it will take more than 2 months to repair such damage, (b) the Premises are damaged during the last 6 months of the Extension Term and Landlord reasonably estimates that it will take more than 2 months to repair such damage, (c) the Premises are damaged during the last 24 months of the Base Term, Landlord reasonably estimates that it will take more than 12 months to repair such damage, and Tenant does not exercise the Extension Right within 5 business days of receipt of the Restoration Notice, (d) the Premises are damaged during the last 30 months of the Extension Term and Landlord reasonably estimates that it will take more than 12 months to repair such damage, or (e) insurance proceeds are not available for such restoration, provided that Landlord may not terminate this Lease pursuant to clause (e) if Tenant, by written notice to Landlord within 10 days after Landlord's notice of proposed termination, offers to provide all funds necessary to repair such damage and thereafter deposits with Landlord, within 10 days after written notice from Landlord of Landlord's reasonable estimate of the cost to repair such damage, all such funds. Rent shall be abated from the date all required Hazardous Material Clearances are obtained until the Premises are restored, in the proportion that the area of the Premises, if any, that is not usable by Tenant bears to the total area of the Premises, unless Landlord provides Tenant with other space during the period of restoration that is suitable for the temporary conduct of Tenant's business; provided, however, that under no circumstances shall Rent be abated pursuant to this Section for more than 12 months. Such abatement shall be the sole remedy of Tenant, and except as provided herein, Tenant waives any right to terminate the Lease by reason of damage or casualty loss. The provisions of this Lease, including this Section 18, constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, or any other portion of the Project, and any statute or regulation which is now or may hereafter be in effect shall have no application to this Lease or any damage or destruction to all or any part of the Premises or any other portion of the Project, the parties hereto expressly agreeing that this Section 18 sets forth their entire understanding and agreement with respect to such matters. Condemnation . If the whole or any material part of the Premises or the Project is taken for any public or quasi-public use under governmental law, ordinance, or regulation, or by right of eminent domain, or by private purchase in lieu thereof (a "Taking" or "Taken"), and the Taking would in Landlord's reasonable judgment either prevent or materially interfere with Tenant's use of the Premises or materially interfere with or impair Landlord's ownership or operation of the Project, then upon written notice by Landlord this Lease shall terminate and Rent shall be apportioned as of said date. If part of the Premises shall be Taken, and this Lease is not terminated as provided above, Landlord shall promptly restore the Premises and the Project as nearly as is commercially reasonable under the circumstances to their condition prior to such partial Taking and the rentable square footage of the Building, the rentable square footage of the Premises, Tenant's Share of Operating Expenses and the Rent payable hereunder during the unexpired Term shall be reduced to such extent as may be fair and reasonable under the circumstances. Upon any such Taking, Landlord shall be entitled to receive the entire price or award from any such Taking without any payment to Tenant, and Tenant hereby assigns to Landlord Tenant's interest, if any, in such award. Tenant shall have the right, to the extent that same shall not diminish Landlord's award, to make a separate claim against the condemning authority (but not Landlord) for such compensation as may be separately awarded or recoverable by Tenant for moving expenses and damage to Tenant's trade fixtures, if a separate award for such items is made to Tenant. Tenant hereby waives any and all rights it might otherwise have pursuant to any provision of state law to terminate this Lease upon a partial Taking of the Premises or the Project. Events of Default . Each of the following events shall be a default ("Default") by Tenant under this Lease: Payment Defaults . Tenant shall fail to pay any installment of Rent or any other payment hereunder when due; provided , however , that Landlord will give Tenant notice and an opportunity to cure any failure to pay Rent within 3 days of any such notice not more than twice in any 12 month period and Tenant agrees that such notice shall be in lieu of and not in addition to, or shall be deemed to be, any notice required by law. Insurance . Any insurance required to be maintained by Tenant pursuant to this Lease shall be canceled or terminated or shall expire or shall be reduced or materially changed, or Landlord shall receive a notice of non-renewal of any such insurance and Tenant shall fail to obtain replacement insurance at least 20 days before the expiration of the current coverage. Abandonment . Tenant shall abandon the Premises. Improper Transfer . Tenant shall assign, sublease, or otherwise transfer or attempt to transfer all or any portion of Tenant's interest in this Lease or the Premises except as expressly permitted herein, or Tenant's interest in this Lease shall be attached, executed upon, or otherwise judicially seized and such action is not released within 90 days of the action. Liens . Tenant shall fail to discharge or otherwise obtain the release of any lien placed upon the Premises in violation of this Lease within 20 days after any such lien is filed against the Premises. Insolvency Events . Tenant or any guarantor or surety of Tenant's obligations hereunder shall: (A) make a general assignment for the benefit of creditors; (B) commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or of any substantial part of its property (collectively a " Proceeding for Relief "); (C) become the subject of any Proceeding for Relief that is not dismissed within 90 days of its filing or entry; or (D) die or suffer a legal disability (if Tenant or any guarantor or surety is an individual) or be dissolved or otherwise fail to maintain its legal existence (if Tenant or any guarantor or surety is a corporation, partnership, or other entity). Estoppel Certificate or Subordination Agreement . Tenant fails to execute any document required from Tenant under Sections 23 or 27 within 5 days after a second notice requesting such document. Default Under 11075 Lease . At any time that Tenant is also the tenant under the 11075 Lease, there is a Default under the 11075 Lease, as the term Default is defined in such 11075 Lease. Other Defaults . Tenant shall fail to comply with any provision of this Lease other than those specifically referred to in this Section 20, and, except as otherwise expressly provided herein, such failure shall continue for a period of 20 days after written notice thereof from Landlord to Tenant. Any notice given under Section 20(i) hereof shall: (i) specify the alleged default, (ii) demand that Tenant cure such default, (iii) be in lieu of, and not in addition to, or shall be deemed to be, any notice required under any provision of applicable law, and (iv) not be deemed a forfeiture or a termination of this Lease unless Landlord elects otherwise in such notice; provided that if the nature of Tenant's default pursuant to Section 20(i) is such that it cannot be cured solely by the payment of money and reasonably requires more than 20 days to cure, then Tenant shall not be deemed to be in default if Tenant commences such cure within said 20-day period and thereafter diligently prosecutes the same to completion; provided, however, that such cure shall be completed no later than 45 days from the date of Landlord's notice. Landlord's Remedies . Payment By Landlord; Interest . Upon a Default by Tenant hereunder, Landlord may, without waiving or releasing any obligation of Tenant hereunder, make such payment or perform such act. All sums so paid or incurred by Landlord, together with interest thereon, from the date such sums were paid or incurred, at the annual rate equal to 12.0% per annum or the highest rate permitted by law (the " Default Rate "), whichever is less, shall be payable to Landlord on demand as Additional Rent. Nothing herein shall be construed to create or impose a duty on Landlord to mitigate any damages resulting from Tenant's Default hereunder. Late Payment Rent . Late payment by Tenant to Landlord of Rent and other sums due will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult and impracticable to ascertain. Such costs include, but are not limited to, processing and accounting charges and late charges which may be imposed on Landlord under any Mortgage covering the Premises. Therefore, if any installment of Rent due from Tenant is not received by Landlord within 5 days after the date such payment is due, Tenant shall pay to Landlord an additional sum equal to 6.0% of the overdue Rent as a late charge. The parties agree that this late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant. In addition to the late charge, Rent not paid when due shall bear interest at the Default Rate from the 5th day after the date due until paid. Remedies . Upon the occurrence of a Default, Landlord, at its option, without further notice or demand to Tenant, shall have in addition to all other rights and remedies provided in this Lease, at law or in equity, the option to pursue any one or more of the following remedies, each and all of which shall be cumulative and nonexclusive, without any notice or demand whatsoever. Terminate this Lease, or at Landlord's option, Tenant's right to possession only, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim or damages therefor; Upon any termination of this Lease, whether pursuant to the foregoing Section 21 (c)(i) or otherwise, Landlord may recover from Tenant the following; The worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus The worth at the time of award of the amount by which the unpaid rent for the balance of the Term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, specifically including, but not limited to, brokerage commissions and advertising expenses incurred, expenses of remodeling the Premises or any portion thereof for a new tenant, whether for the same or a different use, and any special concessions made to obtain a new tenant; and At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law. The term "rent" as used in this Section 21 shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord or to others. As used in Sections 21(c)(ii) (A) and (B), above, the "worth at the time of award" shall be computed by allowing interest at the Default Rate. As used in Section 21(c)(ii)(C) above, the "worth at the time of award" shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus 1.0%. Landlord may continue this Lease in effect after Tenant's Default and recover rent as it becomes due (Landlord and Tenant hereby agreeing that Tenant has the right to sublet or assign hereunder, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease following a Default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies hereunder, including the right to recover all Rent as it becomes due. If Landlord elects to terminate this Lease following a Default by Tenant, Landlord shall have the right to terminate any and all subleases, licenses, concessions or other consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in Landlord's sole discretion, succeed to Tenant's interest in such subleases, licenses, concessions or arrangements. Upon Landlord's election to succeed to Tenant's interest in any such subleases, licenses, concessions or arrangements, Tenant shall, as of the date of notice by Landlord of such election, have no further right to or interest in the rent or other consideration receivable thereunder. Independent of the exercise of any other remedy of Landlord hereunder or under applicable law, Landlord may conduct an environmental test of the Premises as generally described in Section 30(d) hereof, at Tenant's expense. Effect of Exercise . Exercise by Landlord of any remedies hereunder or otherwise available shall not be deemed to be an acceptance of surrender of the Premises and/or a termination of this Lease by Landlord, it being understood that such surrender and/or termination can be effected only by the express written agreement of Landlord and Tenant. Any law, usage, or custom to the contrary notwithstanding, Landlord shall have the right at all times to enforce the provisions of this Lease in strict accordance with the terms hereof; and the failure of Landlord at any time to enforce its rights under this Lease strictly in accordance with same shall not be construed as having created a custom in any way or manner contrary to the specific terms, provisions, and covenants of this Lease or as having modified the same and shall not be deemed a waiver of Landlord's right to enforce one or more of its rights in connection with any subsequent default. A receipt by Landlord of Rent or other payment with knowledge of the breach of any covenant hereof shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Landlord. To the greatest extent permitted by law, Tenant waives the service of notice of Landlord's intention to re-enter, re-take or otherwise obtain possession of the Premises as provided in any statute, or to institute legal proceedings to that end, and also waives all right of redemption in case Tenant shall be dispossessed by a judgment or by warrant of any court or judge. Any reletting of the Premises or any portion thereof shall be on such terms and conditions as Landlord in its sole discretion may determine. Landlord shall not be liable for, nor shall Tenant's obligations hereunder be diminished because of, Landlord's failure to relet the Premises or collect rent due in respect of such reletting or otherwise to mitigate any damages arising by reason of Tenant's Default. Assignment and Subletting . General Prohibition . Without Landlord's prior written consent subject to and on the conditions described in this Section 22, Tenant shall not, directly or indirectly, voluntarily or by operation of law, assign this Lease or sublease the Premises or any part thereof or mortgage, pledge, or hypothecate its leasehold interest or grant any concession or license within the Premises, and any attempt to do any of the foregoing shall be void and of no effect. If Tenant is a corporation, partnership, or limited liability company, the shares or other ownership interests thereof that are not actively traded upon a stock exchange or in the over-the-counter market, a transfer or series of transfers whereby 25.0% or more of the issued and outstanding shares or other ownership interests of such corporation, partnership, or limited liability company are, or voting control is, transferred (but excepting transfers upon deaths of individual owners) from a person or persons or entity or entities that were owners thereof as of the Lease Date to persons or entities that were not owners of shares or other ownership interests of the corporation, partnership, or limited liability company as of the Lease Date, shall be deemed an assignment of this Lease requiring the consent of Landlord as provided in this Section 22. Notwithstanding the foregoing, any public offering of shares or other ownership interest in Tenant shall not be deemed an assignment. Permitted Transfers . If Tenant desires to assign, hypothecate, or otherwise transfer this Lease or sublet the Premises other than pursuant to a Permitted Assignment (as defined below), then at least 15 business days, but not more than 45 business days, before the date (the " Proposed Transfer Date ") Tenant desires the assignment, hypothecation, other transfer, or sublease to be effective (generally, " Proposed Transfer "), Tenant shall give Landlord a notice (the " Proposed Transfer Notice ") containing such information about the proposed assignee or sublessee (the " Proposed Transferee "), including the proposed use of the Premises and any Hazardous Materials proposed to be used, stored handled, treated, generated in, or released or disposed of from the Premises, the Proposed Transfer Date, any relationship between Tenant and the Proposed Transferee, and all material terms and conditions of the Proposed Transfer, including a copy of any documents, in their final form, evidencing such Proposed Transfer (" Proposed Transfer Documents "), and such other information as Landlord may deem reasonably necessary or appropriate to its consideration whether to grant its consent. Landlord may, by giving written notice to Tenant within 15 business days after receipt of the Proposed Transfer Notice: (x) grant or refuse such consent, in its sole discretion with respect to any Proposed Transfer that involves an assignment of this Lease, or grant or refuse such consent, in its reasonable discretion with respect to any Proposed Transfer that involves a sublease of the Premises (a " Proposed Sublease ") (provided that Landlord shall further have the right to review and reasonably approve or disapprove the forms of the Proposed Transfer Documents prior to the Proposed Transfer Date), or (y) terminate this Lease with respect to the space described in the Proposed Transfer Notice as of the Proposed Transfer Date (a " Proposed Transfer Termination "). If Landlord elects a Proposed Transfer Termination, Tenant shall have the right to withdraw such Proposed Transfer Notice by written notice to Landlord of such election within 5 days after Landlord's notice electing to exercise the Proposed Transfer Termination. If Tenant withdraws such Proposed Transfer Notice, this Lease shall continue in full force and effect. If Tenant does not withdraw such Proposed Transfer Notice, this Lease, and the term and estate herein granted, shall terminate as of the Proposed Transfer Date with respect to the space described in such Proposed Transfer Notice. No failure of Landlord to exercise any such option to terminate this Lease shall be deemed to be Landlord's consent to the Proposed Transfer. Tenant shall reimburse Landlord for all of Landlord's reasonable out-of-pocket expenses in connection with its consideration of any Proposed Transfer Notice (not to exceed $3,000.00). For purposes of this Section, Landlord shall be conclusively presumed to have acted reasonably in refusing consent to a Proposed Sublease if any of the following is a basis for such refusal: in Landlord's reasonable judgment, the Proposed Transferee's intended use of the Premises (A) will be inconsistent with the Permitted Use, (B) will overload or materially increase the burden on, or cause material overuse of, the Building Systems or the Common Areas (including, without limitation, parking areas), (C) will materially increase the insurance risk or cause the disallowance of any sprinkler or other insurance credits, (D) will materially increase the sounds or vibrations extending from the Premises into Common Areas or other space in the Project; (E) will materially alter the times at which operations are being conducted within the Premises, or (F) will otherwise materially increase Landlord's obligations under this Lease; in Landlord's reasonable judgment, the Proposed Transferee's general character, reputation, or credit history is not consistent with the general character or quality of the Project, or the Proposed Transferee does not have adequate operating experience for its intended use of the Premises', the Proposed Transferee is not in the pharmaceutical, biotechnology, diagnostic and personal care products, contract research, scientific research, or other life sciences industries; in Landlord's reasonable judgment, the Proposed Transferee is not financially capable of fulfilling all of its obligations in connection with the Proposed Sublease; the space subject to the Proposed Sublease is irregular in shape and/or the configuration of the remaining space not subject to the Proposed Sublease would be, in Landlord's sole and absolute discretion, materially more difficult to lease; at that time of the Proposed Transfer Notice, the Proposed Transferee occupies space in the Project and there is other space available in the Project for lease that is contiguous to such Proposed Transferee's existing space; the Proposed Transferee is a governmental agency or an instrumentality of one (but only if the Project does not have a governmental agency or instrumentality of similar type and size as a tenant at the time of the Proposed Transfer Notice); during the 6 months immediately preceding the Proposed Transfer Notice, the Proposed Transferee (or any of its affiliates) has inquired about leasing space, or has been shown space for lease, in the Project or in any other property of Landlord or Landlord's affiliates in the greater San Diego, California area; the Proposed Transfer (A) would cause Landlord to violate any other lease, agreement, covenant, condition, or restriction to which Landlord is a party or by which the Project is bound, or (B) would give any other tenant of the Project the right to terminate its lease; the rent to be charged the Proposed Transferee in connection with the Proposed Sublease is less than 90.0% of the rent then being quoted by Landlord for comparable available space in the Project for a comparable term; either the Proposed Sublease or the Proposed Transferee do not meet any of the conditions or requirements set forth in subsections (c) or (f) below; or in Landlord's reasonable judgment (based on advice of counsel), any fact or circumstance related to the Proposed Sublease or the Proposed Transferee would be likely to affect Landlord's status as a "real estate investment trust", as defined in Section 856 of the Internal Revenue Code (as amended); The foregoing list is not exhaustive and is not intended to limit, in any way, the circumstances under which Landlord may act reasonably in refusing consent to a Proposed Sublease. Tenant hereby waives the provisions of any law, now or hereafter in force (including, without limitation, Section 1995.310 of the California Civil Code), that provide that Tenant may terminate this Lease if Landlord is determined to have unreasonably refused consent to a Proposed Sublease in violation of Tenant's rights under this Section, it being agreed that Tenant's sole remedy in such a case will be the recovery of contract damages (if any) caused by Landlord's actions. In addition to the foregoing, Tenant shall have the right to assign this Lease, upon 30 days' prior written notice to Landlord but without obtaining Landlord's prior written consent and without Landlord having the right to give Tenant a Proposed Transfer Termination, to a corporation or other entity that is a successor-in-interest to Tenant, by way of merger, consolidation, or corporate reorganization, or by the purchase of all or substantially all of the assets or the ownership interests of Tenant provided, that (x) such merger or consolidation, or such acquisition or assumption, as the case may be, is for a good business purpose and not principally for the purpose of transferring the Lease, and (y) the net worth (as determined in accordance with generally accepted accounting principles) of the assignee is at least $100,000,000.00, and (z) such assignee shall agree in writing to assume all of the terms, covenants, and conditions of this Lease arising after the effective date of the assignment (a "Permitted Assignment"). Additional Conditions . As a condition to any such assignment or subletting, whether or not Landlord's consent is required, Landlord may require: that any assignee or subtenant agree, in writing at the time of such assignment or subletting, that if Landlord gives such party notice that Tenant is in default under this Lease, such party shall thereafter make all payments otherwise due Tenant directly to Landlord, which payments will be received by Landlord without any liability except to credit such payment against those due under the Lease, and any such third party shall agree to attorn to Landlord or its successors and assigns should this Lease be terminated for any reason; provided, however, in no event shall Landlord or its successors or assigns be obligated to accept such attornment; and A list of Hazardous Materials, certified by the proposed assignee or sublessee to be true and correct, which the proposed assignee or sublessee intends to use, store, handle, treat, generate in or release or dispose of from the Premises, together with copies of all documents relating to such use, storage, handling, treatment, generation, release or disposal of Hazardous Materials by the proposed assignee or subtenant in the Premises or on the Project, prior to the proposed assignment or subletting, including, without limitation: permits; approvals; reports and correspondence; storage and management plans; plans relating to the installation of any storage tanks to be installed in, on, or under the Project (provided, said installation of tanks shall only be permitted after Landlord has given its written consent to do so, which consent may be withheld in Landlord's sole and absolute discretion); and all closure plans or any other documents required by any and all federal, state and local Governmental Authorities for any storage tanks installed in, on or under the Project for the closure of any such tanks. Neither Tenant nor any such proposed assignee or subtenant is required, however, to provide Landlord with any portion(s) of the such documents containing information of a proprietary nature which, in and of themselves, do not contain a reference to any Hazardous Materials or hazardous activities. No Release of Tenant, Sharing of Excess Rents . Notwithstanding any assignment or subletting, Tenant and any guarantor or surety of Tenant's obligations under this Lease shall at all times remain fully and primarily responsible and liable for the payment of Rent and for compliance with all of Tenant's other obligations under this Lease. If the Rent due and payable by a sublessee or assignee (or a combination of the rental payable under such sublease or assignment plus any bonus or other consideration therefor or incident thereto) exceeds the rental payable under this Lease (excluding, however, any Rent payable under this Section), plus actual and reasonable brokerage fees, legal costs, and any design or construction fees directly related to and required pursuant to the terms of any such sublease, then Tenant shall be bound and obligated to pay Landlord as Additional Rent hereunder 50.0% of such excess rental and other excess consideration within 10 days following receipt thereof by Tenant. If Tenant shall sublet the Premises or any part thereof, Tenant hereby immediately and irrevocably assigns to Landlord, as security for Tenant's obligations under this Lease, all rent from any such subletting, and Landlord as assignee and as attorney-in-fact for Tenant, or a receiver for Tenant appointed on Landlord's application, may collect such rent and apply it toward Tenant's obligations under this Lease; except that, until the occurrence of a Default, Tenant shall have the right to collect such rent. No Waiver . The consent by Landlord to an assignment or subletting shall not relieve Tenant or any assignees of this Lease or any sublessees of the Premises from obtaining the consent of Landlord to any further assignment or subletting nor shall it release Tenant or any assignee or sublessee of Tenant from full and primary liability under the Lease. The acceptance of Rent hereunder, or the acceptance of performance of any other term, covenant, or condition thereof, from any other person or entity shall not be deemed to be a waiver of any of the provisions of this Lease or a consent to any subletting, assignment or other transfer of the Premises. Prior Conduct of Proposed Transferee . Notwithstanding any other provision of this Section 22, if (i) the proposed assignee or sublessee of Tenant has been required by any prior landlord, lender, or Governmental Authority to take remedial action in connection with Hazardous Materials contaminating a property, where the contamination resulted from such party's action or use of the property in question, (ii) the proposed assignee or sublessee is subject to an enforcement order issued by any Governmental Authority in connection with the use, storage, handling, treatment, generation, release, or disposal of Hazardous Materials (including, without limitation, any order related to the failure to make a required reporting to any Governmental Authority), or (iii) because of the existence of a pre-existing environmental condition in the vicinity of or underlying the Project, the risk that Landlord would be targeted as a responsible party in connection with the remediation of such pre-existing environmental condition would be materially increased or exacerbated by the proposed use of Hazardous Materials by such proposed assignee or sublessee, Landlord shall have the absolute right to refuse to consent to any assignment or subletting to any such party. Estoppel Certificate . Tenant shall, within 10 business days of written notice from Landlord, execute, acknowledge and deliver a statement in writing substantially in the form attached to this Lease as Exhibit G with the blanks filled in, or on any other form reasonably requested by a proposed lender or purchaser, (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease as so modified is in full force and effect) and the dates to which the rental and other charges are paid in advance, if any, (ii) acknowledging that there are not any uncured defaults on the part of Landlord hereunder, or specifying such defaults if any are claimed, and (iii) setting forth such further information with respect to the status of this Lease or the Premises as may be requested thereon. Any such statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the real property of which the Premises are a part. Tenant's failure to deliver such statement within such time shall be conclusive upon Tenant that the Lease is in full force and effect and without modification except as may be represented by Landlord in any certificate prepared by Landlord and delivered to Tenant for execution. Quiet Enjoyment . So long as Tenant shall perform all of the covenants and agreements herein required to be performed by Tenant, Tenant shall, subject to the terms of this Lease, at all times during the Term, have peaceful and quiet enjoyment of the Premises against any person claiming by, through, or under Landlord. Prorations . All prorations required or permitted to be made hereunder shall be made on the basis of a 360-day year and 30-day months. Rules and Regulations . At all times during the Term, Tenant shall comply with all reasonable rules and regulations covering use of the Premises and the Project (the current rules and regulations are attached hereto as Exhibit E). Landlord shall have the right to promulgate or adopt, at any time and from time to time, any changes to such rules and regulations as Landlord may deem necessary or appropriate, in Landlord's sole and absolute discretion (provided, however, that such changes must be uniformly applicable to all tenants of the Project and may not materially, adversely affect Tenant's use or occupancy of the Premises for the Permitted Use). If there is any conflict between said rules and regulations and other provisions of this Lease, the terms and provisions of this Lease shall control. Landlord shall not have any liability or obligation for the breach of any rules or regulations by other tenants in the Project and shall not enforce such rules and regulations in a discriminatory manner. Subordination . This Lease and Tenant's interest and rights hereunder are and shall be subject and subordinate at all times to the lien of any Mortgage now existing or hereafter created on or against the Project or the Premises, and all amendments, restatements, renewals, modifications, consolidations, refinancing, assignments and extensions thereof, without the necessity of any further instrument or act on the part of Tenant; provided, however that so long as there is no Default hereunder, Tenant's right to possession of the Premises shall not be disturbed by the Holder of any such Mortgage. Tenant agrees, at the election of the Holder of any such Mortgage, to attorn to any such Holder. Tenant agrees upon demand to execute, acknowledge and deliver a Subordination, Non-disturbance and Attornment Agreement in substantially the form attached hereto as Exhibit H, or such other instruments, confirming such subordination, and such instruments of attornment as shall be reasonably requested by any such Holder, provided any such instruments contain appropriate recognition and non-disturbance provisions assuring Tenant's quiet enjoyment of the Premises as set forth in Section 24 hereof. Tenant hereby appoints Landlord attorney-in-fact for Tenant irrevocably (such power of attorney being coupled with an interest) to execute, acknowledge and deliver any such instrument and instruments for and in the name of Tenant and to cause any such instrument to be recorded. Notwithstanding the foregoing, any such Holder may at any time subordinate its Mortgage to this Lease, without Tenant's consent, by notice in writing to Tenant, and thereupon this Lease shall be deemed prior to such Mortgage without regard to their respective dates of execution, delivery or recording and in that event such Holder shall have the same rights with respect to this Lease as though this Lease had been executed prior to the execution, delivery and recording of such Mortgage and had been assigned to such Holder. The term "Mortgage" whenever used in this Lease shall be deemed to include deeds of trust, security assignments and any other encumbrances, and any reference to the "Holder" of a Mortgage shall be deemed to include the beneficiary under a deed of trust. Surrender . Upon the expiration of the Term or earlier termination of Tenant's right of possession, Tenant shall surrender the Premises to Landlord in the same condition as received, subject to any Alterations or Installations permitted by Landlord or this Lease to remain in the Premises, free of Hazardous Materials brought upon, kept, used, stored, handled, treated, generated in, or released or disposed of from, the Premises by any person other than a Landlord Party (collectively, "Tenant HazMat Operations") and released of all Hazardous Materials Clearances, broom clean, ordinary wear and tear and casualty loss and condemnation covered by Sections 18 and 19 excepted. At least 3 months prior to the surrender of the Premises, Tenant -shall deliver to Landlord a narrative description of the actions proposed (or required by any Governmental Authority) to be taken by Tenant in order to surrender the Premises (including any Installations permitted by Landlord to remain in the Premises) at the expiration or earlier termination of the Term, free from any residual impact from the Tenant HazMat Operations and otherwise released for unrestricted use and occupancy (the "Surrender Plan"). Such Surrender Plan shall be accompanied by a current listing of (i) all Hazardous Materials licenses and permits held by or on behalf of any Tenant Party with respect to the Premises, and (ii) all Hazardous Materials used, stored, handled, treated, generated, released or disposed of from the Premises, and shall be subject to the review and approval of Landlord's environmental consultant. In connection with the review and approval of the Surrender Plan, upon the request of Landlord, Tenant shall deliver to Landlord or its consultant such additional non-proprietary information concerning Tenant HazMat Operations as Landlord shall request. On or before such surrender, Tenant shall deliver to Landlord evidence that the approved Surrender Plan shall have been satisfactorily completed and Landlord shall have the right, subject to reimbursement at Tenant's expense as set forth below, to cause Landlord's environmental consultant to inspect the Premises and perform such additional procedures as may be deemed reasonably necessary to confirm that the Premises are, as of the effective date of such surrender or early termination of the Lease, free from any residual impact from Tenant HazMat Operations. Tenant shall reimburse Landlord, as Additional Rent, for the actual out-of pocket expense incurred by Landlord for Landlord's environmental consultant to review and approve the Surrender Plan and to visit the Premises and verify satisfactory completion of the same, which cost shall not exceed $5,000. Landlord shall have the unrestricted right to deliver such Surrender Plan and any report by Landlord's environmental consultant with respect to the surrender of the Premises to third parties. If Tenant shall fail to prepare or submit a Surrender Plan approved by Landlord, or if Tenant shall fail to complete the approved Surrender Plan, or if such Surrender Plan, whether or not approved by Landlord, shall fail to adequately address any residual effect of Tenant HazMat Operations in, on or about the Premises, Landlord shall have the right to take such actions as Landlord may deem reasonable or appropriate to assure that the Premises and the Project are surrendered free from any residual impact from Tenant HazMat Operations, the cost of which actions shall be reimbursed by Tenant as Additional Rent, without regard to the limitation set forth in the first paragraph of this Section 28. Tenant shall immediately return to Landlord all keys and/or access cards to parking, the Project, restrooms or all or any portion of the Premises furnished to or otherwise procured by Tenant. If any such access card or key is lost, Tenant shall pay to Landlord, at Landlord's election, either the cost of replacing such lost access card or key or the cost of reprogramming the access security system in which such access card was used or changing the lock or locks opened by such lost key. Any Tenant's Property, Alterations and property not so removed by Tenant as permitted or required herein shall be deemed abandoned and may be stored, removed, and disposed of by Landlord at Tenant's expense, and Tenant waives all claims against Landlord for any damages resulting from Landlord's retention and/or disposition of such property. All obligations of Tenant hereunder not fully performed as of the termination of the Term, including the obligations of Tenant under Section 30 hereof, shall survive the expiration or earlier termination of the Term, including, without limitation, indemnity obligations, payment obligations with respect to Rent and obligations concerning the condition and repair of the Premises. Waiver of Jury Trial . TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO. Environmental Requirements . Prohibition/Compliance/indemnity . Tenant shall not cause or permit any Hazardous Materials (as hereinafter defined) to be brought upon, kept, used, stored, handled, treated, generated in or about, or released or disposed of from, the Premises or the Project in violation of applicable Environmental Requirements (as hereinafter defined) by Tenant or any Tenant Party. If Tenant breaches the obligation stated in the preceding sentence, or if the presence of Hazardous Materials in the Premises during the Term or any holding over results in contamination of the Premises, the Project or any adjacent property or if contamination of the Premises, the Project or any adjacent property by Hazardous Materials brought into, kept, used, stored, handled, treated, generated in or about, or released or disposed of from, the Premises by anyone other than Landlord and Landlord's employees, agents and contractors otherwise occurs during the Term or any holding over, Tenant hereby indemnifies and shall defend and hold Landlord, its officers, directors, employees, agents and contractors harmless from any and all actions (including, without limitation, remedial or enforcement actions of any kind, administrative or judicial proceedings, and orders or judgments arising out of or resulting therefrom), costs, claims, damages (including, without limitation, punitive damages and damages based upon diminution in value of the Premises or the Project, or the loss of, or restriction on, use of the Premises or any portion of the Project), expenses (including, without limitation, attorneys', consultants' and experts' fees, court costs and amounts paid in settlement of any claims or actions), fines, forfeitures or other civil, administrative or criminal penalties, injunctive or other relief (whether or not based upon personal injury, property damage, or contamination of, or adverse effects upon, the environment, water tables or natural resources), liabilities or losses (collectively, " Environmental Claims ") which arise during or after the Term as a result of such contamination. This indemnification of Landlord by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, treatment, remedial, removal, or restoration work required by any federal, state or local Governmental Authority because of Hazardous Materials present in the air, soil or ground water above, on, or under the Premises. Without limiting the foregoing, if the presence of any Hazardous Materials on the Premises, the Building, the Project, or any adjacent property caused or permitted by Tenant or any Tenant Party results in any contamination of the Premises, the Building, the Project, or any adjacent property, Tenant shall promptly take all actions at its sole expense and in accordance with applicable Environmental Requirements as are necessary to return the Premises, the Building, the Project, or any adjacent property to the condition existing prior to the time of such contamination, provided that Landlord's approval of such action shall first be obtained, which approval shall not unreasonably be withheld so long as such actions would not potentially have any material adverse long-term or short-term effect on the Premises, the Building, or the Project. Business . Landlord acknowledges that it is not the intent of this Section 30 to prohibit Tenant from using the Premises for the Permitted Use. Tenant may operate its business according to prudent industry practices so long as the use or presence of Hazardous Materials is strictly and properly monitored according to all then applicable Environmental Requirements. As a material inducement to Landlord to allow Tenant to use Hazardous Materials in connection with its business, Tenant shall deliver to Landlord prior to the Commencement Date a list identifying each type of Hazardous Materials to be brought upon, kept, used, stored, handled, treated, generated on, or released or disposed of from, the Premises and setting forth any and all governmental approvals or permits required in connection with the presence, use, storage, handling, treatment, generation, release or disposal of such Hazardous Materials on or from the Premises (" Hazardous Materials List "). Tenant shall deliver to Landlord an updated Hazardous Materials List at least once a year and shall also deliver an updated list before any new Hazardous Material is brought onto, kept, used, stored, handled, treated, generated on, or released or disposed of from, the Premises. Tenant shall deliver to Landlord true and correct copies of the following documents (the " HazMat Documents ") relating to the use, storage, handling, treatment, generation, release, or disposal of Hazardous Materials prior to the Commencement Date, or if unavailable at that time, concurrent with the receipt from or submission to a Governmental Authority: permits; approvals; reports and correspondence; storage and management plans; notice of violations of any Legal Requirements; plans relating to the installation of any storage tanks to be installed in, on, or under the Project ( provided said installation of tanks shall only be permitted after Landlord has given Tenant its written consent to do so, which consent may be withheld in Landlord's sole and absolute discretion); all closure plans or any other documents required by any and all federal, state, and local Governmental Authorities for any storage tanks installed in, on, or under the Project for the closure of any such tanks; and a Surrender Plan (to the extent surrender in accordance with Section 28 cannot be accomplished in 3 months). Tenant is not required, however, to provide Landlord with any portion(s) of the HazMat Documents containing information of a proprietary nature which, in and of themselves, do not contain a reference to any Hazardous Materials or hazardous activities. It is not the intent of this Section to provide Landlord with information which could be detrimental to Tenant's business should such information become possessed by Tenant's competitors. Tenant Representation and Warranty . Tenant hereby represents and warrants to Landlord that (i) neither Tenant nor any of its legal predecessors has been required by any prior landlord, lender, or Governmental Authority at any time to take remedial action in connection with Hazardous Materials contaminating a property, which contamination was permitted by Tenant of such predecessor or resulted from Tenant's or such predecessor's action or use of the property in question, and (ii) Tenant is not subject to any enforcement order issued by any Governmental Authority in connection with the use, storage, handling, treatment, generation, release, or disposal of Hazardous Materials (including, without limitation, any order related to the failure to make a required reporting to any Governmental Authority). If Landlord determines that this representation and warranty was not true as of the date of this lease, Landlord shall have the right to terminate this Lease in Landlord's sole and absolute discretion. Testing . Landlord shall have the right to conduct annual tests of the Premises to determine whether any contamination of the Premises, the Building, or the Project has occurred as a result of Tenant's use. Tenant shall be required to pay the cost of such annual tests; provided , however , that if Tenant conducts its own tests of the Premises and the Building using third party contractors and test procedures reasonably acceptable to Landlord, which tests are certified to Landlord, Landlord shall accept such tests in lieu of the annual tests to be paid for by Tenant. In addition, at any time, and from time to time, prior to the expiration or earlier termination of the Term, Landlord shall have the right to conduct appropriate tests of the Premises, the Building, and the Project to determine if contamination has occurred as a result of Tenant's use of the Premises, the Building, or the Project. In connection with such testing, upon the request of Landlord, Tenant shall deliver to Landlord or its consultant such non-proprietary information concerning the use of Hazardous Materials in or about the Premises, the Building, or the Project by Tenant or any Tenant Party. If contamination has occurred for which Tenant is liable under this Section 30, Tenant shall pay all costs to conduct such tests. If no such contamination is found, Landlord shall pay the costs of such tests (which shall not constitute an Operating Expense). Landlord shall provide Tenant with a copy of all third party, non- confidential reports and tests of the Premises and the Building made by or on behalf of Landlord during the Term without representation or warranty and subject to a confidentiality agreement. Tenant shall, at its sole cost and expense, promptly and satisfactorily remediate any environmental conditions identified by such testing in accordance with all Environmental Requirements. Landlord's receipt of or satisfaction with any environmental assessment in no way waives any rights which Landlord may have against Tenant. Underground Tanks . If underground or other storage tanks storing Hazardous Materials located on the Premises or the Project are used by Tenant or are hereafter placed on the Premises or the Project by Tenant, Tenant shall install, use, monitor, operate, maintain, upgrade, and manage such storage tanks, maintain appropriate records, obtain and maintain appropriate insurance, implement reporting procedures, properly close any underground storage tanks, and take or cause to be taken all other actions necessary or required under applicable state and federal Legal Requirements, as such now exists or may hereafter be adopted or amended in connection with the installation, use, maintenance, management, operation, upgrading, and closure of such storage tanks. Tenant's Obligations . Tenant's obligations under this Section 30 shall survive the expiration or earlier termination of the Lease. During any period of time after the expiration or earlier termination of this Lease required by Tenant or Landlord to complete the removal from the Premises of any Hazardous Materials (including, without limitation, the release and termination of any licenses or permits restricting the use of the Premises and the completion of the approved Surrender Plan), Tenant shall continue to pay the full Rent in accordance with this Lease for any portion of the Premises not relet by Landlord in Landlord's sole discretion, which Rent shall be prorated daily. Definitions . As used herein, the term " Environmental Requirements " means all applicable present and future statutes, regulations, ordinances, rules, codes, judgments, orders, or other similar enactments of any Governmental Authority regulating or relating to health, safety, or environmental conditions on, under, or about the Premises, the Building, or the Project, or the environment, including without limitation, the following: the Comprehensive Environmental Response, Compensation and Liability Act; the Resource Conservation and Recovery Act; and all state and local counterparts thereto, and any regulations or policies promulgated or issued thereunder. As used herein, the term " Hazardous Materials " means and includes any substance, material, waste, pollutant, or contaminant listed or defined as hazardous or toxic, or regulated by reason of its impact or potential impact on humans, animals and/or the environment under any Environmental Requirements, asbestos and petroleum, including crude oil or any fraction thereof, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas). As defined in Environmental Requirements, Tenant is and shall be deemed to be the " operator " of Tenant's " facility " and the " owner " of all Hazardous Materials brought on the Premises by Tenant or any Tenant Party, and the wastes, by-products, or residues generated, resulting, or produced therefrom. Tenant's Remedies/Limitation of Liability . Landlord shall not be in default hereunder unless Landlord fails to perform any of its obligations hereunder within 30 days after written notice from Tenant specifying such failure (unless such performance will, due to the nature of the obligation, require a period of time in excess of 30 days, then after such period of time as is reasonably necessary). Upon any default by Landlord, Tenant shall give notice by registered or certified mail to any Holder of a Mortgage covering the Premises and to any landlord of any lease of property in or on which the Premises are located and Tenant shall offer such Holder and/or landlord a reasonable opportunity to cure the default, including time to obtain possession of the Project by power of sale or a judicial action if such should prove necessary to effect a cure; provided Landlord shall have furnished to Tenant in writing the names and addresses of all such persons who are to receive such notices. All obligations of Landlord hereunder shall be construed as covenants, not conditions; and, except as may be otherwise expressly provided in this Lease, Tenant may not terminate this Lease for breach of Landlord's obligations hereunder. Notwithstanding the foregoing, if any claimed Landlord default hereunder will immediately, materially, and adversely affect Tenant's ability to conduct its business in the Premises (a "Material Landlord Default"), Tenant, as soon as reasonably possible, but in any event within 2 business days of obtaining knowledge of such claimed Material Landlord Default, shall give Landlord written notice of such claim and telephonic notice to Tenant's principal contact with Landlord. Landlord shall then have 2 business days to commence cure of such claimed Material Landlord Default and shall diligently prosecute such cure to completion. If such claimed Material Landlord Default is not a default by Landlord hereunder, or if Tenant failed to give Landlord the notice required hereunder within 2 business days of learning of the conditions giving rise to the claimed Material Landlord Default, Landlord shall be entitled to recover from Tenant, as Additional Rent, any costs incurred by Landlord in connection with such cure in excess of the costs, if any, that Landlord would otherwise have been liable to pay hereunder, If Landlord fails to commence cure of any claimed Material Landlord Default as provided above, Tenant may commence and prosecute such cure to completion, and shall be entitled to recover from Landlord the costs of such cure (but not any consequential or other damages), to the extent of Landlord's obligation to cure such claimed Material Landlord Default hereunder, subject to the limitations set forth in the immediately preceding sentence of this paragraph and the other provisions of this Lease. All obligations of Landlord under this Lease will be binding upon Landlord only during the period of its ownership of the Premises and not thereafter. The term "Landlord" in this Lease shall mean only the owner for the time being of the Premises. Upon the transfer by such owner of its interest in the Premises, such owner shall thereupon be released and discharged from all obligations of Landlord thereafter accruing, but such obligations shall be binding during the Term upon each new owner for the duration of such owner's ownership. Inspection and Access . Landlord and its agents, representatives, and contractors may enter the Premises at any reasonable time to inspect the Premises and to make such repairs as may be required or permitted pursuant to this Lease and for any other business purpose. Landlord and Landlord's representatives may enter the Premises during business hours on not less than 48 hours advance written notice (except in the case of emergencies in which case no such notice shall be required and such entry may be at any time) for the purpose of effecting any such repairs, inspecting the Premises, showing the Premises to prospective purchasers and, during the last year of the Term, to prospective tenants or for any other business purpose. Landlord may erect a suitable sign on the Premises stating the Premises are available to let or that the Project is available for sale. Landlord may grant easements, make public dedications, designate Common Areas and create restrictions on or about the Premises, provided that no such easement, dedication, designation, or restriction materially, adversely affects Tenant's use or occupancy of the Premises for the Permitted Use. At Landlord's request, Tenant shall execute such instruments as may be necessary for such easements, dedications or restrictions. Tenant shall at all times, except in the case of emergencies, have the right to escort Landlord or its agents, representatives, contractors or guests while the same are in the Premises, provided such escort does not materially and adversely affect Landlord's access rights hereunder. Security . Tenant acknowledges and agrees that security devices and services, if any, while intended to deter crime may not in given instances prevent theft or other criminal acts and that Landlord is not providing any security services with respect to the Premises. Tenant agrees that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, any loss by theft or any other damage suffered or incurred by Tenant in connection with any unauthorized entry into the Premises or any other breach of security with respect to the Premises. Tenant shall be solely responsible for the personal safety of Tenant's officers, employees, agents, contractors, guests and invitees while any such person is in, on or about the Premises and/or the Project. Tenant shall at Tenant's cost obtain insurance coverage to the extent Tenant desires protection against such criminal acts. Force Majeure . Landlord shall not be held responsible for delays in the performance of its obligations hereunder when caused by strikes, lockouts, labor disputes, weather, natural disasters. inability to obtain labor or materials or reasonable substitutes therefor, governmental restrictions, governmental regulations, governmental controls, delay in issuance of permits, enemy or hostile governmental action, civil commotion, fire or other casualty, and other causes beyond the reasonable control of Landlord ("Force Majeure"). Brokers, Entire Agreement, Amendment . Landlord and Tenant each represents and warrants that it has not dealt with any broker, agent, or other person (collectively, "Broker") in connection with this transaction and that no Broker brought about this transaction, other than the brokers doing business as CRESA Partners (whose commission, if any, shall be Landlord's responsibility pursuant to a separate agreement among Landlord and such brokers). Landlord and Tenant each hereby agree to indemnify and hold the other harmless from and against any claims by any Broker (other than the broker, if any, named in this Section 35) claiming a commission or other form of compensation by virtue of having dealt with Tenant or Landlord, as applicable, with regard to this leasing transaction. This Lease constitutes the entire agreement of the parties with respect to the subject matter hereof. This Lease may not be amended except by an instrument in writing signed by both parties hereto. Limitation on Landlord's Liability . NOTWITHSTANDING ANYTHING SET FORTH HEREIN OR IN ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT TO THE CONTRARY: (A) LANDLORD SHALL NOT BE LIABLE TO TENANT OR ANY OTHER PERSON FOR (AND TENANT AND EACH SUCH OTHER PERSON ASSUME ALL RISK OF) LOSS, DAMAGE OR INJURY, WHETHER ACTUAL OR CONSEQUENTIAL TO: TENANT'S PERSONAL PROPERTY OF EVERY KIND AND DESCRIPTION, INCLUDING, WITHOUT LIMITATION TRADE FIXTURES, EQUIPMENT, INVENTORY, SCIENTIFIC RESEARCH, SCIENTIFIC EXPERIMENTS, LABORATORY ANIMALS, PRODUCT, SPECIMENS, SAMPLES, AND/OR SCIENTIFIC, BUSINESS, ACCOUNTING AND OTHER RECORDS OF EVERY KIND AND DESCRIPTION KEPT AT THE PREMISES AND ANY AND ALL INCOME DERIVED OR DERIVABLE THEREFROM; (B) THERE SHALL BE NO PERSONAL RECOURSE TO LANDLORD FOR ANY ACT OR OCCURRENCE IN, ON OR ABOUT THE PREMISES OR ARISING IN ANY WAY UNDER THIS LEASE OR ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT WITH RESPECT TO THE SUBJECT MATTER HEREOF AND ANY LIABILITY OF LANDLORD HEREUNDER SHALL BE STRICTLY LIMITED SOLELY TO LANDLORD'S INTEREST IN THE PROJECT OR ANY PROCEEDS FROM SALE OR CONDEMNATION THEREOF AND ANY INSURANCE PROCEEDS PAYABLE IN RESPECT OF LANDLORD'S INTEREST IN THE PROJECT OR IN CONNECTION WITH ANY SUCH LOSS; AND (C) IN NO EVENT SHALL ANY PERSONAL LIABILITY BE ASSERTED AGAINST LANDLORD IN CONNECTION WITH THIS LEASE NOR SHALL ANY RECOURSE BE HAD TO ANY OTHER PROPERTY OR ASSETS OF LANDLORD OR ANY OF LANDLORD'S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORS. UNDER NO CIRCUMSTANCES SHALL LANDLORD OR ANY OF LANDLORD'S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORS BE LIABLE FOR INJURY TO TENANT'S BUSINESS OR FOR ANY LOSS OF INCOME OR PROFIT THEREFROM. Severability . If any clause or provision of this Lease is illegal, invalid, or unenforceable under present or future laws, then and in that event, it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby. It is also the intention of the parties to this Lease that in lieu of each clause or provision of this Lease that is illegal, invalid, or unenforceable, there be added, as a part of this Lease, a clause or provision as similar in effect to such illegal, invalid, or unenforceable clause or provision as shall be legal, valid and enforceable. Signs; Exterior Appearance . Tenant shall not, without the prior written consent of Landlord, which may be granted or withheld in Landlord's sole discretion: (i) attach any awnings, exterior lights, decorations, balloons, flags, pennants, banners, painting, or other projection to any outside wall of the Project, (ii) use any curtains, blinds, shades, or screens other than Landlord's standard window coverings, (iii) coat or otherwise sunscreen the interior or exterior of any windows, (iv) place any bottles, parcels, or other articles on the window sills, (v) place any equipment, furniture, or other items of personal property on any exterior balcony, or (vi) paint, affix, or exhibit on any part of the Premises, the Building, or the Project any signs, notices, window or door lettering, placards, decorations, or advertising media of any type that can be viewed from the exterior of the Premises. Interior signs on doors and the directory tablet shall be inscribed, painted or affixed for Tenant by Landlord at the sole cost and expense of Tenant, and shall be of a size, color, and type acceptable to Landlord. Nothing may be placed on the exterior of corridor walls or corridor doors other than Landlord's standard lettering. The directory tablet shall be provided exclusively for the display of the name and location of tenants. Right to Extend Term . Tenant shall have the right to extend the Term of the Lease upon the following terms and conditions: Extension Right . Tenant shall have 1 right (the " Extension Right ") to extend the term of this Lease for 3 years (the " Extension Term ") on the same terms and conditions as this Lease (except as may be expressly provided below) by giving Landlord written notice of its election to exercise the Extension Right at least 6 months prior, and no earlier than 12 months prior, to the expiration of the Base Term (or by giving Landlord written notice of its election to exercise the Extension Right in accordance with the terms of Section 18 hereof). Upon the commencement of the Extension Term, Base Rent shall be payable at the Market Rate (as defined below). Base Rent shall thereafter be adjusted on each annual anniversary of the commencement of the Extension Term by a percentage as determined by Landlord and agreed to by Tenant at the time the Market Rate is determined. As used herein, " Market Rate " shall mean the then market rental rate as determined by Landlord and agreed to by Tenant, which shall in no event be less than the Base Rent payable as of the date immediately preceding the commencement of the Extension Term increased by the Rent Adjustment Percentage multiplied by such Base Rent. In addition, Landlord may impose a market rent for any parking rights hereunder, if such parking rights are not already reflected in the new Base Rent. If, on or before the date that is 90 days prior to the expiration of the Base Term of this Lease, Tenant, after negotiating in good faith, has not agreed with Landlord's determination of the Market Rate and the rent escalations during the Extension Term, Tenant may, by written notice to Landlord not later than 90 days prior to the expiration of the Base Term of this Lease, elect arbitration as described in Section 39(b) below. If Tenant does not elect such arbitration, Tenant shall be deemed to have waived any right to extend, or further extend, the Term of the Lease and all of the remaining Extension Rights shall terminate. Arbitration . Within 10 days of Tenant's notice to Landlord of its election to arbitrate Market Rate and escalations, each party shall deliver to the other a proposal containing the Market Rate and escalations that the submitting party believes to be correct ("Extension Proposal"). If either party fails to timely submit an Extension Proposal, the other party's submitted proposal shall determine the Base Rent and escalations for the Extension Term. If both parties submit Extension Proposals, then Landlord and Tenant shall meet within 7 days after delivery of the last Extension Proposal and make a good faith attempt to mutually appoint a single "Arbitrator" (and defined below) to determine the Market Rate and escalations. If Landlord and Tenant are unable to agree upon a single Arbitrator, then each shall, by written notice delivered to the other within 10 days after the meeting, select an Arbitrator. If either party fails to timely give notice of its selection for an Arbitrator, the other party's submitted proposal shall determine the Base Rent for the Extension Term. The 2 Arbitrators so appointed shall, within 5 business days after their appointment, appoint a third Arbitrator. If the 2 Arbitrators so selected cannot agree on the selection of the third Arbitrator within the time above specified, then either party, on behalf of both parties, may request such appointment of such third Arbitrator by application to any state court of general jurisdiction in the jurisdiction in which the Premises are located, upon 10 days prior written notice to the other party of such intent. The decision of the Arbitrator(s) shall be made within 30 days after the appointment of a single Arbitrator or the third Arbitrator, as applicable. The decision of the single Arbitrator shall be final and binding upon the parties. The average of the two closest Arbitrators in a three Arbitrator panel shall be final and binding upon the parties. Each party shall pay the fees and expenses of the Arbitrator appointed by or on behalf of such party and the fees and expenses of the third Arbitrator shall be borne equally by both parties. If the Market Rate and escalations are not determined by the first day of the Extension Term, then Tenant shall pay Landlord Base Rent in an amount equal to the Base Rent in effect immediately prior to the Extension Term and increased by the Rent Adjustment Percentage until such determination is made. After the determination of the Market Rate and escalations, the parties shall make any necessary adjustments to such payments made by Tenant. Landlord and Tenant shall then execute an amendment recognizing the Market Rate and escalations for the Extension Term. An "Arbitrator" shall be any person appointed by or on behalf of either party or appointed pursuant to the provisions hereof and: (i) shall be (A) a member of the American Institute of Real Estate Appraisers with not less than 10 years of experience in the appraisal of improved office and high tech industrial real estate in the greater San Diego, California metropolitan area, or (B) a licensed commercial real estate broker with not less than 15 years experience representing landlords and/or tenants in the leasing of high tech or life sciences space in the greater San Diego, California metropolitan area, (ii) devoting substantially all of their time to professional appraisal or brokerage work, as applicable, at the time of appointment and (iii) be in all respects impartial and disinterested. Right Personal . The Extension Right is personal to Tenant and is not assignable without Landlord's consent, which may be granted or withheld in Landlord's sole discretion separate and apart from any consent by Landlord to an assignment of Tenant's interest in the Lease, except that the Extension Right may be assigned in connection with any Permitted Assignment. Exceptions . Notwithstanding anything set forth above to the contrary, Extension Rights shall not be in effect and Tenant may not exercise any of the Extension Rights: during any period of time that Tenant is in Default under any provision of this Lease; or if Tenant has been in Default under any provision of this Lease 3 or more times, whether or not the Defaults are cured, during the 12 month period immediately prior to the date that Tenant intends to exercise an Extension Right, whether or not the Defaults are cured. No Extensions . The period of time within which the Extension Right may be exercised shall not be extended or enlarged by reason of Tenant's inability to exercise the Extension Right. Termination . The Extension Right shall terminate and be of no further force or effect even after Tenant's due and timely exercise of the Extension Right, if, after such exercise, but prior to the commencement date of the Extension Term, (i) Tenant fails to timely cure any default by Tenant under this Lease; or (ii) Tenant has Defaulted 3 or more times during the period from the date of the exercise of an Extension Right to the date of the commencement of the Extension Term, whether or not such Defaults are cured. Miscellaneous . Notices . All notices or other communications between the parties shall be in writing and shall be deemed duly given upon delivery or refusal to accept delivery by the addressee thereof if delivered in person, or upon actual receipt if delivered by reputable overnight guaranty courier, addressed and sent to the parties at their addresses set forth above. Landlord and Tenant may from time to time by written notice to the other designate another address for receipt of future notices. Joint and Several Liability . If and when included within the term " Tenant ", as used in this instrument, there is more than one person or entity, each shall be jointly and severally liable for the obligations of Tenant. Recordation . Neither this Lease nor a memorandum of lease shall be filed by or on behalf of Tenant in any public record. Landlord may prepare and file, and upon request by Landlord Tenant will execute, a memorandum of lease. Interpretation . The normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Lease or any exhibits or amendments hereto. Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. The captions inserted in this Lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof, or in any way affect the interpretation of this Lease. Not Binding Until Executed . The submission by Landlord to Tenant of this Lease shall have no binding force or effect, shall not constitute an option for the leasing of the Premises, nor confer any right or impose any obligations upon either party until execution of this Lease by both parties. Limitations on Interest . It is expressly the intent of Landlord and Tenant at all times to comply with applicable law governing the maximum rate or amount of any interest payable on or in connection with this Lease. If applicable law is ever judicially interpreted so as to render usurious any interest called for under this Lease, or contracted for, charged, taken, reserved, or received with respect to this Lease, then it is Landlord's and Tenant's express intent that all excess amounts theretofore collected by Landlord be credited on the applicable obligation (or, if the obligation has been or would thereby be paid in full, refunded to Tenant), and the provisions of this Lease immediately shall be deemed reformed and the amounts thereafter collectible hereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder. Choice of Law . Construction and interpretation of this Lease shall be governed by the internal laws of the state in which the Premises are located, excluding any principles of conflicts of laws. Time . Time is of the essence as to the performance of Tenant's obligations under this Lease. Incorporation by Reference . All exhibits and addenda attached hereto are hereby incorporated into this Lease and made a part hereof. If there is any conflict between such exhibits or addenda and the terms of this Lease, such exhibits or addenda shall control. Hazardous Activities . Notwithstanding any other provision of this Lease, Landlord, for itself and its employees, agents, and contractors, reserves the right to refuse to perform any repairs or services in any portion of the Premises that, pursuant to Tenant's routine safety guidelines, practices, or custom or prudent industry practices, require any form of protective clothing or equipment other than safety glasses. In any such case, Tenant shall contract with parties who are acceptable to Landlord, in Landlord's reasonable discretion, for all such repairs and services, and Landlord shall, to the extent required, equitably adjust Tenant's Share of Operating Expenses in respect of such repairs or services to reflect that Landlord is not providing such repairs or services to Tenant. [ Signatures on next page ] IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year first above written. TENANT: CELL GENESYS, INC., a Delaware corporation By: ___________________________ Print Name: ____________________ Print Title: _________________________ LANDLORD: AREA 1025/11075 ROSELLE STREET, LLC, a Delaware limited liability company By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., a Delaware limited partnership, managing member By: ARE-QRS CORP., a Maryland corporation, general partner By: ___________________________ Michael C. Kelcy, Senior Vice President, Real Estate Legal Affairs

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.1 FULL RECOURSE SECURED PROMISSORY NOTE $250,000   March 5, 2001     For Value Received, the undersigned hereby unconditionally promises to pay to the order of Photon Dynamics, Inc., a California corporation (the "Company"), at 6325 San Ignacio Avenue, San Jose, CA 95119-1202, or at such other place as the holder hereof may designate in writing, in lawful money of the United States of America and in immediately available funds, the principal sum of two hundred fifty thousand dollars ($250,000) together with interest accrued from the date hereof on the unpaid principal at the rate of 7% per annum, or the maximum rate permissible by law (which under the laws of the State of California shall be deemed to be the laws relating to permissible rates of interest on commercial loans), whichever is less, as follows:     1.  Principal Repayment. The outstanding principal amount hereunder shall be due and payable in full on March 5, 2006 (the "Maturity Date").     2.  Interest Payments. Interest on the principal amount hereunder shall accrue commencing with the date hereof and shall be calculated on the basis of a 360-day year for the actual number of days elapsed. The interest amount hereunder shall be due and payable in full on the Maturity Date.     3.  Accelerated Repayment.     a.  In the event that the undersigned's employment by or association with the Company is terminated for Cause (as defined below) or is voluntarily terminated prior to payment in full of this Note, this Note shall be accelerated and all remaining unpaid principal and accrued and unpaid interest shall become due and payable on the ninetieth (90th) day after the effective date of such termination. In the event that the undersigned's employment is terminated without Cause prior to payment in full of this Note, this note shall be accelerated and all remaining unpaid principle and accrued and unpaid interest shall become due and payable one (1) year from the effective date of such termination. For the purposes of this section 3(a) the definition of "Cause" shall mean: (a) indictment or conviction of any felony or of any crime involving dishonesty; (b) participation in any fraud against the Company; (c) breach of Executive's duties to the Company, including persistent unsatisfactory performance of job duties; (d) intentional damage to any property of the Company; or (e) conduct by Executive which in the good faith and reasonable determination of the Board demonstrates gross unfitness to serve.     b.  If the undersigned fails to pay any of the principal and accrued interest when due, the Company, at its sole option, shall have the right to accelerate this Note, in which event the entire principal balance and all accrued interest shall become immediately due and payable, and immediately collectible by the Company pursuant to applicable law. The outstanding principal amount and all accrued interest hereunder shall be due and payable in full upon the earlier to occur of (A) any filing by or against the undersigned under any law relating to bankruptcy, insolvency or moratorium or any other law for the relief of, or relating to, the relief of debtors generally, now or hereafter in effect, (B) any assignment of or appointment for any assets of the undersigned to a custodian, receiver, trustee or assignee for the benefit of creditors or (C) any action by the undersigned in furtherance of any of the foregoing.     4.  Prepayment. This Note may be prepaid at any time without penalty. All money paid toward the satisfaction of this Note shall be applied first to the payment of interest as required hereunder and then to the retirement of the principal. 1 --------------------------------------------------------------------------------     5.  Security. The full amount of this Note is secured by a pledge of shares of Common Stock of the Company, and is subject to all of the terms and provisions of the Stock Pledge Agreement (attached as Exhibit A); provided, however, that recourse is not limited in any way and may be had as to all the assets of the undersigned. Additional rights of Company are set forth in the Stock Pledge Agreement.     6.  Representations. The undersigned hereby represents and agrees that the amounts due under this Note are for business purposes.     7.  Waiver. The undersigned hereby waives presentment, protest and notice of protest, demand for payment, notice of dishonor and all other notices or demands in connection with the delivery, acceptance, performance, default or endorsement of this Note.     8.  Fees and Expenses. The holder hereof shall be entitled to recover, and the undersigned agrees to pay when incurred, all costs and expenses of collection of this Note, including without limitation, reasonable attorneys' fees.     9.  Governing Law. This Note shall be governed by, and construed, enforced and interpreted in accordance with, the laws of the State of California, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.     10. Successors and Assigns. The provisions of this Note shall inure to the benefit of and be binding on any successor to Borrower and shall extend to any holder hereof. Borrower shall not, without the prior written consent of holder, assign any of its rights or obligations hereunder. Signed /s/ Bruce P. Delmore     Bruce P. Delmore 2 -------------------------------------------------------------------------------- EXHIBIT A STOCK PLEDGE AGREEMENT     THIS STOCK PLEDGE AGREEMENT ("Pledge Agreement") is made by Bruce P. Delmore ("Pledgor"), in favor of Photon Dynamics, Inc., a California corporation ("Pledgee"), with its principal place of business at 6325 San Ignacio Avenue, San Jose, CA 95119-1202.     WHEREAS, Pledgor has concurrently herewith executed that certain Full Recourse Secured Promissory Note, dated March 5, 2001 in favor of Pledgee in the amount of two hundred fifty thousand dollars ($250,000) (the "Note"); and     WHEREAS, Pledgee is willing to accept the Note from Pledgor, but only upon the condition, among others, that Pledgor shall have executed and delivered to Pledgee this Pledge Agreement and the Collateral (as defined below).     NOW, THEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, Pledgor hereby agrees as follows:      1. As security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of all indebtedness of Pledgor to Pledgee created under the Note and the prompt payment of all expenses, including, without limitation, reasonable attorneys' fees and legal expenses, incidental to the collection of Pledgor's liabilities and the enforcement or protection of Pledgee's lien in and to the collateral pledged hereunder (collectively, the "Liabilities"), Pledgor hereby pledges to Pledgee, and grants to Pledgee, a first priority security interest in all of the following (collectively, the "Pledged Collateral"):     (a) all shares of Common Stock of Pledgee now or hereafter owned, obtained or acquired by Pledgor pursuant to grants made under Pledgee's 1995 Stock Option Plan, whether or nor represented by any certificates (the "Pledged Shares"), and all dividends, cash, instruments, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares;     (b) all voting trust certificates held by Pledgor evidencing the right to vote any Pledged Shares subject to any voting trust; and     (c) all additional shares and voting trust certificates from time to time acquired by Pledgor in any manner (which additional shares shall be deemed to be part of the Pledged Shares), and the certificates, if any, representing such additional shares, and all dividends, cash, instruments, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of such shares.     The term "indebtedness" is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and Liabilities heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and whether recovery upon such indebtedness may be or hereafter becomes unenforceable.      2. Upon the acquisition of any additional shares which are Pledged Shares hereunder, Pledgor agrees to deliver any and all certificates associated with such shares to Pledgee and to execute the attached Assignment Separate from Certificate covering such shares for the purpose of perfecting Pledgor's security interest hereunder.      3. At any time, without notice, and at the expense of Pledgor, Pledgee in its name or in the name of its nominee or of Pledgor may, but shall not be obligated to: (1) collect by legal proceedings or otherwise all dividends (except cash dividends other than liquidating dividends), interest, principal payments and other sums now or hereafter payable upon or on account of said Pledged Collateral; (2) enter into any extension, reorganization, deposit, merger or consolidation agreement, or any agreement in any way relating to or affecting the Pledged Collateral, and in connection therewith may -------------------------------------------------------------------------------- deposit or surrender control of such Pledged Collateral thereunder, accept other property in exchange for such Pledged Collateral and do and perform such acts and things as it may deem proper, and any money or property received in exchange for such Pledged Collateral shall be applied to the indebtedness or thereafter held by it pursuant to the provisions hereof; (3) insure, process and preserve the Pledged Collateral; (4) cause the Pledged Collateral to be transferred to its name or to the name of its nominee; (5) exercise as to such Pledged Collateral all the rights, powers and remedies of an owner, except that so long as no default exists under the Note or hereunder Pledgor shall retain all voting rights as to the Pledged Shares.      4. Pledgor agrees to pay prior to delinquency all taxes, charges, liens and assessments against the Pledged Collateral, and upon the failure of Pledgor to do so, Pledgee at its sole option has the right, but not the obligation, to pay any of them and shall be the sole judge of the legality or validity thereof and the amount necessary to discharge the same. Any amounts paid or costs incurred by Pledgee pursuant to this Section 4 shall become part of the Liabilities hereunder, secured by the Pledged Collateral, and shall become immediately due and payable by Pledgor.      5. Pledgor agrees that Pledgor:     (a) will not (1) sell, transfer or otherwise dispose of, or grant any option or warrant with respect to, any of the Pledged Collateral (or any part thereof or interest therein) except with the prior written consent of Pledgee, or (2) create or permit to exist any lien or encumbrance upon or with respect to any of the Pledged Collateral. If any Pledged Collateral, or any part thereof, is sold, transferred or otherwise disposed of in violation of this Section 5, the security interest of Pledgee shall continue in the Pledged Collateral notwithstanding such sale, transfer or other disposition, and the Pledgor will deliver any proceeds thereof to the Pledgee to be held as Pledged Collateral hereunder.     (b) shall, at Pledgor's own expense, promptly execute, acknowledge, and deliver all such instruments and take all such actions as Pledgee from time to time may reasonably request in order to ensure to Pledgee the benefits of the lien in and to the Pledged Collateral intended to be created by this Pledge Agreement.     (c) shall maintain, preserve and defend the title to the Pledged Collateral and the lien of Pledgee thereon against the claim of any other person.      6. At the option of Pledgee and without necessity of demand or notice, all or any part of the indebtedness of Pledgor shall immediately become due and payable irrespective of any agreed maturity, upon the happening of any of the following events: (1) failure to keep or perform any of the terms or provisions of this Pledge Agreement; (2) failure to pay any Liabilities when due; (3) the levy of any attachment, execution or other process against the Pledged Collateral; or (4) the insolvency, commission of an act of bankruptcy, general assignment for the benefit of creditors, filing of any petition in bankruptcy or for relief under the provisions of Title 11 of the United States Code of, by, or against Pledgor.      7. In the event of the nonpayment of any indebtedness when due, whether by acceleration or otherwise, or upon the happening of any of the events specified in the last preceding paragraph, Pledgee may then, or at any time thereafter, at its election, apply, set off, collect or sell in one or more sales, or take such steps as may be necessary to liquidate and reduce to cash in the hands of Pledgee in whole or in part, with or without any previous demands or demand of performance or notice or advertisement, the whole or any part of the Pledged Collateral in such order as Pledgee may elect, and any such sale may be made either at public or private sale at its place of business or elsewhere, or at any broker's board or securities exchange, either for cash or upon credit or for future delivery; provided, however, that if such disposition is at private sale, then the purchase price of the Pledged Collateral shall be equal to the public market price then in effect, or, if at the time of sale no public market for the Pledged Collateral exists, then, in recognition of the fact that the sale of the Pledged Collateral would have to be registered under the Securities Act of 1933 and that the expenses of such registration are commercially unreasonable for the type and amount of collateral pledged hereunder, -------------------------------------------------------------------------------- Pledgee and Pledgor hereby agree that such private sale shall be at a purchase price mutually agreed to by Pledgee and Pledgor or, if the parties cannot agree upon a purchase price, then at a purchase price established by a majority of three independent appraisers knowledgeable of the value of such collateral, one named by Pledgor within 10 days after written request by the Pledgee to do so, one named by Pledgee within such 10 day period, and the third named by the two appraisers so selected, with the appraisal to be rendered by such body within 30 days of the appointment of the third appraiser. The cost of such appraisal, including all appraiser's fees, shall be charged against the proceeds of sale as an expense of such sale. Pledgee may be the purchaser of any or all Pledged Collateral so sold and hold the same thereafter in its own right free from any claim of Pledgor or right of redemption. Demands of performance, notices of sale, advertisements and presence of property at sale are hereby waived, and Pledgee is hereby authorized to sell hereunder any evidence of debt pledged to it. Any sale hereunder may be conducted by any officer or agent of Pledgee.      8. The proceeds of any sale or other disposition of the Pledged Collateral and all sums received or collected by Pledgee from or on account of such Pledged Collateral shall be applied (a) first, to the payment of expenses incurred or paid by Pledgee in connection with any sale, transfer or delivery of the Pledged Collateral or collection or enforcement of the Note or this Pledge Agreement, (b) second, to the payment of any other costs, charges, attorneys' fees or expenses mentioned herein, and (c) third, to the payment of any remaining Liabilities or any part hereof, all in such order and manner as Pledgee in its discretion may determine. The balance of such proceeds shall then be paid to Pledgor.      9. Upon the transfer of all or any part of the indebtedness, Pledgee may transfer its security interest in all or any part of the Pledged Collateral and shall be fully discharged thereafter from any and all liability and responsibility with respect to such Pledged Collateral, and the transferee shall be vested with all the rights and powers of Pledgee hereunder with respect to such Pledged Collateral so transferred; but with respect to any Pledged Collateral not so transferred, Pledgee shall retain all rights and powers.     10. Until all indebtedness shall have been paid in full the power of sale and all other rights, powers and remedies granted to Pledgee hereunder shall continue to exist and may be exercised by Pledgee at any time and from time to time irrespective of the fact that the indebtedness or any part thereof may have become barred by any statute of limitations, or that the personal liability of Pledgor may have ceased.     11. Pledgee may at any time deliver the Pledged Collateral or any part thereof to Pledgor and the receipt of Pledgor shall be a complete and full acquittance for the Pledged Collateral so delivered, and Pledgee shall thereafter be discharged from any liability or responsibility therefor.     12. The rights, powers and remedies given to Pledgee by this Pledge Agreement shall be in addition to all rights, powers and remedies given to Pledgee by virtue of any statute or rule of law. Any forbearance or failure or delay by Pledgee in exercising any right, power or remedy hereunder shall not be deemed to be a waiver of such right, power or remedy, and any single or partial exercise of any right, power or remedy hereunder shall not preclude the further exercise thereof; and every right, power and remedy of Pledgee shall continue in full force and effect until such right, power or remedy is specifically waived by an instrument in writing executed by Pledgee. Any waiver or partial waiver granted by Pledgee of any right, power or remedy of Pledgee hereunder shall not be deemed a waiver of any other right, power or remedy of Pledgee under any other circumstances.     13. If any provision of this Pledge Agreement is held to be unenforceable for any reason, it shall be adjusted, if possible, rather than voided in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Pledge Agreement shall be deemed valid and enforceable to the full extent possible. --------------------------------------------------------------------------------     14. This Pledge Agreement shall be governed by, and construed in accordance with, the laws of the State of California as applied to contracts made and performed entirely within the State of California by residents of such State.     Dated: March 5, 2001 PLEDGOR Signed: /s/ BRUCE P. DELMORE              Bruce P. Delmore -------------------------------------------------------------------------------- QuickLinks Exhibit 10.1

Exhibit 10.2 IBM CREDIT CORPORATION AGREEMENT FOR WHOLESALE FINANCING (SECURITY AGREEMENT)         This Agreement for Wholesale Financing - Security Agreement (as amended, supplemented or otherwise modified from time to time, this “Agreement”) dated as of January 5, 2001(replacing the same agreement dated as of November 27, 2000) is by and between IBM Credit Corporation, a Delaware corporation, with a place of business at 1500 RiverEdge Parkway, Atlanta, GA 30358 (“IBM Credit”), and Information Technology Services, Inc., a New York corporation, (“Customer”). This Agreement replaces that Inventory and Working Capital Financing Agreement between the IBM Credit and Customer (as amended, modified or supplemented from time to time) dated September 24, 1996.         In the course of Customer’s business, Customer acquires products and wants IBM Credit to finance Customer’s purchase of such products under the following terms and conditions: 1.     IBM Credit may in its sole discretion from time to time decide the amount of credit IBM Credit extends to Customer, notwithstanding any prior course of conduct between IBM Credit and Customer. IBM Credit may combine all of its advances to make one debt owed by Customer. 2.     IBM Credit may in its sole discretion decide the amount of funds, if any, IBM Credit will advance on any products Customer may seek to acquire. Customer agrees that any decision to finance products will not be binding on IBM Credit until such time as the funds are actually advanced by IBM Credit. 3.     In the course of Customer’s operations, Customer intends to purchase from persons approved in writing by IBM Credit for the purpose of this Agreement (the “Authorized Suppliers”) computer hardware and software products manufactured or distributed by or bearing any trademark or trade name of such Authorized Suppliers (the “Approved Inventory”). When IBM Credit advances funds, IBM Credit may send Customer a Statement of Transaction or other statement. If IBM Credit does, Customer will have acknowledged the debt to be an account stated and Customer will have agreed to the terms set forth on such statement unless Customer notifies IBM Credit in writing of any question or objection within seven (7) days after such statement is mailed to Customer. 4.     To secure payment of all of Customer’s current and future obligations to IBM Credit whether under this Agreement, any guaranty that Customer now or hereafter executes, or any other agreement between Customer and IBM Credit, whether direct or contingent, Customer grants IBM Credit a security interest in all of Customer’s inventory, equipment, fixtures, accounts, contract rights, chattel paper, instruments, reserves, documents of title, deposit accounts and general intangibles, whether now owned or hereafter acquired, and all attachments, accessories, accessions, substitutions and/or replacements thereto and all proceeds thereof. All of the above assets are defined pursuant to the provisions of Article 9 of the Uniform Commercial Code and are hereinafter collectively referred to as the “Collateral”. This security interest is also granted to secure Customer’s obligations to all of IBM Credit’s affiliates. Customer will hold all of the Collateral financed by IBM Credit, and the proceeds thereof, in trust for IBM Credit and Customer will immediately account for and remit directly to IBM Credit all such proceeds when payment is required under the terms set forth in the billing statement or as otherwise provided in this Agreement. IBM Credit may directly collect any amount owed to Customer from Authorized Suppliers with respect to the Collateral and credit Customer with all such sums received by IBM Credit from Authorized Suppliers. IBM Credit’s title, lien or security interest will not be impaired by any payments Customer makes to the seller or anyone else or by Customer’s failure or refusal to account to IBM Credit for proceeds. 5.     Customer's principal place of business is located at:      20 Precision Drive, Shirley, NY 11967 --------------------------------------------------------------------------------    (Number and Street)                                               (City, County, State, Zip Code) and Customer represents that its business is conducted as a ___ SOLE PROPRIETORSHIP, ___ PARTNERSHIP XXX CORPORATION, __ LIMITED LIABILITY COMPANY (check applicable term). Customer will notify IBM Credit, in writing, prior to any change in Customer’s identity, name, form of ownership or management, and of any change in Customer’s principal place of business, or any additions or discontinuances of other business locations. The Collateral will be kept at Customer’s principal place of business. Customer will notify IBM Credit, in writing, thirty (30) days prior to moving any of the Collateral to any other address. Customer and Customer’s predecessors have done business during the last six (6) months only under the following names: -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- This paragraph is not in any manner intended to limit the extent of IBM Credit’s security interest in the Collateral. 6.     Customer represents and covenants that the Collateral is and will remain free from all claims and liens superior to IBM Credit’s unless otherwise agreed to by IBM Credit in writing, and that Customer will defend the Collateral against all other claims and demands. Customer will not sell, rent, lease, lend, demonstrate, pledge, transfer or secrete any of the Collateral or use any of the Collateral for any purpose other than exhibition and sale to buyers in the ordinary course of business, without IBM Credit’s prior written consent. Customer will execute all documents IBM Credit may request to confirm or perfect IBM Credit’s security interest in the Collateral. Customer warrants and represents that Customer is not in default in the payment of any principal, interest or other charges relating to any indebtedness owed to any third party, and no event has occurred, as of the effective date of this Agreement or as of the date of any request by Customer to IBM Credit for financing in the future, under the terms of any agreement, document, promissory note or other instrument, which with or without the passage of time and/or the giving of notice constitutes or would constitute an event of default thereunder. Customer will promptly provide its year-end financial statement, in form and detail satisfactory to IBM Credit, to IBM Credit within ninety (90) days after Customer’s fiscal year ends and, if requested by IBM Credit, Customer will also promptly provide Customer’s financial statement to IBM Credit after each fiscal quarter within forty five (45) days. Customer represents and covenants that each financial statement that Customer submits to IBM Credit will be prepared according to generally accepted accounting principles in effect in the United States from time to time, and is and will be correct and will accurately represent Customer’s financial condition. Customer further acknowledges IBM Credit’s reliance on the truthfulness and accuracy of each financial statement that Customer submits to IBM Credit in IBM Credit’s extension of various financial accommodations to Customer. 7.     Customer will pay all taxes, license fees, assessments and charges on the Collateral when due. Customer will immediately notify IBM Credit of any loss, theft, or destruction of or damage to any of the Collateral. Customer will be responsible for any loss, theft or destruction or damage of Collateral. Customer will keep the Collateral insured for its full insurable value against loss or damage under an “all risk” insurance policy. Customer will obtain insurance under such terms and in such amounts acceptable to IBM Credit, from time to time, with companies acceptable to IBM Credit, with a lender loss-payee or mortgagee clause payable to IBM Credit to the extent of any loss to the Collateral and containing a waiver of all defenses against Customer that is acceptable to IBM Credit. Customer agrees to provide IBM Credit with written evidence of the required insurance coverage and lender loss-payee or mortgagee clause. Customer assigns to IBM Credit all amounts owed to Customer under any insurance policy, and Customer directs any insurance company to make payment directly to IBM Credit to be applied to the unpaid obligations owed IBM Credit. Customer further grants IBM Credit an irrevocable power of attorney to endorse any checks or drafts and sign and file any of the papers, forms and documents required to initiate and settle any insurance claims with respect to the Collateral. If Customer fails to pay any of the above-referenced costs, charges, or insurance premiums, or if Customer fails to insure the Collateral, IBM Credit may, but will not be obligated to, pay such costs, charges and insurance premiums, and the amounts paid will be considered an additional obligation owed by Customer to IBM Credit. 8.     IBM Credit has the right to enter upon Customer’s premises from time to time, as IBM Credit in its sole discretion may determine for IBM Credit’s sole benefit, and all without any advance notice to Customer, to: examine the Collateral; appraise it as security; verify its condition and non-use; verify that all Collateral have been properly accounted for; verify that Customer has complied with all terms and provisions of this Agreement; and assess, examine, and make copies of Customer’s books and records. Any collection by IBM Credit of any amounts Customer owes at or during IBM Credit’s examination of the Collateral does not relieve Customer of its continuing obligation to pay Customer’s obligations owed to IBM Credit in accordance with such terms. 9.     Customer agrees to immediately pay IBM Credit the full amount of the principal balance owed IBM Credit on each item of Approved Inventory financed by IBM Credit at the time such Approved Inventory is sold, lost, stolen, destroyed, or damaged, whichever occurs first, unless IBM Credit has agreed in writing to provide financing to Customer on other terms. Customer also agrees to provide IBM Credit, upon IBM Credit’s request, an inventory report which describes all the Approved Inventory in Customer’s possession (excluding any Approved Inventory financed by IBM Credit under the Demonstration and Training Equipment Financing Option). Regardless of the repayment terms set forth in any billing statement, if IBM Credit determines, after conducting an inspection of all of Customer’s inventory, that the current outstanding obligations owed by Customer to IBM Credit exceeds the aggregate wholesale invoice price, net of all applicable price reduction credits, of the Approved Inventory in Customer’s possession that is new and in manufacturer sealed boxes and in which IBM Credit has a perfected first priority security interest, Customer agrees to immediately pay to IBM Credit an amount equal to the difference between such outstanding obligations and the aggregate wholesale invoice price, net of all applicable price reduction credits, of such Approved Inventory. Customer will make all payments to IBM Credit according to the remit to instructions in the billing statement. Any checks or other instruments delivered to IBM Credit to be applied against Customer’s outstanding obligations will constitute conditional payment until the funds represented by such instruments are actually received by IBM Credit. IBM Credit may apply payments to reduce finance charges first and then principal, irrespective of Customer’s instructions. Further, IBM Credit may apply principal payments to the oldest (earliest) invoice for the Approved Inventory financed by IBM Credit, or to such Approved Inventory which is sold, lost, stolen, destroyed, damaged, or otherwise disposed of. If Customer signs any instrument for any outstanding obligations, it will be evidence of Customer’s obligation to pay and will not be payment. Any discount, rebate, bonus, or credit for Approved Inventory granted to Customer by any Authorized Supplier will not, in any way, reduce the obligations Customer owes IBM Credit, until IBM Credit has received payment in good funds. 10.     Customer will pay IBM Credit finance charges on the total amount of credit extended to Customer in the amount agreed to between Customer and IBM Credit from time to time. The period of any financing will begin on the invoice date for the Approved Inventory whether or not IBM Credit advances payment on such date. This period will be included in the calculation of the annual percentage rate of the finance charges. Such finance charges may be applied by IBM Credit to cover any amounts expended for IBM Credit’s: appraisal and examination of the Collateral; maintenance of facilities for payment; assistance in support of Customer’s retail sales; IBM Credit’s commitments to Authorized Suppliers to finance shipments of Approved Inventory to Customer; recording and filing fees; expenses incurred in obtaining additional collateral or security; and any costs and expenses incurred by IBM Credit arising out of the financing IBM Credit extends to Customer. Customer also agrees to pay IBM Credit additional charges which will include: late payment fees at a per annum rate equal to the Prime Rate plus 6.5%; flat charges; charges for receiving NSF checks from Customer; renewal charges; and any other charges agreed to by Customer and IBM Credit from time to time. For purposes of this Agreement, “Prime Rate” will mean the average of the rates of interest announced by banks which IBM Credit uses in its normal course of business of determining prime rate. Unless Customer hereafter otherwise agrees in writing, the finance charges and additional charges agreed upon will be IBM Credit’s applicable finance charges and additional charges for the class of Approved Inventory involved prevailing from time to time at IBM Credit’s principal place of business, but in no event greater than the highest rate from time to time permitted by applicable law. If it is determined that amounts received from Customer were in excess of such highest rate, then the amount representing such excess will be considered reductions to the outstanding principal of IBM Credit’s advances to Customer. IBM Credit will send Customer, at monthly or other intervals, a statement of all charges due on Customer’s account with IBM Credit. Customer will have acknowledged the charges due, as indicated on the statement, to be an account stated, unless Customer objects in writing to IBM Credit within seven (7) days after such statement is mailed to Customer. This statement may be adjusted by IBM Credit at any time to conform to applicable law and this Agreement. IBM Credit shall calculate any free financing period utilizing a methodology that is consistent with the methodologies used for similarly situated customers of IBM Credit. The Customer understands that IBM Credit may not offer, may change or may cease to offer a free financing period for the Customer’s purchases of Approved Inventory. If any Authorized Supplier fails to provide payment of a finance charge for Customer, as agreed, Customer will be responsible for and pay to IBM Credit all finance charges billed to Customer’s account. 11.     Any of the following events will constitute an event of default by Customer under this Agreement: Customer breaches any of the terms, warranties or representations contained in this Agreement or in any other agreements between Customer and IBM Credit or between Customer and any of IBM Credit’s affiliates; any guarantor of Customer’s obligations to IBM Credit under this Agreement or any other agreements breaches any of the terms, warranties or representations contained in such guaranty or other agreements between such guarantor and IBM Credit; any representation, statement, report or certificate made or delivered by Customer or any of Customer’s owners, representatives, employees or agents or by any guarantor to IBM Credit is not true and correct; Customer fails to pay any of the liabilities or obligations owed to IBM Credit or any of IBM Credit’s affiliates when due and payable under this Agreement or under any other agreements between Customer and IBM Credit or between Customer and any of IBM Credit’s affiliates; IBM Credit determines that IBM Credit is insecure with respect to any of the Collateral or the payment of Customer’s obligations owed to IBM Credit; Customer abandons the Collateral or any part thereof; Customer or any guarantor becomes in default in the payment of any indebtedness owed to any third party; a judgment issues on any money demand against Customer or any guarantor; an attachment, sale or seizure is issued against Customer or any of the Collateral; any part of the Collateral is seized or taken in execution; the death of the undersigned if the business is operated as a sole proprietorship, or the death of a partner if the business is operated as a partnership, or the death of any guarantor; Customer ceases or suspends Customer’s business; Customer or any guarantor makes a general assignment for the benefit of creditors; Customer or any guarantor becomes insolvent or voluntarily or involuntarily becomes subject to the Federal Bankruptcy Code, state insolvency laws or any act for the benefit of creditors; any receiver is appointed for any of Customer’s or any guarantor’s assets, or any guaranty pertaining to Customer’s obligations to IBM Credit is terminated for any reason whatsoever; any guarantor disclaims any obligations under any guaranty; Customer loses any franchise, permission, license or right to sell or deal in any Approved Inventory; Customer or any guarantor misrepresents its respective financial condition or organizational structure; or IBM Credit determines, in its sole discretion, that the Collateral, any other collateral given to IBM Credit to secure Customer’s obligations to IBM Credit, any guarantor’s guaranty, or Customer’s or any guarantor’s net worth has decreased in value, and Customer has been unable, within the time period prescribed by IBM Credit, to either provide IBM Credit with additional collateral in a form and substance satisfactory to IBM Credit or reduce Customer’s total obligations by an amount sufficient to satisfy IBM Credit. Following an event of a default:           (a)         IBM Credit may, at any time at IBM Credit’s election, without notice or demand to Customer do any one or more of the following: declare all or any part of the obligations Customer owes IBM Credit immediately due and payable, together with all court costs and all costs and expenses of IBM Credit’s repossession and collection activity, including, but not limited to, all attorney’s fees; exercise any or all rights of a secured party under applicable law; cease making any further financial accommodations or extending any additional credit to Customer; and/or exercise any or all rights available at law or in equity. All of IBM Credit’s rights and remedies are cumulative.           (b)         Customer will segregate, hold and keep the Collateral in trust, in good order and repair, only for IBM Credit’s benefit, and Customer will not exhibit, transfer, sell, further encumber, otherwise dispose of or use for any other purpose whatsoever any of the Collateral.           (c)         Upon IBM Credit’s oral or written demand, Customer will immediately deliver the Collateral to IBM Credit, in good order and repair, at a place specified by IBM Credit, together with all related documents; or IBM Credit may, in its sole discretion and without notice or demand to Customer, take immediate possession of the Collateral, together with all related documents.           (d)         Customer waives and releases: any claims and causes of action which Customer may now or ever have against IBM Credit as a direct or indirect result of any possession, repossession, collection or sale by IBM Credit of any of the Collateral and the benefit of all valuation, appraisal and exemption laws. If IBM Credit seeks to take possession of any of the Collateral by court process, Customer irrevocably waives any notice, bonds, surety and security relating thereto required by any statute, court rule or otherwise.           (e)         Customer appoints IBM Credit or any person IBM Credit may delegate as Customer’s duly authorized Attorney-In-Fact to do, in IBM Credit’s sole discretion, any of the following in the event of a default: endorse Customer’s name on any notes, checks, drafts or other forms of exchange constituting Collateral or received as payment on any Collateral for deposit in IBM Credit’s account; sell, assign, transfer, negotiate, demand, collect, receive, settle, extend or renew any amounts due on any of the Collateral; and exercise any rights Customer has in the Collateral. If Customer brings any action or asserts any claim against IBM Credit which arises out of this Agreement, any other agreement or any of the business dealings between IBM Credit and Customer, in which Customer does not prevail, Customer agrees to pay IBM Credit all costs and expenses of IBM Credit’s defense of such action or claim including, but not limited to, all attorney’s fees. If IBM Credit fails to exercise any of IBM Credit’s rights or remedies under this Agreement, such failure will in no way or manner waive any of IBM Credit’s rights or remedies as to any past, current or future default. 12.     Customer agrees that if IBM Credit conducts a private sale of any Collateral by soliciting bids from ten (10) or more other dealers or distributors in the type of Collateral repossessed by or returned to IBM Credit hereunder, any sale by IBM Credit of such property will be deemed to be a commercially reasonable disposition under the Uniform Commercial Code. IBM Credit agrees that commercially reasonable notice of any public or private sale will be deemed given to Customer if IBM Credit sends Customer a notice of sale at least seven (7) days prior to the date of any public sale or the time after which a private sale will be made. If IBM Credit disposes of any such Collateral other than as herein contemplated, the commercial reasonableness of such sale will be determined in accordance with the provisions of the Uniform Commercial Code as adopted by the state whose laws govern this Agreement. Customer agrees that IBM Credit does not warrant the Approved Inventory. Customer will pay IBM Credit in full even if the Approved Inventory is defective or fails to conform to any warranties extended by any third party. Customer’s obligations to IBM Credit will not be affected by any dispute Customer may have with any third party. Customer will not assert against IBM Credit any claim or defense Customer may have against any third party. Customer will indemnify and hold IBM Credit harmless against any claims or defenses asserted by any buyer of the Approved Inventory by reason of: the condition of any Approved Inventory; any representations made about the Approved Inventory; or for any and all other reasons whatsoever. 13.     Customer grants to IBM Credit a power of attorney authorizing any of IBM Credit’s representatives to: execute or endorse on Customer’s behalf any documents, financing statements and instruments evidencing Customer’s obligations to IBM Credit; supply any omitted information and correct errors in any documents or other instruments executed by or for Customer; do any and every act which Customer is obligated to perform under this Agreement; and do any other things necessary to preserve and protect the Collateral and IBM Credit’s security interest in the Collateral. Customer further authorizes IBM Credit to provide to any third party any credit, financial or other information about Customer that is in IBM Credit’s possession. 14.     Each party may electronically transmit to or receive from the other party certain documents specified in the E-Business Schedule A attached hereto (“E-Documents”) via the Internet or electronic data interchange (“EDI”). Any transmission of data which is not an E-Document shall have no force or effect between the parties. EDI transmissions may be transmitted directly or through any third party service provider (“Provider”) with which either party may contract. Each party will be liable for the acts or omissions of its Provider while handling E-Documents for such party, provided, that if both parties use the same Provider, the originating party will be liable for the acts or omissions of such Provider as to such E-Document. Some information to be made available to Customer will be specific to Customer and will require Customer to register with IBM Credit before access is provided. After IBM Credit has approved the registration submitted by Customer, IBM Credit will provide an ID and password(s) to an individual designated by Customer (“Customer Recipient”). Customer accepts responsibility for the designated individual’s distribution of the ID and password(s) within its organization and Customer will take reasonable measures to ensure that passwords are not shared or disclosed to unauthorized individuals. Customer will conduct an annual review of all IDs and passwords to ensure that they are accurate and properly authorized. IBM CREDIT MAY CHANGE OR DISCONTINUE USE OF AN ID OR PASSWORD AT ITS DISCRETION AT ANY TIME. E-Documents will not be deemed to have been properly received, and no E-Document will give rise to any obligation, until accessible to the receiving party at such party’s receipt computer at the address specified herein. Upon proper receipt of an E-Document, the receiving party will promptly transmit a functional acknowledgment in return. A functional acknowledgment will constitute conclusive evidence that an E-Document has been properly received. If any transmitted E-Document is received in an unintelligible or garbled form, the receiving party will promptly notify the originating party in a reasonable manner. In the absence of such a notice, the originating party’s records of the contents of such E-Document will control. Each party will use those security procedures which are reasonably sufficient to ensure that all transmissions of E-Documents are authorized and to protect its business records and data from improper access. Any E-Document received pursuant to this paragraph 14 will have the same effect as if the contents of the E-Document had been sent in paper rather than electronic form. The conduct of the parties pursuant to this paragraph 14 will, for all legal purposes, evidence a course of dealing and a course of performance accepted by the parties. The parties agree not to contest the validity or enforceability of E-Documents under the provisions of any applicable law relating to whether certain agreements are to be in writing or signed by the party to be bound thereby. The parties agree, as to any E-Document accompanied by Customer’s ID, that IBM Credit can reasonably rely on the fact that such E-Document is properly authorized by Customer. E-Documents, if introduced as evidence on paper in any judicial, arbitration, mediation or administrative proceedings, will be admissible as between the parties to the same extent and under the same conditions as other business records originated and maintained in documentary form. Neither party will contest the admissibility of copies of E-Documents under either the business records exception to the hearsay rule or the best evidence rule on the basis that the E-Documents were not originated or maintained in documentary form. Neither party will be liable to the other for any special, incidental, exemplary or consequential damages arising from or as a result of any delay, omission or error in the electronic transmission or receipt of any E-Document pursuant to this paragraph 14, even if either party has been advised of the possibility of such damages. In the event Customer requests IBM Credit to effect a withdrawal or debit of funds from an account of Customer, then in no event will IBM Credit be liable for any amount in excess of any amount incorrectly debited, except in the event of IBM Credit’s gross negligence or willful misconduct. No party will be liable for any failure to perform its obligations pursuant to this paragraph 14 in connection with any E-Document, where such failure results from any act of God or other cause beyond such party’s reasonable control (including, without limitation, any mechanical, electronic or communications failure) which prevents such party from transmitting or receiving E-Documents. CUSTOMER RECIPIENT for Internet transmissions: Mary Driscoll, Controller (PLEASE PRINT) Name of Customer's Designated Central Contact Authorized to Receive IDs and Passwords: Mary Driscoll, Controller e-mail Address:  [email protected] Phone Number: (631) 205-1000 x115 15.     Time is of the essence in this Agreement. This Agreement will be effective from the date of its acceptance at IBM Credit’s office. Customer acknowledges receipt of a true copy and waives notice of IBM Credit’s acceptance of it. If IBM Credit advances funds under this Agreement, IBM Credit will have accepted it. This Agreement will remain in force until one of the parties gives notice to the other that it is terminated. If Customer terminates this Agreement, IBM Credit may declare all or any part of the obligations Customer owes IBM Credit due and payable immediately. If this Agreement is terminated, Customer will not be relieved from any obligations to IBM Credit arising out of IBM Credit’s advances or commitments made before the effective date of termination. IBM Credit’s rights under this Agreement and IBM Credit’s security interest in present and future Collateral will remain valid and enforceable until all Customer’s obligations to IBM Credit are paid in full. This Agreement shall be binding upon and inure to the benefit of IBM Credit and the Customer and their respective successors and assigns; provided, that the Customer shall have no right to assign this Agreement without the prior written consent of IBM Credit. This Agreement will protect and bind IBM Credit’s and Customer’s respective heirs, representatives, successors and assigns. It can be varied only by a document signed by IBM Credit’s and Customer’s authorized representatives. If any provision of this Agreement or its application is invalid or unenforceable, the remainder of this Agreement will not be impaired or affected and will remain binding and enforceable. This Agreement is executed with the authority of Customer’s Board of Directors, and with shareholder approval, if required by the law, if Customer is a corporation or if Customer is a limited liability company, with the authority of authorized members. All notices IBM Credit sends to Customer will be sufficiently given if mailed or delivered to Customer at its address shown in paragraph 5. 16.     The laws of the State of New York will govern this Agreement. Customer agrees that venue for any lawsuit will be in the State or Federal Court within the county, parish, or district where IBM Credit’s office, which provides the financial accommodations, is located. Customer hereby waives any right to change the venue of any action. 17.     If Customer has previously executed any security agreements relating to the Collateral with IBM Credit, Customer agrees that this Agreement is intended only to amend and supplement such written agreements, and will not be deemed to be a novation or termination of such written agreements. In the event the terms of this Agreement conflict with the terms of any prior security agreement that Customer previously executed with IBM Credit, the terms of this Agreement will control in determining the agreement between Customer and IBM Credit. 18.     CUSTOMER WAIVES ALL EXEMPTIONS AND HOMESTEAD LAWS TO THE MAXIMUM EXTENT PERMITTED BY LAW. CUSTOMER WAIVES ANY STATUTORY RIGHT TO NOTICE OR HEARING PRIOR TO IBM CREDIT’S ATTACHMENT, REPOSSESSION OR SEIZURE OF THE COLLATERAL CUSTOMER FURTHER WAIVES ANY AND ALL RIGHTS OF SETOFF CUSTOMER MAY HAVE AGAINST IBM CREDIT. CUSTOMER AGREES THAT ANY PROCEEDING IN WHICH CUSTOMER, OR IBM CREDIT OR ANY OF IBM CREDIT’S AFFILIATES, OR CUSTOMER’S OR IBM CREDIT’S ASSIGNS ARE PARTIES, AS TO ALL MATTERS AND THINGS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT, OR THE RELATIONS AMONG THE PARTIES LISTED IN THIS PARAGRAPH WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE WITHOUT A JURY. EACH PARTY TO THIS AGREEMENT HEREBY WAIVES ANY RIGHT TO A JURY TRIAL IN ANY SUCH PROCEEDING. ATTEST:   INFORMATION TECHNOLOGY SERVICES, INC.     Customer /s/  MICHAEL KRAWITZ --------------------------------------------------------------------------------   By:  /s/  DAVID A. LOPPERT                                         Secretary           Print Name:   Michael Krawitz   Print Name:   David A. Loppert     Title:   Chief Executive Officer (CORPORATE SEAL) E-BUSINESS SCHEDULE A (“SCHEDULE A”) CUSTOMER NAME: INFORMATION TECHNOLOGY SERVICES, INC. EFFECTIVE DATE OF THIS SCHEDULE A: November 27, 2000 E-DOCUMENTS AVAILABLE TO SUPPLIERS: Invoices Payment Report/Remittance Advisor E-DOCUMENTS AVAILABLE TO CUSTOMER: Invoices Remittance Advisor Transaction Approval Billing Statement Payment Planner Auto Cash Statements of Transaction Common Dispute Form SECRETARY'S CERTIFICATE OF RESOLUTION      I certify that I am the Secretary and the official custodian of certain records, including the certificate of incorporation, charter, by-laws and minutes of the meeting of the Board of Directors of the corporation named below, and that the following is a true, accurate and compared extract from the minutes of the Board of Directors of the corporation adopted at a special meeting thereof held on due notice, at which meeting there was present a quorum authorized to transact the business described below, and that the proceedings of the meeting were in accordance with the certificate of incorporation, charter and by-laws of the corporation, and that they have not been revoked, annulled or amended in any manner whatsoever.      Upon motion duly made and seconded, the following resolution was unanimously adopted after full discussion: "RESOLVED, That the several officers, directors and agents of this corporation, or any one or more of them, are hereby authorized and empowered on behalf of this corporation: to obtain financing from IBM Credit Corporation ("IBM Credit") in such amounts and on such terms as such officers, directors or agents deem proper; to enter into security and other agreements with IBM Credit relating to the terms upon which financing may be obtained and security to be furnished by this corporation therefor; from time to time to supplement or amend any such agreements; and from time to time to pledge, assign, guaranty, mortgage, grant security interest in and, otherwise transfer to IBM Credit as collateral security for any obligations of this corporation to IBM Credit and its affiliated companies, whenever and however arising, any assets of this corporation, whether now owned or hereafter acquired; hereby ratifying, approving and confirming all that any of said officers, directors or agents have done or may do in the premises."      IN WITNESS WHEREOF, I have executed and affixed the seal of the corporation on the date stated below. Dated: January 5, 2001     --------------------------------------------------------------------------------     Secretary Information Technology Services, Inc.       Corporate Name

EXHIBIT 10.5 PREVIEW SYSTEMS, INC. OFFICER RETENTION, SEVERANCE, OPTIONS GRANT, AND ACCELERATED VESTING AGREEMENT Name:   Roger Rowe                                                               Date:   April 3, 2001              Preview Systems wishes to provide you with an incentive to continue in the service of the Company through certain potential transactions and for a reasonable period of time thereafter.  If you wish to receive the benefits of the Retention Bonus, Severance and Accelerated Vesting Agreement, please sign the bottom of this letter indicating your acknowledgement and agreement to the terms described in this letter, and return it to HR no later than 5:00 p.m. on April 10, 2001. Retention Bonus Amount: Lump sum payment equal to six months of your base salary plus 50% of your target bonus for this year, reduced by applicable withholding taxes. Severance Amount: Lump sum payment equal to three months of your base salary plus 25% of your target bonus for this year, reduced by applicable withholding taxes. Options Grant:  50,000 shares of Preview Systems common stock at a price per share of $2.6562 Accelerated Vesting: •            100% of  new grant •            50% of previously unvested options or unvested stock subject to repurchase Conditions for Receipt of the Retention Bonus:  You will receive the Retention Bonus if One of the following circumstances applies to you:   • You continue in the active full time employment of Preview on the Retention Bonus payment dates specified below; or         • You are terminated from your employment by Preview other than for cause before July 31, 2001. And you meet each of the following conditions:   • You maintain the confidentiality of this Retention Bonus offer.         • You sign and return a general release of claims in a form provided by Preview Systems (a copy of which is attached) within the time frame described on the release. Payment of Retention Bonus: Half of the Retention Bonus shall be paid on June 30, 2001, and the remaining half shall be paid on July 31, 2001. Conditions for Receipt of the Severance Amount:   • Your employment with the Company is terminated by the Company other than for cause, and other than on account of your commencement of employment with an acquiring company. And you meet each of the following conditions:   • You maintain the confidentiality of this Severance offer.         • You sign and return a general release of claims in a form provided by Preview Systems (a copy of which is attached) within the time frame described on the release. Condition for Receipt of Accelerated Vesting:  You will receive the Acceleration of Vesting on the earlier of the following events:   • You are employed by the Company immediately prior to the closing of a transaction involving the sale of substantially all of the Company’s assets or the acquisition of more than 50% of the voting shares of the Company’s stock.         • Termination of your employment other than for cause, and you sign and return a general release of claims.     Preview Systems, Inc.       By:   --------------------------------------------------------------------------------       Title: President & CEO         ACKNOWLEDGED AND ACCEPTED:         Date: -------------------------------------------------------------------------------- --------------------------------------------------------------------------------    

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.1 EIGHTH AMENDMENT TO THE FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF WESTFIELD AMERICA LIMITED PARTNERSHIP     This EIGHTH AMENDMENT TO THE FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF WESTFIELD AMERICA LIMITED PARTNERSHIP, dated as of May 2, 2001 (this "Amendment"), is among Westfield America, Inc., a Missouri corporation (the "Managing General Partner"), as the managing general partner of Westfield America Limited Partnership, a Delaware limited partnership (the "Partnership"), and on behalf of the Limited Partners pursuant to the authority conferred on the Managing General Partner by Sections 2.4 and 12.3 of the First Amended and Restated Agreement of Limited Partnership of Westfield America Limited Partnership, dated as of August 3, 1998, as amended (as so amended, the "Agreement"). Capitalized terms used herein, but not otherwise defined herein, shall have the respective meanings ascribed thereto in the Agreement.     WHEREAS, pursuant to Sections 7.1 and 12.3 of the Agreement, the Managing General Partner is authorized to determine the designations, preferences and relative, participating, optional or other special rights, powers and duties of additional Partnership Units and to amend the Agreement, and the Managing General Partner is hereby creating the Partnership Preferred Units with the designations, preferences and other rights, terms and provisions as set forth on Exhibit Q attached hereto.     NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:     1.  The Agreement is hereby amended by the addition of a new exhibit, entitled "Exhibit Q" in the form attached hereto, which shall be attached to and made a part of the Agreement.     2.  Except as specifically amended hereby, the terms, covenants, provisions and conditions of the Agreement shall remain unmodified and continue in full force and effect and, except as amended hereby, all of the terms, covenants, provisions and conditions of the Agreement are hereby ratified and confirmed in all respects.     3.  This Amendment shall be construed and enforced in accordance with, and governed by, the laws of the State of Delaware, without regard to principles of conflicts of law. --------------------------------------------------------------------------------     IN WITNESS WHEREOF, this Amendment has been executed as of the date first written above.     WESTFIELD AMERICA, INC., Managing General Partner               By:   /s/ IRV HEPNER    -------------------------------------------------------------------------------- Name: Irv Hepner Title: Secretary               ALL LIMITED PARTNERS     By:   Westfield America, Inc., as attorney-in-fact pursuant to the power of attorney granted under Section 2.4 of the Agreement.               By:   /s/ IRV HEPNER    -------------------------------------------------------------------------------- Name: Irv Hepner Title: Secretary 2 -------------------------------------------------------------------------------- QuickLinks EIGHTH AMENDMENT TO THE FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF WESTFIELD AMERICA LIMITED PARTNERSHIP

Astec Industries, Inc. and Astec Financial Services, Inc.   $80,000,000   7.56% Senior Secured Notes due September 10, 2011   Note Purchase Agreement Dated September 10, 2001       Astec Industries, Inc. and Astec Financial Services, Inc. 4101 Jerome Avenue Chattanooga, Tennessee 37407 7.56% Senior Secured Notes due September 10, 2011 Dated as of September 10, 2001 To each of the Purchasers listed in the attached Schedule A: Ladies and Gentlemen: Astec Industries, Inc., a Tennessee corporation (the "Company"), and Astec Financial Services, Inc., a Tennessee corporation ("Financial," and the Company and Financial are hereinafter referred to, individually, as an "Obligor" and, collectively, as the "Obligors"), jointly and severally, agree with you as follows: Section 1. Authorization of Notes. The Obligors will authorize the issue and sale of $80,000,000 aggregate principal amount of their 7.56% Senior Secured Notes due September 10, 2011 (the "Notes", such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement or the Other Agreements (as hereinafter defined)). The Notes shall be substantially in the form set out in Exhibit 1, with such changes therefrom, if any, as may be approved by you and the Obligors. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement. Section 2. Sale and Purchase of Notes; Security. Section 2.1. Sale and Purchase of Notes. Subject to the terms and conditions of this Agreement, the Obligors will issue and sell to you and you will purchase from the Obligors, at the Closing provided for in Section 3, Notes in the principal amount specified opposite your name in Schedule A at the purchase price of 100% of the principal amount thereof. Contemporaneously with entering into this Agreement, the Obligors are entering into separate Note Purchase Agreements (the "Other Agreements") identical with this Agreement with each of the other purchasers named in Schedule A (the "Other Purchasers"), providing for the sale at such Closing to each of the Other Purchasers of Notes in the principal amount specified opposite its name in Schedule A. Your obligation hereunder, and the obligations of the Other Purchasers under the Other Agreements, are several and not joint obligations, and you shall have no obligation under any Other Agreement and no liability to any Person for the performance or nonperformance by any Other Purchaser thereunder. Section 2.2. Security. The Notes will be entitled to the benefit of and will be secured by the Pledge Agreement dated as of September 10, 2001, by and between the Obligors, the Banks and Bank One, N.A., as Collateral Agent, substantially in the form of Exhibit 5 attached hereto and made a part hereof (as the same may be further amended, supplemented or otherwise modified from time to time, the "Pledge Agreement"). The enforcement of the rights and benefits in respect of the Pledge Agreement and the allocation of proceeds thereof will be subject to a Collateral Agency and Intercreditor Agreement dated as of September 10, 2001 entered into by the Banks, the Collateral Agent and you, substantially in the form of Exhibit 6 attached hereto and made a part hereof (as the same may be further amended, supplemented or otherwise modified from time to time, the "Intercreditor Agreement"). Section 3. Closing. The sale and purchase of the Notes to be purchased by you and the Other Purchasers shall occur at the offices of Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, at 10:00 a.m. Chicago time, at a closing (the "Closing") on September 10, 2001 or on such other Business Day thereafter on or prior to September 14, 2001 as may be agreed upon by the Obligors and you and the Other Purchasers. At the Closing the Obligors will deliver to you the Notes to be purchased by you in the form of a single Note (or such greater number of Notes in denominations of at least $1,000,000 as you may request) dated the date of the Closing and registered in your name (or in the name of your nominee), against delivery by you to the Obligors or their order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 5506875 at Bank One, NA, Chicago, Illinois ABA 071000013. If at the Closing the Obligors shall fail to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment. Section 4. Conditions to Closing. Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions: Section 4.1. Representations and Warranties. (a) The representations and warranties of the Obligors in this Agreement shall be correct when made and at the time of the Closing. (b) The representations and warranties of the Company in the Pledge Agreement shall be correct when made and at the time of Closing. Section 4.2. Performance; No Default. Each Obligor shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and the Company shall have performed and complied with all agreements and conditions contained in the Pledge Agreement required to be performed or complied with by it prior to or at the Closing, and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Section 5.14), no Default or Event of Default shall have occurred and be continuing. Neither of the Obligors nor any of their Subsidiaries shall have entered into any transaction since the date of the Memorandum that would have been prohibited by Section 10.1 or Sections 10.8 through 10.10 hereof had such Sections applied since such date. Section 4.3. Compliance Certificates. (a) Officer's Certificate. Each Obligor shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled. (b) Secretary's Certificate. Each Obligor shall have delivered to you a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes and the Agreements. Section 4.4. Opinions of Counsel. You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing (a) (i) from Chambliss, Bahner & Stophel, P.C., Special Counsel for the Obligors, covering the matters set forth in Exhibit 4.4(a) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Obligors hereby instruct their counsel to deliver such opinion to you), (ii) from special Canadian counsel for the Company, covering the matters set forth in Exhibit 4.4(c) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Obligors hereby instruct their counsel to deliver such opinion to you), and (b)  from Chapman and Cutler, your special counsel in connection with such transactions, substantially in the form set forth in Exhibit 4.4(b) and covering such other matters incident to such transactions as you may reasonably request. Section 4.5. Purchase Permitted by Applicable Law, etc. On the date of the Closing your purchase of Notes shall (i) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (ii) not violate any applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (iii) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted. Section 4.6. Sale of Other Notes. Contemporaneously with the Closing, the Obligors shall sell to the Other Purchasers, and the Other Purchasers shall purchase, the Notes to be purchased by them at the Closing as specified in Schedule A. Section 4.7. Payment of Special Counsel Fees.; Without limiting the provisions of Section 15.1, the Obligors shall have paid on or before the Closing the fees, charges and disbursements of your special counsel referred to in Section 4.4 to the extent reflected in a statement of such counsel rendered to the Obligors at least one Business Day prior to the Closing. Section 4.8. Private Placement Number. A Private Placement Number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for the Notes. Section 4.9. Changes in Corporate Structure. Neither of the Obligors shall have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5. Section 4.10. Pledge Agreement and Intercreditor Agreement. Both the Pledge Agreement and the Intercreditor Agreement shall be in form and substance satisfactory to you and your special counsel, shall have been duly executed and delivered by the parties thereto and shall be in full force and effect and you shall have received true, correct and complete copies of each thereof. Section 4.11. Filing and Recording. The Pledge Agreement (and/or financing statements or similar notices thereof if and to the extent permitted or required by applicable law) and the collateral described therein shall have been recorded or filed for record in such public offices or otherwise maintained in the possession of the appropriate party, as the case may be, as may be deemed necessary or appropriate by you or your special counsel in order to perfect the Liens and security interests granted or conveyed thereby. Section 4.12. Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request. Section 5. Representations and Warranties of the Obligors. The Obligors, jointly and severally, represent and warrant to you that: Section 5.1. Organization; Power and Authority. Each Obligor is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each Obligor has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver the Financing Documents to which it is a party and to perform the provisions hereof and thereof. Section 5.2. Authorization, etc. Each Financing Document has been duly authorized by all necessary corporate action on the part of each Obligor, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of each Obligor party thereto enforceable against such Obligor in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Section 5.3. Disclosure. The Obligors, through their agent, Banc One Capital Markets, Inc., have delivered to you and each Other Purchaser a copy of a Private Placement Memorandum, dated July 2001 (the "Memorandum"), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Obligors and their Subsidiaries. This Agreement, the Memorandum and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Since December 31, 2000, there has been no change in the financial condition, operations, business, properties or prospects of the Obligors or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Obligors that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum. Section 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates. (a) Schedule 5.4 contains (except as noted therein) complete and correct lists (i) of the Subsidiaries of each Obligor, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by each Obligor and each other Subsidiary, (ii) of the Affiliates of each Obligor, other than Subsidiaries, and (iii) of the directors and senior officers of each Obligor. (b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Obligors and their Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Obligors or another Subsidiary free and clear of any Lien other than the Lien granted to you and the Other Purchasers pursuant to the Pledge Agreement (except as otherwise disclosed in Schedule 5.4). (c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. (d) No Subsidiary is a party to, or otherwise subject to, any legal restriction or any agreement (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Obligors or any of their Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary. Section 5.5. Financial Statements. The Obligors have delivered to you and each Other Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). Section 5.6. Compliance with Laws, Other Instruments, etc. The execution, delivery and performance by the Obligors of each Financing Document to which it is a party will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of either Obligor or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which either Obligor or any Subsidiary is bound or by which either Obligor or any Subsidiary or any of their respective properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to either Obligor or any Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to either Obligor or any Subsidiary. Section 5.7. Governmental Authorizations, etc. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by either Obligor of each Financing Document to which it is a party. Section 5.8. Litigation; Observance of Agreements, Statutes and Orders. (a) There are no actions, suits or proceedings pending or, to the knowledge of either Obligor, threatened against or affecting either Obligor or any Subsidiary or any property of either Obligor or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (b) Neither of the Obligors nor any of their Subsidiaries is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Section 5.9. Taxes. Each of the Obligors and their Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which is not individually or in the aggregate Material or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which such Obligor or such Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. Neither of the Obligors knows of any basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Obligors and their Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Obligors and their Subsidiaries have never been audited by the Internal Revenue Service, but the consolidated Federal income tax returns of the Company for the fiscal year ending December 31, 1998, are presently being audited. Section 5.10. Title to Property; Leases. The Obligors and their Subsidiaries have good and sufficient title to their respective properties, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by either of the Obligors or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. Section 5.11. Licenses, Permits, etc. (a)  the Obligors and their Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others; (b) to the best knowledge of the Obligors, no product of either of the Obligors or any of their Subsidiaries infringes in any Material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and (c) to the best knowledge of the Obligors, there is no Material violation by any Person of any right of either of the Obligors or any of their Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by either of the Obligors or any of their Subsidiaries. Section 5.12. Compliance with ERISA. (a) Each Obligor and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither of the Obligors nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by either Obligor or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of either Obligor or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. (b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities. The term "benefit liabilities" has the meaning specified in section 4001 of ERISA and the terms "current value" and "present value" have the meanings specified in section 3 of ERISA. (c) Neither of the Obligors nor any of their ERISA Affiliates have incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material. (d) The expected post-retirement benefit obligation (determined as of the last day of each Obligor's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of each Obligor and its Subsidiaries is not Material. (e) The execution and delivery of this Agreement and the Pledge Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by each Obligor in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you. Section 5.13. Private Offering by the Obligors. Neither of the Obligors nor anyone acting on their behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than you, the Other Purchasers and not more than 60 other Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither of the Obligors nor anyone acting on their behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act. Section 5.14. Use of Proceeds; Margin Regulations. The Obligors will use the proceeds of the sale of the Notes to refinance existing indebtedness and for general corporate purposes. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Obligors in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 5.00% of the value of the consolidated assets of the Obligors and their Subsidiaries and the Obligors do not have any present intention that margin stock will constitute more than 5.00% of the value of such assets. As used in this Section, the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in said Regulation U. Section 5.15. Existing Indebtedness; Future Liens. (a) Schedule 5.15 sets forth a complete and correct list of all outstanding Indebtedness of the Obligors and their Subsidiaries as of June 30, 2001, since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Obligors or their Subsidiaries. Neither of the Obligors nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Obligors or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Obligors or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (b) Except as disclosed in Schedule 5.15, neither of the Obligors nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.8. Section 5.16. Foreign Assets Control Regulations, etc. Neither the sale of the Notes by the Obligors hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. Section 5.17. Status under Certain Statutes. Neither of the Obligors nor any of their Subsidiaries is an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, or is subject to regulation under the Public Utility Holding Company Act of 1935, as amended, the ICC Termination Act of 1995, as amended, or the Federal Power Act, as amended. Section 5.18. Environmental Matters. Neither of the Obligors nor any of their Subsidiaries has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Obligors or any of their Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed to you in writing: (a) neither of the Obligors nor any of their Subsidiaries has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; (b) neither of the Obligors nor any of their Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them or has disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by either of the Obligors or any of their Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect. Section 5.19. Pledge Agreement. The provisions of the Pledge Agreement are effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in all right, title and interest of the Obligors in the pledged stock described therein, and when the Collateral Agent receives possession of the stock certificates representing the shares of pledged stock described therein with respect to which the Collateral Agent has been granted a first priority security interest, registered in the name of the Collateral Agent or otherwise accompanied by undated stock powers duly executed in blank, the Pledge Agreement shall constitute a fully perfected and continuing first priority Lien on and security interest in all right, title and interest of the Company in the pledged stock described therein. The interest of the Collateral Agent in the pledged stock has described therein has been duly registered on the books and records of the issuers thereof. Section 6. Representations of the Purchaser. Section 6.1. Purchase for Investment. You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Obligors are not required to register the Notes. Section 6.2. Source of Funds. You represent that at least one of the following statements is an accurate representation as to each source of funds (a "Source") to be used by you to pay the purchase price of the Notes to be purchased by you hereunder: (a) the Source is an "insurance company general account" within the meaning of Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee benefit plan, treating as a single plan, all plans maintained by the same employer or employee organization, with respect to which the amount of the general account reserves and liabilities for all contracts held by or on behalf of such plan, exceed ten percent (10%) of the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the NAIC Annual Statement filed with your state of domicile; or (b) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Obligors in writing pursuant to this paragraph (b), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (c) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in either Obligor and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Obligors in writing pursuant to this paragraph (c); or (d) the Source is a governmental plan; or (e) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Obligors in writing pursuant to this paragraph (e); or (f) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. If you or any subsequent transferee of the Notes indicates that you or such transferee are relying on any representation contained in paragraph (b), (c) or (e) above, the Obligors shall deliver on the date of Closing and on the date of any applicable transfer a certificate, which shall either state that (i) it is neither a party in interest nor a "disqualified person" (as defined in section 4975(e)(2) of the Internal Revenue Code of 1986, as amended), with respect to any plan identified pursuant to paragraphs (b) or (e) above, or (ii) with respect to any plan, identified pursuant to paragraph (c) above, neither it nor any "affiliate" (as defined in Section V(c) of the QPAM Exemption) has at such time, and during the immediately preceding one year, exercised the authority to appoint or terminate said QPAM as manager of any plan identified in writing pursuant to paragraph (c) above or to negotiate the terms of said QPAM's management agreement on behalf of any such identified plan. As used in this Section 6.2, the terms "employee benefit plan", "governmental plan", "party in interest" and "separate account" shall have the respective meanings assigned to such terms in section 3 of ERISA. Section 7. Information as to the Obligors. Section 7.1. Financial and Business Information. The Obligors shall deliver to each holder of Notes that is an Institutional Investor: (a) Quarterly Statements - within 60 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of: (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a); (b) Annual Statements - within 105 days after the end of each fiscal year of the Company, duplicate copies of: (i) a consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, provided that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(b); (c) SEC and Other Reports - promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by either Obligor or any Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by either Obligor or any Subsidiary with the Securities and Exchange Commission and of all press releases and other statements made available generally by an Obligor or any Subsidiary to the public concerning developments that are Material; (d) Notice of Default or Event of Default - promptly, and in any event within five (5) Business Days after a Responsible Officer of either Obligor becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Obligors are taking or propose to take with respect thereto; (e) ERISA Matters - promptly, and in any event within five (5) Business Days after a Responsible Officer of either Obligor becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that either Obligor or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by either Obligor or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event, transaction or condition that could result in the incurrence of any liability by either Obligor or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of either Obligor or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; (f) Notices from Governmental Authority - promptly, and in any event within 30 days of receipt thereof, copies of any notice to either Obligor or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; and (g) Requested Information - with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of either Obligor or any of their Subsidiaries or relating to the ability of either Obligors to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes. Section 7.2. Officer's Certificate. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer of each of the Obligors setting forth: (a) Covenant Compliance - the information (including detailed calculations) required in order to establish whether the Obligors were in compliance with the requirements of Sections 10.2 through 10.4, 10.6 and 10.7 hereof, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (b) Event of Default - a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Obligors and their Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of either Obligor or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Obligors shall have taken or propose to take with respect thereto. Section 7.3. Inspection. Each Obligor shall permit the representatives of each holder of Notes that is an Institutional Investor: (a) No Default - if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to such Obligor, to visit the principal executive office of such Obligor, to discuss the affairs, finances and accounts of such Obligor and its Subsidiaries with such Obligor's officers, and (with the consent of such Obligor, which consent will not be unreasonably withheld) to discuss relevant accounting matters (such as a qualified opinion or a change in accounting method) with its independent public accountants, and (with the consent of such Obligor, which consent will not be unreasonably withheld) to visit the other offices and properties of such Obligor and each of its Subsidiaries, all at such reasonable times and as often as may be reasonably requested in writing; and (b) Default - if a Default or Event of Default then exists, at the expense of the Obligors, to visit and inspect any of the offices or properties of such Obligor or any of its Subsidiaries, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision such Obligor authorizes said accountants to discuss the affairs, finances and accounts of such Obligor and its Subsidiaries), all at such times and as often as may be requested. Section 8. Prepayment of the Notes. Section 8.1. Required Prepayments. On September 10, 2005 and on each September 10 thereafter to and including September 10, 2010 the Obligors will prepay $10,714,286 principal amount (or such lesser principal amount as shall then be outstanding) of the Notes at par and without payment of the Make-Whole Amount or any premium, provided that upon any partial prepayment of the Notes pursuant to Section 8.2 or 8.3 or purchase of the Notes permitted by Section 8.5 the principal amount of each required prepayment of the Notes becoming due under this Section 8.1 on and after the date of such prepayment or purchase shall be reduced in the same proportion as the aggregate unpaid principal amount of the Notes is reduced as a result of such prepayment or purchase. Section 8.2. Optional Prepayments with Make-Whole Amount. The Obligors may, at their option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes, in an amount not less than 5.00% of the aggregate principal amount of the Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid, together with interest accrued thereon to the date of such prepayment, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Obligors will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date, the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Obligors shall deliver to each holder of Notes a certificate of a Senior Financial Officer of each Obligor specifying the calculation of such Make-Whole Amount as of the specified prepayment date. Section 8.3. Prepayment of Notes Upon Change of Control. (a) Condition to Obligors Action. Within five (5) days of a Change of Control, the Obligors shall have given to each holder of Notes written notice containing and constituting an offer to prepay Notes as described in subparagraph (b) of this Section 8.3, accompanied by the certificate described in subparagraph (e) of this Section 8.3. (b) Offer to Prepay Notes. The offer to prepay Notes contemplated by subparagraph (a) of this Section 8.3 shall be an offer to prepay, in accordance with and subject to this Section 8.3, all, but not less than all, the Notes held by each holder (in this case only, "holder" in respect of any Note registered in the name of a nominee for a disclosed beneficial owner shall mean such beneficial owner) on the date specified in such offer (the "Proposed Prepayment Date") that is not less than 30 days and not more than 60 days after the date of such offer (if the Proposed Prepayment Date shall not be specified in such offer, the Proposed Prepayment Date shall be the first Business Day which is at least 45 days after the date of such offer). (c) Acceptance; Rejection. A holder of Notes may accept the offer to prepay made pursuant to this Section 8.3 by causing a notice of such acceptance to be delivered to the Obligors at least 10 days prior to the Proposed Prepayment Date. A failure by a holder of Notes to respond to an offer to prepay made pursuant to this Section 8.3 shall be deemed to constitute a rejection of such offer by such holder. (d) Prepayment. Prepayment of the Notes to be prepaid pursuant to this Section 8.3 shall be at 100% of the principal amount of such Notes, together with interest on such Notes accrued to the date of prepayment. The prepayment shall be made on the Proposed Prepayment Date. (e) Officer's Certificate. Each offer to prepay the Notes pursuant to this Section 8.3 shall be accompanied by a certificate, executed by a Senior Financial Officer of each of the Obligors and dated the date of such offer, specifying: (i) the Proposed Prepayment Date; (ii) that such offer is made pursuant to this Section 8.3; (iii) the principal amount of each Note offered to be prepaid; (iv) the interest that would be due on each Note offered to be prepaid, accrued to the Proposed Prepayment Date; (v) that the conditions of this Section 8.3 have been fulfilled; and (vi) in reasonable detail, the nature and date or proposed date of the Change of Control. Section 8.4. Allocation of Partial Prepayments. In the case of each partial prepayment of the Notes pursuant to Sections 8.1 and 8.2, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof. Section 8.5. Maturity; Surrender, etc. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Obligors shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Obligors and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. Section 8.6. Purchase of Notes. The Obligors will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Obligors will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes. Section 8.7. Make-Whole Amount. The term "Make-Whole Amount" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "Called Principal" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "Discounted Value" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "Reinvestment Yield" means, with respect to the Called Principal of any Note, 0.50% over the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "USD" on the Bloomberg Financial Market Services Screen (or such other display as may replace USD of the Bloomberg Financial Market Services Screen) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the maturity closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the maturity closest to and less than the Remaining Average Life. "Remaining Average Life" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "Remaining Scheduled Payments" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1. "Settlement Date" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. Section 9. Affirmative Covenants. The Obligors covenant, jointly and severally, that so long as any of the Notes are outstanding: Section 9.1. Compliance with Law. Each Obligor will, and will cause each of its Subsidiaries to, comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Section 9.2. Insurance. Each Obligor will, and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. Section 9.3. Maintenance of Properties. Each Obligor will, and will cause each of its Subsidiaries to, maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent such Obligor or any of its Subsidiaries from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and such Obligor has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Section 9.4. Payment of Taxes and Claims. Each Obligor will, and will cause each of its Subsidiaries to, file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of such Obligor or any of its Subsidiaries, provided that neither Obligors nor any of its Subsidiaries need pay any such tax or assessment or claims if (i) the amount, applicability or validity thereof is contested by such Obligor or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and such Obligor or such Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of such Obligor or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect. Section 9.5. Corporate Existence, etc. Each Obligor will at all times preserve and keep in full force and effect their corporate existence. Subject to Sections 10.9 and 10.10, each Obligor will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries and all rights and franchises of such Obligor and its Subsidiaries unless, in the good faith judgment of such Obligor, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. Section 9.6. Ownership of Financial. Financial will at all times be and remain a Subsidiary of the Company. Section 9.7. Additional Security Pledge. If at any time an Obligor grants to the Banks additional security (or Guaranty) of any kind or other credit support of any kind in respect of such Obligor's obligations relative to the Bank Credit Agreement, including but not limited to Sections 6.27 and 6.28 of the Bank Credit Agreement, then such Obligor shall grant (or cause such Subsidiary to grant) to the holders of the Notes the same security so that the holders of the Notes shall at all times be secured on an equal and pro rata basis with the Banks. All such additional security shall be subject to the provisions of Section 2.2. Section 10. Negative Covenants. The Obligors covenant, jointly and severally, that so long as any of the Notes are outstanding: Section 10.1. Transactions with Affiliates. Each Obligor will not and will not permit any Subsidiary to enter into, directly or indirectly, any transaction (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than an Obligor or another Subsidiary), except in the ordinary course and pursuant to the reasonable requirements of such Obligor's or such Subsidiary's business and upon fair and reasonable terms no less favorable to such Obligor or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate. Section 10.2. Consolidated Net Worth. The Obligors will not, at any time, permit Consolidated Net Worth to be less than the sum of (a) $160,000,000, plus (b) an aggregate amount equal to 40% of Consolidated Net Earnings (but, in each case, only if a positive number) for each completed fiscal quarter beginning with the fiscal quarter ending September 30, 2001. Section 10.3. Consolidated Total Debt Coverage. The Obligors will not permit, as at the end of each fiscal quarter, the ratio of Consolidated Total Debt to Consolidated Operating Cash Flow to exceed (a) 3.50 to 1.00 for the fiscal quarters ending on or prior to December 31, 2002 or (b) 3.25 to 1.00 for the fiscal quarters ending on or after March 31, 2003, in each case for the immediately preceding four quarter period, taken as a single accounting period ending on the date of calculation. Section 10.4. Fixed Charge Coverage. The Obligors will not permit, as at the end of each fiscal quarter, the ratio of Consolidated Earnings Available for Fixed Charges to Consolidated Fixed Charges to be less than 1.75 to 1.00 for the immediately preceding four quarter period, taken as a single accounting period ending on the date of calculation. Section 10.5. Permitted Investments. Each Obligor will not, and will not permit any Subsidiary to, make, authorize or have any Investment other than Permitted Investments. Section 10.6. Priority Debt. The Obligors will not, at any time, permit Priority Debt to exceed 25% of Consolidated Net Worth. Section 10.7. Subsidiary Debt. In addition to and not in limitation of any other applicable restrictions herein, including Section 10.3, the Obligors will not, at any time, permit any Subsidiary (other than Financial) to, directly or indirectly, create, incur, assume, guarantee, have outstanding, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness other than: (a) Indebtedness of a Subsidiary outstanding on the date of Closing and any extension, renewal or refunding thereof, provided that the principal amount thereof is not increased; (b) Indebtedness of a Subsidiary owed to the Company or a Wholly-Owned Subsidiary; (c) Indebtedness of one or more Special Purpose Subsidiaries incurred in connection with the Permitted Receivables Securitization Program, which Indebtedness shall not at any time exceed $150,000,000 aggregate principal amount aggregating all such Special Purpose Subsidiaries; and (d) if and so long as no Default or Event of Default exists hereunder, including, without limitation, under Section 10.6, Indebtedness of a Subsidiary in addition to that otherwise permitted by the foregoing provisions. Section 10.8. Liens. Each Obligor will not, and will not permit any Subsidiary to, create, assume, incur or suffer to be created, assumed or incurred or to exist any Lien in respect of any Property, whether now owned or hereafter acquired, except: (a) Liens for taxes or assessments or other governmental charges or levies, provided that payment thereof is not required by Section 9.1 or 9.4; (b) Liens created by or resulting from any litigation or legal proceeding which is currently being contested in good faith by appropriate proceedings, provided that payment thereof is not required by Section 9.1 or 9.4; (c) other Liens incidental to the normal conduct of the business of the Obligors and their Subsidiaries or the ownership of their property which are not incurred in connection with the incurrence of Indebtedness and which do not, in the aggregate, materially impair the use of such property in the operation of the business of the Obligors and their Subsidiaries taken as a whole or the value of such property for the purposes of such business; (d) minor survey exceptions or minor encumbrances which are necessary for the conduct of the activities of the Obligors and their Subsidiaries or which customarily exist on properties of corporations engaged in similar activities, which do not materially impair their use in operations of the business of the Obligors and their Subsidiaries; (e) the Lien of the Pledge Agreement and other existing Liens at the time of the issuance of the Notes as described on Schedule 5.15; (f) the extension, renewal or replacement of any Lien permitted by the foregoing paragraph (e) in respect of the same property subject thereto or the extension, renewal of such replacement liens (without increase of principal amount of the Indebtedness secured); (g) (i) any Lien in property or in rights relating thereto to secure any rights granted with respect to such property in connection with the provision of all or a part of the purchase price or cost of the construction of such property created contemporaneously with, or within 180 days after, such acquisition or the completion of such construction, or (ii) any Lien in property existing in such property at the time of acquisition thereof, whether or not the Indebtedness secured thereby is assumed by an Obligor or such Subsidiary, or (iii) any Lien existing in the property of a corporation at the time such corporation is merged into or consolidated with an Obligor or a Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation or firm as an entirety or substantially as an entirety to an Obligor or a Subsidiary, provided, however, that all of such Liens described in this Section 10.8(g) shall not exceed, in the aggregate, 100% of the fair market value on the related property; (h) Liens, security obligations of a Subsidiary to the Company or a Wholly-Owned Subsidiary; (i) Liens on assets of Special Purpose Subsidiaries securing Indebtedness of such Special Purpose Subsidiaries pursuant to the Permitted Receivables Securitization Program; and (j) if and so long as no Default or Event of Default exists hereunder, including, without limitation under Section 10.6, Liens securing Indebtedness of any Obligor or any Subsidiary in addition to those described in clauses (a) through (i) above. Section 10.9. Merger, Consolidation, etc. Each Obligor will not, and will not permit any Subsidiary to, consolidate with or merge with any other corporation or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to any Person (except that any Subsidiary may merge with or into, or convey, transfer or lease substantially all of its assets to, any Obligor or any Wholly-Owned Subsidiary if (1) in any such merger or consolidation involving an Obligor, the Obligor is the survivor and (2) immediately after giving effect to any such merger, consolidation or conveyance, transfer or lease, no Default or Event of Default would exist) unless: (a) the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease substantially all of the assets of such Obligor or such Subsidiary as an entirety, as the case may be, shall be a solvent corporation organized and existing under the laws of the United States or any State thereof (including the District of Columbia), and, in the case of any such transaction involving an Obligor, if such Obligor is not such corporation, (i) such corporation shall have executed and delivered to each holder of any Notes its assumption of the due and punctual performance and observance of each covenant and condition of any Financing Documents to which it is a party and (ii) shall have caused to be delivered to each holder of any Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof; (b) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing. No such conveyance, transfer or lease of substantially all of the assets of such Obligor or such Subsidiary shall have the effect of releasing such Obligor or such Subsidiary or any successor corporation that shall theretofore have become such in the manner prescribed in this Section 10.9 from its liability under any Financing Documents to which it is a party. Section 10.10. Sale of Assets. Except as permitted under Section 10.9 and without limiting the provisions of the Pledge Agreement, each Obligor will not, and will not permit any Subsidiary to, make any Asset Disposition unless: (a) in the good faith opinion of the Obligor or Subsidiary making the Asset Disposition, the Asset Disposition is in exchange for consideration having a fair market value at least equal to that of the property exchanged; (b) immediately after giving effect to the Asset Disposition, no Default or Event of Default would exist; and (c) immediately after giving effect to such Asset Disposition, the Obligors could incur at least $1.00 of additional Debt pursuant to Section 10.3 and Section 10.4 assuming such Asset Disposition occurred as of the end of the immediately preceding fiscal quarter; and (d) the sum of (i) the Disposition Value of the property subject to such Asset Disposition, plus (ii) the aggregate Disposition Value for all other property that was the subject of an Asset Disposition during the period of 365 days immediately preceding such Asset Disposition would not exceed 15% of Consolidated Total Assets determined as of the end of the most recently ended calendar month preceding such Asset Disposition. To the extent that the Net Sales Amount consisting of cash for any Transfer to a Person other than an Obligor or a Subsidiary is applied to a Debt Prepayment Application or applied or committed to be applied to a Property Reinvestment Application within one year after such Transfer, then such Transfer (or, if less than all such Net Sales Amount is applied as contemplated hereinabove, the pro rata percentage thereof which corresponds to the Net Sales Amount so applied), only for the purpose of determining compliance with subsection (d) of this Section 10.10 as of any date, shall be deemed not to be an Asset Disposition. Section 10.11. Nature of Business. Each Obligor will not, and will not permit any Subsidiary to, engage to any substantial extent in any business other than the businesses in which the Obligors and their Subsidiaries are engaged on the date of this Agreement as described in the Memorandum and businesses reasonably related thereto or in furtherance thereof. Section 11. Events of Default. An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing: (a) an Obligor defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) an Obligor defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or (c) an Obligor defaults in the performance of or compliance with any term contained in Section 10 or in the Pledge Agreement; or (d) an Obligor defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) an Obligor receiving written notice of such default from any holder of a Note (any such written notice to be identified as a "notice of default" and to refer specifically to this paragraph (d) of Section 11); or (e) any representation or warranty made in writing by or on behalf of either Obligor or by any officer of either Obligor in a Financing Document or in any writing furnished in connection with the transactions contemplated by any Financing Document proves to have been false or incorrect in any material respect on the date as of which made; or (f) (i) either Obligor or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or Make-Whole Amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $10,000,000 beyond any period of grace provided with respect thereto, or (ii) either Obligor or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $10,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared (or one or more Persons are entitled to declare such Indebtedness to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), (x) an Obligor or any Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $10,000,000, or (y) one or more Persons have the right to require an Obligor or any Subsidiary so to purchase or repay such Indebtedness; or (g) an Obligor or any Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by an Obligor or any Subsidiary, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of either Obligor or any Subsidiary, or any such petition shall be filed against an Obligor or any Subsidiary and such petition shall not be dismissed within 60 days; or (i) a final judgment or judgments for the payment of money aggregating in excess of $15,000,000 are rendered against one or more of the Obligors and their Subsidiaries (net of insurance proceeds whereunder a solvent insurer with an investment grade long term bond rating has acknowledged in writing its obligation to satisfy such judgment) and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal; or (j) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified either Obligor or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed $15,000,000, (iv) either Obligor or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) either Obligor or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) either Obligor or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of either Obligor or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect. As used in Section 11(j), the terms "employee benefit plan" and "employee welfare benefit plan" shall have the respective meanings assigned to such terms in section 3 of ERISA. Section 12. Remedies on Default, etc. Section 12.1. Acceleration. (a) If an Event of Default with respect to an Obligor described in paragraph (g) or (h) of Section 11 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default has occurred and is continuing, any holder or holders of more than 50% in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Obligors, declare all the Notes then outstanding to be immediately due and payable. (c) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder of Notes at the time outstanding affected by such Event of Default may at any time, at its option, by notice or notices to an Obligor, declare all the Notes held by it to be immediately due and payable. Upon any Note's becoming due and payable under this Section 12.1, whether automatically or by declaration, such Note will forthwith mature and the entire unpaid principal amount of such Note, plus (i) all accrued and unpaid interest thereon and (ii) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Obligors acknowledge, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Obligors (except as herein specifically provided for), and that the provision for payment of a Make-Whole Amount by the Obligors in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. Section 12.2. Other Remedies. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. Section 12.3. Rescission. At any time after any Notes have been declared due and payable pursuant to clause (b) or (c) of Section 12.1, the holders of not less than 51% in principal amount of the Notes then outstanding, by written notice to an Obligor, may rescind and annul any such declaration and its consequences if (a) the Obligors have paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. Section 12.4. No Waivers or Election of Remedies, Expenses, etc. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Obligors under Section 15, the Obligors will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements. Section 13. Registration; Exchange; Substitution of Notes. Section 13.1. Registration of Notes. The Obligors shall keep at the principal executive office of the Company a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Obligors shall not be affected by any notice or knowledge to the contrary. The Obligors shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. Section 13.2. Transfer and Exchange of Notes. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or its attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Obligors shall execute and deliver, at the Obligors' expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Obligors may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $1,000,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $100,000. Any transferee of a Note, or purchaser of a participation therein, shall, by its acceptance of such Note be deemed to make the same representations to the Obligors regarding the Note or participation as you and the Other Purchasers have made pursuant to Section 6.2, provided that such entity may (in reliance upon information provided by the Obligors, which shall not be unreasonably withheld) make a representation to the effect that the purchase by such entity of any Note will not constitute a non-exempt prohibited transaction under section 406(a) of ERISA. In the event of any transfer or exchange of any Note, the Company shall give written notice of such transfer or exchange to the Collateral Agent within five (5) Business Days of any such event, as defined under the Pledge Agreement. Section 13.3. Replacement of Notes. Upon receipt by the Obligors of evidence reasonably satisfactory to the Obligors of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to the Obligors (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of a Note with a minimum net worth of at least $10,000,000, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation thereof, the Obligors at their own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. Section 14. Payments on Notes. Section 14.1. Place of Payment. Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in Chicago, Illinois at the principal office of Bank One, N.A. in such jurisdiction. The Obligors may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of an Obligor in such jurisdiction or the principal office of a bank or trust company in such jurisdiction. Section 14.2. Home Office Payment. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Obligors will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Obligors in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Obligors made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Obligors at their principal executive office or at the place of payment most recently designated by the Obligors pursuant to Section 14.1. The Obligors will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 14.2. Section 15. Expenses, etc. Section 15.1. Transaction Expenses. (a) Whether or not the transactions contemplated hereby are consummated, the Obligors, jointly and severally, will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each Other Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement, the Pledge Agreement, the Intercreditor Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement, the Pledge Agreement, the Intercreditor Agreement or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement, the Pledge Agreement, the Intercreditor Agreement or the Notes, or by reason of being a holder of any Note, and (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of an Obligor or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. The Obligors will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses, if any, of brokers and finders (other than those retained by you). (b) Without limiting the foregoing, the Obligors agree to pay all fees of the Collateral Agent in connection with the preparation, execution and delivery of the Intercreditor Agreement and the Pledge Agreement and the transactions contemplated thereby, including but not limited to attorneys fees; to pay to the Collateral Agent from time to time reasonable compensation for all services rendered by it under the Intercreditor Agreement and the Pledge Agreement; to indemnify the Collateral Agent for, and to hold it harmless against, any loss, liability or expense incurred without gross negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of the Intercreditor Agreement and the Pledge Agreement, including, but not limited to, the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties thereunder. Section 15.2. Survival. The obligations of the Obligors under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement, the Pledge Agreement, the Intercreditor Agreement or the Notes, and the termination of this Agreement. Section 16. Survival of Representations and Warranties; Entire Agreement. All representations and warranties contained herein shall survive the execution and delivery of this Agreement, the Pledge Agreement, the Intercreditor Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Obligors pursuant to this Agreement shall be deemed representations and warranties of the Obligors under this Agreement. Subject to the preceding sentence, this Agreement, the Pledge Agreement, the Intercreditor Agreement and the Notes embody the entire agreement and understanding between you and the Obligors and supersede all prior agreements and understandings relating to the subject matter hereof. Section 17. Amendment and Waiver. Section 17.1. Requirements. (a) This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Obligors and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20. (b) The Pledge Agreement and the Intercreditor Agreement may be amended in the manner prescribed in the Intercreditor Agreement, and all amendments to the Pledge Agreement and the Intercreditor Agreement obtained in conformity with such requirements shall bind all holders of the Notes. Section 17.2. Solicitation of Holders of Notes. (a) Solicitation. The Obligors will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof, of the Pledge Agreement, of the Intercreditor Agreement or of the Notes. The Obligors will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (b) Payment. The Obligors will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions hereof or of the Notes unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding whether or not such holder consented to such waiver or amendment. Section 17.3. Binding Effect, etc. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Obligors without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Obligors and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. Section 17.4. Notes Held by Obligors, etc. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement, the Pledge Agreement, the Intercreditor Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by either Obligor or any of their Affiliates shall be deemed not to be outstanding. Section 18. Notices. All notices and communications provided for hereunder shall be in writing and sent (a) by telefacsimile if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Obligors in writing, (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Obligors in writing, or (iii) if to any Obligor, to the Company at its address set forth at the beginning hereof to the attention of Chief Financial Officer, or at such other address as the Obligors shall have specified to the holder of each Note in writing. Notices under this Section 18 will be deemed given only when actually received. Section 19. Reproduction of Documents. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Obligors agree and stipulate that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Obligors or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. Section 20. Confidential Information. For the purposes of this Section 20, "Confidential Information" means information delivered to you by or on behalf of either Obligor or any of their Subsidiaries in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of such Obligor or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any Person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by either Obligor or any of their Subsidiaries or (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, trustees, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which you offer to purchase any security of the Obligors (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio, or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Obligors in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee or any other holder that shall have previously delivered such a confirmation), such holder will confirm in writing that it is bound by the provisions of this Section 20. Section 21. Substitution of Purchaser. You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Obligors, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Obligors of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement. Section 22. Miscellaneous. Section 22.1. Successors and Assigns. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. Section 22.2. Payments Due on Non-Business Days. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. Section 22.3. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. Section 22.4. Construction. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. Section 22.5. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by fewer than all, but together signed by all, of the parties hereto. Section 22.6. Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. Section 23. Company Guaranty. Section 23.1 Guaranty of Payment and Performance of Obligations of Financial. The Company hereby guarantees to the holders, as a primary obligor and not merely as a surety, the full and punctual payment when due (whether at maturity, by acceleration or otherwise), as well as the performance, of all of the obligations incurred or owed by or chargeable to Financial (the "Financial Obligations"). The Company's obligation under this Section 23 is an absolute, unconditional and continuing guaranty of the full and punctual payment and performance of all of the Financial Obligations and not of their collectability only and is in no way conditioned upon any requirement that any holders first attempt to collect any of the Financial Obligations from Financial or resort to any collateral security of any holder in favor of Financial or any other Person or other means of obtaining payment. Should Financial default in the payment or performance of any of the Financial Obligations, the holders may cause the obligations of the Company (as guarantor) hereunder with respect to such Financial Obligations to become forthwith due and payable to the holders, without demand or notice of any nature, all of which are expressly waived by the Company. Section 23.2 Additional Amounts. The Company further agrees, as the primary obligor and not as a guarantor only, to pay to the holders, forthwith upon demand in funds immediately available to the holders, all reasonable costs and expenses (including court costs and legal fees and expenses) incurred or expended by the holders in connection with the Financial Obligations, this Section 23 and the enforcement thereof, together with interest on amounts recoverable under this Section 23 from the time when such amounts become due until payment, at a rate of interest equal to the Default Rate. Section 23.3. Waivers by the Company: Holders' Freedom to Act. The Company waives notice of acceptance of this Section 23, notice of any action taken or omitted by any holder in reliance on this Section 23, and any requirement that any holder be diligent or prompt in making demands under this Section 23, giving notice of any default by Financial or asserting any other rights of any holder under this Section 23. The Company also irrevocably waives all defenses that at any time may be available in respect of the Financial Obligations by virtue of any statute of limitations, valuation, stay, moratorium law or other similar law now or hereafter in effect. the Company also irrevocably waives any benefit of any collateral which may from time to time secure the Financial Obligations and authorizes the holders to take any action or exercise any remedy with respect thereto which they in their discretion shall determine, without notice to the Company. The Company agrees that the validity and enforceability of this Section 23 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 Financial 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 Financial Obligations or any part thereof or any agreement relating thereto, or any collateral securing the Financial Obligations or any part thereof; (c) any waiver of any right, power or remedy or of any default with respect to the Financial 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 with respect to the Financial Obligations or any part thereof; (e) the enforceability or validity of the Financial Obligations or any part thereof or the genuineness, enforceability or validity of any agreement relating thereto or with respect to the Financial Obligations or any part thereof; (f) the application of payments received from any source to the payment of Indebtedness other than the Financial Obligations, any part thereof or amounts which are not covered by this Section 23 even though any Purchaer might lawfully have elected to apply such payments to any part or all of the Financial Obligations or to amounts which are not covered by this Section 23 or (g) the existence of any claim, setoff or other rights which the Company may have at any time against any of Financial in connection herewith or any unrelated transaction, all whether or not the Company shall have had notice or knowledge of any act or omission referred to in the foregoing clauses (a) through (g) of this Section 23.3. Section 23.4. Unenforceability of Financial Obligations Against Financial. Notwithstanding (a) any change of ownership of Financial or the insolvency, bankruptcy or any other change in the legal status of Financial; (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 Financial Obligations; (c) the failure of Financial or the undersigned 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 Financial Obligations or this Section 23, or to take any other action required in connection with the performance of all obligations pursuant to the Financial Obligations or this Section 23; or (d) if any of the moneys included in the Financial Obligations have become irrecoverable from Financial for any other reason other than indefeasible payment in full of the Financial Obligations in accordance with their terms, this Section 23 shall nevertheless be binding on the Company. This Section 23 shall be in addition to any other guaranty or other security for the Financial 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 Financial Obligations is stayed upon the insolvency, bankruptcy or reorganization of Financial, or for any other reason, all such amounts otherwise subject to acceleration under the terms of this Agreement, the Other Agreements or any other agreement evidencing, securing or otherwise executed in connection with the Financial Obligations shall be immediately due and payable by the Company. Section 23.5. Subrogation; Subordination. The Company shall not enforce or otherwise exercise any right of subrogation to any of the rights of any holder against Financial until all of the Financial Obligations are indefeasibly paid in full. The payment of any amounts due with respect to any indebtedness of Financial now or hereafter owed to the Company is hereby subordinated to the prior payment in full of all of the Financial Obligations. The Company agrees that, after the occurrence of any default in the payment or performance of any of the Financial Obligations, the Company will not demand, sue for or otherwise attempt to collect any such indebtedness of Financial to the Company until all of the Financial Obligations shall have been paid in full. If, notwithstanding the foregoing sentence, the Company shall collect, enforce or receive any amounts in respect of such indebtedness while Financial Obligations are still outstanding, such amounts shall be collected, enforced and received by the Company as trustee for the holders and be paid over to the holders on account of the Financial Obligations without affecting in any manner the liability of the Company under the other provisions of this Section 23. The provisions of this Section 23.5 shall be supplemental to and not in derogation of any rights and remedies of the holders under any separate subordination agreement which the holders may at any time and from time to time enter into with the Company. Section 23.6. Termination. The Company's obligations hereunder shall continue in full force and effect until Financial Obligations are indefeasibly paid in full and this Agreement is terminated, provided that this Section 23 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 Financial Obligations is rescinded or must otherwise be restored or returned upon the bankruptcy, insolvency, or reorganization of Financial, or otherwise, as though such payment had not been made or other satisfaction occurred, whether or not any holder is in possession of this Agreement. 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 Financial Obligations shall impair, affect, be a defense to or claim against the obligations of the Company under this Section 23. Section 23.7. Effect of Bankruptcy. The Company's obligations under this Section 23 shall survive the insolvency of Financial and the commencement of any case or proceeding by or against Financial 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 or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes to which any Financial is subject shall postpone the obligations of the Company under this Section 23. Section 23.8. Setoff. Regardless of the other means of obtaining payment of any of the Financial Obligations, each of the holders is hereby authorized at any time and from time to time, without notice to the Company (any such notice being expressly waived by the Company) and to the fullest extent permitted by law, to set off and apply such deposits and other sums against the obligations of the Company under this Section 23, whether or not the holders shall have made any demand under this Section 23 and although such obligations may be contingent or unmatured. Section 23.9. Further Assurances. The Company agrees to do all such things and execute all such documents as the holders may consider necessary or desirable to give full effect to this Section 23 and to perfect and preserve the rights and powers of the holders hereunder.   If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Obligors, whereupon the foregoing shall become a binding agreement between you and the Obligors. Very truly yours, Astec Industries, Inc. By /s/ Richard W. Bethea Name: Richard W. Bethea Title: Executive Vice President     Astec Financial Services, Inc. /s/ Albert E. Guth Name: Albert E. Guth Title: President The foregoing is hereby agreed to as of the date thereof. [Variation]   Information Relating to Purchasers Principal Amount of Notes to be Purchased $3,000,000 Name and Address of Purchaser American United Life Insurance Company One American Square Post Office Box 368 Indianapolis, Indiana 46206-0368 Attention: Christopher D. Pahlke, Securities Department Overnight mailing address: One American Square Indianapolis, Indiana 46282 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Astec Industries, Inc. and Astec Financial Services, Inc., 7.56% Senior Secured Notes due 2011, PPN 04623# AA 3" and identifying the breakdown of principal and interest and the payment date) to:   Bank of New York Attention: P&I Department One Wall Street, 3rd Floor Window A New York, New York 10286 ABA #021000018, BNF:IOC566 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 35-0145825     Principal Amount of Notes to be Purchased $5,000,000, $5,000,000, $2,500,000 Name and Address of Purchaser The Guardian Life Insurance Company of America 7 Hanover Square New York, New York 10004-2616 Attention: Raymond J. Henry, Investment Department 20-D Fax Number: (212) 919-2656/2658 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Astec Industries, Inc. and Astec Financial Services, Inc., 7.56% Senior Secured Notes due 2011, PPN 04623# AA 3, principal, premium or interest") to: The Chase Manhattan Bank FED ABA #021000021 CHASE/NYC/CTR/BNF A/C 900-9-000200 Reference A/C #G05978, Guardian Life And the name and CUSIP for which payment is being made Notices All notices of payments, on or in respect of the Notes and written confirmation of each such payment to: The Guardian Life Insurance Company of America 7 Hanover Square New York, New York 10004-2616 Attention: Investment Accounting Dept. 17-B Fax Number: (212) 598-7011 All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: CUDD & CO. Taxpayer I.D. Number: 13-6022143     Principal Amount of Notes to be Purchased $1,000,000 Name and Address of Purchaser The Guardian Insurance & Annuity Company, Inc. c/o The Guardian Life Insurance Company of America 7 Hanover Square New York, New York 10004-2616 Attention: Raymond J. Henry, Investment Department 20-D Fax Number: (212) 919-2656/2658 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Astec Industries, Inc. and Astec Financial Services, Inc., 7.56% Senior Secured Notes due 2011, PPN 04623# AA 3, principal, premium or interest") to: The Chase Manhattan Bank FED ABA #021000021 CHASE/NYC/CTR/BNF A/C 900-9-000200 Reference A/C #G53637, GIAC - Guardian Tradition And the name and CUSIP for which payment is being made Notices All notices of payments, on or in respect of the Notes and written confirmation of each such payment to:   The Guardian Insurance & Annuity Company, Inc. c/o The Guardian Life Insurance Company of America 7 Hanover Square New York, New York 10004-2616 Attention: Investment Accounting Dept. 17-B Fax Number: (212) 598-7011 All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: CUDD & CO. Taxpayer I.D. Number: 13-6022143     Principal Amount of Notes to be Purchased $1,000,000 Name and Address of Purchaser Fort Dearborn Life Insurance Company c/o Guardian Asset Management Corp. 7 Hanover Square New York, New York 10004-2616 Attention: Raymond J. Henry, Fixed Income Securities 20-D Fax Number: (212) 919-2656/2658 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Astec Industries, Inc. and Astec Financial Services, Inc., 7.56% Senior Secured Notes due 2011, PPN 04623# AA 3, principal, premium or interest") to: Bank One ABA #044000037 For further credit to Bank One Account #980401787 Attn: A/C #2600218700 Ft. Dearborn Life Insurance - Guardian ISP All notices of payments, on or in respect of the Notes and written confirmation of each such payment to: Fort Dearborn Life Insurance Company c/o The Guardian Life Insurance Company of America 7 Hanover Square New York, New York 10004-2616 Attention: Investment Accounting Dept. 17-B Fax Number: (212) 598-7011 All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: Bank One & Co. Taxpayer I.D. Number: 362598882   Principal Amount of Notes to be Purchased $500,000 Name and Address of Purchaser Fort Dearborn Life Insurance Company c/o Guardian Asset Management Corp. 7 Hanover Square New York, New York 10004-2616 Attention: Raymond J. Henry, Fixed Income Securities 20-D Fax Number: (212) 919-2656/2658 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Astec Industries, Inc. and Astec Financial Services, Inc., 7.56% Senior Secured Notes due 2011, PPN 04623# AA 3, principal, premium or interest") to: Bank One ABA #044000037 For further credit to Bank One Account #980401787 Attn: A/C #2600218703 Ft. Dearborn Life Insurance Company - Guardian MVA All notices of payments, on or in respect of the Notes and written confirmation of each such payment to:   Fort Dearborn Life Insurance Company c/o The Guardian Life Insurance Company of America 7 Hanover Square New York, New York 10004-2616 Attention: Investment Accounting Dept. 17-B Fax Number: (212) 598-7011 All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: Bank One & Co. Taxpayer I.D. Number: 362598882     Principal Amount of Notes to be Purchased $4,000,000 Name and Address of Purchaser National Life Insurance Company One National Life Drive Montpelier, Vermont 05604 Attention: Private Placements Fax Number: (802) 223-9332 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Astec Industries, Inc. and Astec Financial Services, Inc., 7.56% Senior Secured Notes due 2011, PPN 04623# AA 3, principal, premium or interest") to: J.P. Morgan Chase & Co. New York, NY 10010 ABA #021000021 Account No. 910-4-017752 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 03-0144090   Principal Amount of Notes to be Purchased $3,000,000 Name and Address of Purchaser Life Insurance Company of the Southwest c/o National Life Insurance Company One National Life Drive Montpelier, Vermont 05604 Attention: Private Placements Fax Number: (802) 223-9332 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Astec Industries, Inc. and Astec Financial Services, Inc., 7.56% Senior Secured Notes due 2011, PPN 04623# AA 3, principal, premium or interest") to: J.P. Morgan Chase & Co. New York, NY 10010 ABA #021000021 Account No. 910-2-754349 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 75-0953004     Principal Amount of Notes to be Purchased $15,000,000 Name and Address of Purchaser Unum Life Insurance Company of America c/o Provident Investment Management, LLC One Fountain Square Chattanooga, Tennessee 37402 Attention: Private Placements Telephone: (423) 755-1172 Fax: (423) 755-3351 All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds to: CUDD & CO. c/o The Chase Manhattan Bank New York, New York ABA #021-000-021 SSG Private Income Processing For credit to: A/C #900-9-000200 Custodial Account Number G08287   Please reference: Issuer PPN 04623# AA 3 Coupon Maturity Principal=$__________ Interest=$___________ Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: CUDD & CO. Taxpayer I.D. Number for CUDD & Co.: 13-6022143   Principal Amount of Notes to be Purchased $13,000,000 Name and Address of Purchaser United of Omaha Life Insurance Company Mutual of Omaha Plaza Omaha, Nebraska 68175-1011 Attention: 4-Investment Loan Administration Payments All principal and interest payments on the Notes shall be made by wire transfer of immediately available funds to: Chase Manhattan Bank ABA #021-000-021 Private Income Processing   for credit to: United of Omaha Life Insurance Company Account Number 900-9000200 a/c G07097 Cusip/PPN: 04623# AA 3 Interest Amount: Principal Amount: Notices All notices of payments, on or in respect of the Notes and written confirmation of each such payment, corporate actions and reorganization notifications to: The Chase Manhattan Bank 4 New York Plaza-11th Floor New York, New York 10004 Attention: Income Processing-J. Pipperato a/c: G07097 All other notices and communications (i.e., quarterly/annual reports, tax filings, modifications, waivers regarding the indenture) to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 47-0322111   Principal Amount of Notes to be Purchased $2,000,000 Name and Address of Purchaser Companion Life Insurance Company c/o Mutual of Omaha Insurance Company Mutual of Omaha Plaza Omaha, Nebraska 68175-1011 Attention: 4 - Investment Loan Administration Telefacsimile: (402) 351-2913 Confirmation: (402) 351-2583 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds to:   Chase Manhattan Bank ABA #021000021 Private Income Processing for credit to: Companion Life Insurance Company Account Number 900-9000200 a/c G07903 Cusip/PPN: 04623# AA 3 Interest Amount: Principal Amount: Notices All notices of payments, on or in respect of the Notes and written confirmation of each such payment, corporate actions and reorganization notifications to: The Chase Manhattan Bank 4 New York Plaza-11th Floor New York, New York 10004 Attention: Investment Processing-J. Pipperato a/c: G07903 All other notices and communications (i.e., quarterly/annual reports, tax filings, modifications, waivers regarding the indenture) to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 13-1595128 Principal Amount of Notes to be Purchased $5,000,000 Name and Address of Purchaser Nationwide Life Insurance Company One Nationwide Plaza (1-33-07) Columbus, Ohio 43215-2220 Attention: Corporate Fixed-Income Securities Facsimile: (614) 249-4553 Payments All notices of payment on or in respect of the Notes and written confirmation of each such payment to: The Bank of New York ABA #021-000-018 BNF: IOC566 F/A/O Nationwide Life Insurance Company Attention: P&I Department PPN #04623# AA 3 Security Description: ______________________ Notices All notices of payment on or in respect of the Notes and written confirmation of each such payment to: Nationwide Life Insurance Company c/o The Bank of New York P. O. Box 19266 Newark, New Jersey 07195 Attention: P&I Department With a copy to: Nationwide Life Insurance Company One Nationwide Plaza (1-32-05) Columbus, Ohio 43215-2220 Attention: Investment Accounting All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 31-4156830   Principal Amount of Notes to be Purchased $2,000,000 Name and Address of Purchaser Nationwide Life and Annuity Insurance Company One Nationwide Plaza (1-33-07) Columbus, Ohio 43215-2220 Attention: Corporate Fixed-Income Securities Facsimile: (614) 249-4553 Payments All notices of payment on or in respect of the Notes and written confirmation of each such payment to: The Bank of New York ABA #021-000-018 BNF: IOC566 F/A/O Nationwide Life and Annuity Insurance Company Attention: P&I Department PPN #04623# AA 3 Security Description: __________________ Notices All notices of payment on or in respect of the Notes and written confirmation of each such payment to: Nationwide Life and Annuity Insurance Company c/o The Bank of New York P. O. Box 19266 Newark, New Jersey 07195 Attention: P&I Department With a copy to: Nationwide Life and Annuity Insurance Company One Nationwide Plaza (1-32-05) Columbus, Ohio 43215-2220 Attention: Investment Accounting All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 31-1000740     Principal Amount of Notes to be Purchased $18,000,000 Name and Address of Purchaser Teachers Insurance and Annuity Association of America 730 Third Avenue New York, New York 10017-3206 Payments All payments on or in respect of the Notes shall be made in immediately available funds at the opening of business on the due date by electonic funds transfer through the Automated Clearing House System to: Chase Manhattan Bank ABA #021-000-021 Account of: Teachers Insurance and Annuity Association of America Account Number 900-9-000200 For further credit to the TIAA Account Number: G07040 Reference: PPN#/Issuer/Mat. Date/Coupon Rate/P&I Breakdown Notices Contemporaneous with the above electronic funds transfer, advice setting forth (1) the full name, private placement number and interest rate of the Notes; (2) allocation of payment between principal, interest, premium and any special payment; and (3) name and address of Bank (or Trustee) from which wire transfer was sent, shall be delivered, mailed or faxed to: Teachers Insurance and Annuity Association of America 730 Third Avenue New York, New York 10017-3206 Attention: Securities Accounting Division Telephone: (212) 916-6004 Fax: (212) 916-6955 All other notices and communications shall be delivered or mailed to: Teachers Insurance and Annuity Association of America 730 Third Avenue New York, New York 10017-3206 Attention: Securities Division, Private Placements Telephone: (212) 916-5725 (Estelle Simsolo) (212) 490-9000 (General Number) Fax: (212) 916-6582 (Team Fax Number) Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 13-1624203 Defined Terms Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with GAAP, to the extent applicable, except where such principles are inconsistent with the express requirements of this Agreement. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such Person. As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: "Affiliate" means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of an Obligor or any Subsidiary or any corporation of which an Obligor and such Obligor's Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests. As used in this definition, "Control" 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, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of the Obligors. "Asset Disposition" means any Transfer except: (a) any (i) Transfer from a Subsidiary to an Obligor or a Subsidiary; and (ii) Transfer from an Obligor to a Subsidiary, so long as immediately before and immediately after the consummation of any such Transfer and after giving effect thereto, no Default or Event of Default exists; and (b) any Transfer made in the ordinary course of business and involving only property that is either (i) inventory held for sale or (ii) equipment, fixtures, supplies or materials no longer required in the operation of the business of an Obligor or any Subsidiary or that is obsolete or (iii) receivables owned by an Obligor or a Subsidiary being transferred to a Special Purpose Subsidiary for fair market value pursuant to the Permitted Receivables Securitization Program. "Bank Credit Agreement" means that certain Credit Agreement dated as of April 7, 2000 among Bank One, N.A., as agent, the other parties thereto and the Obligors, as amended, modified, refinanced, replaced or supplemented. "Banks" means the several banks and other financial institutions from time to time parties to the Bank Credit Agreement. "Business Day" means (a) for the purposes of Section 8.7 only, any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in Chicago, Illinois are required or authorized to be closed. "Capital Lease" means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. "Change of Control" means the direct or indirect beneficial ownership (whether by way of an amalgamation, merger or otherwise) by any Person or group of Persons acting in concert of more than 25% of the issued and outstanding Voting Stock of the Company. "Closing" is defined in Section 3. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "Company" means Astec Industries, Inc., a Tennessee corporation. "Confidential Information" is defined in Section 20. "Consolidated Earnings Available for Fixed Charges" means, with respect to any period, Consolidated Net Earnings for such period plus (to the extent deducted to calculate Consolidated Net Earnings): (a) all provisions for income taxes; and (b) Consolidated Fixed Charges for such period, provided that, in the event any Person (or the assets thereof) is acquired by the Company or any Subsidiary (whether by merger, consolidation, asset or stock acquisition or otherwise) at any time during the period of calculation, such acquisition shall be deemed to have been made on the first day of such calculation period. "Consolidated Fixed Charges" means, with respect to any period, the sum of (i) Interest Expense for such period plus (ii) Lease Rentals for such period, determined on a consolidated basis for the Company and its Subsidiaries (excluding Special Purpose Subsidiaries), provided that, in the event any Person (or the assets thereof) is acquired by the Company or any Subsidiary (whether by merger, consolidation, asset or stock acquisition or otherwise) at any time during the period of calculation, such acquisition shall be deemed to have been made on the first day of such calculation period. "Consolidated Net Earnings" means the net earnings (or loss) of the Company and its Subsidiaries (excluding Special Purpose Subsidiaries) for such period (taken as a cumulative whole), as determined in accordance with GAAP, excluding (to the extent deducted to calculate Consolidated Net Earnings): (i) extraordinary gain and losses; and (ii) any equity interest of the Company on the unremitted earnings of any Person that is not a Subsidiary. "Consolidated Net Worth" means the value of stockholders' equity of the Company and its Subsidiaries (excluding Special Purpose Subsidiaries) determined on a consolidated basis in accordance with GAAP. "Consolidated Operating Cash Flow" means Consolidated Net Earnings for the previous four quarters plus (to the extent deducted to calculate Consolidated Net Earnings): (i) provisions for federal, state and local income taxes; (ii) Interest Expense; and (iii) depreciation and amortization, all in accordance with GAAP, provided that, in the event any Person (or the assets thereof) is acquired by the Company or any Subsidiary (whether by merger, consolidation, asset or stock acquisition or otherwise) at any time during the period of calculation, such acquisition shall be deemed to have been made on the first day of such calculation period. "Consolidated Total Assets" means the total assets of the Company and its Subsidiaries (excluding Special Purpose Subsidiaries), determined on a consolidated basis in accordance with GAAP. "Consolidated Total Debt" means, without duplication, all Indebtedness of the Company and its Subsidiaries (excluding Special Purpose Subsidiaries), including current maturities of such obligations, determined on a consolidated basis in accordance with GAAP. "Debt Prepayment Application" means, with respect to any Transfer of property, the application by an Obligor or any Subsidiary (excluding Special Purpose Subsidiaries) of cash in an amount equal to the Net Sales Amount (or portion thereof) with respect to such Transfer to pay Senior Debt of an Obligor or any Subsidiary, (excluding Special Purpose Subsidiaries) (other than Senior Debt in respect of any revolving credit or similar credit facility providing an Obligor or any Subsidiary with the right to obtain loans or other extensions of credit from time to time, except to the extent that in connection with such payment of Senior Debt the availability of credit under such credit facility is permanently reduced by an amount not less than the amount of such proceeds applied to the payment of such Senior Debt), provided that in the course of making such application such Obligor or such Subsidiary shall offer to prepay each outstanding Note in a principal amount which, when added to the Make-Whole Amount applicable thereto, equals the Ratable Portion for such Note (which offer shall be in writing and shall offer to prepay the Ratable Portion of the Notes on a date which is not less than 30 days after the date of the notice of offer). If any holder of a Note fails to accept in writing such offer of prepayment within 15 day of receipt of the notice of offer, then, for purposes of the preceding sentence only, such Obligor or such Subsidiary nevertheless will be deemed to have paid Senior Funded Debt in an amount equal to the Ratable Portion for such Note. "Ratable Portion" for any Note means an amount equal to the product of (x) the Net Sales Amount being so applied to the payment of Senior Debt multiplied by (y) a fraction the numerator of which is the outstanding principal amount of such Note and the denominator of which is the aggregate principal amount of Senior Debt of the Company and its Subsidiaries (excluding Special Purpose Subsidiaries). "Default" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "Default Rate" means that rate of interest that is the greater of (i) 2.00% per annum above the rate of interest stated in clause (a) of the first paragraph of the Notes or (ii) 2.00% over the rate of interest publicly announced by Bank One, N.A. in Chicago, Illinois as its "prime" rate. "Disposition Value" means, at any time, with respect to any property (a) in the case of property that does not constitute stock of a Subsidiary, the book value thereof, valued at the time of such disposition in good faith by the Obligors, and (b) in the case of property that constitutes stock of a Subsidiary, an amount equal to that percentage of book value of the assets of the Subsidiary that issued such stock as is equal to the percentage that the book value of such stock represents of the book value of all of the outstanding capital stock of such Subsidiary (assuming, in making such calculations, that all securities convertible into such capital stock are so converted and giving full effect to all transactions that would occur or be required in connection with such conversion) determined at the time of the disposition thereof, in good faith by the Obligors. "Environmental Laws" means any and all applicable Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA Affiliate" means any trade or business (whether or not incorporated) that is treated as a single employer together with either Obligor under section 414 of the Code. "Event of Default" is defined in Section 11. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Financing Documents" shall mean and include this Agreement, the other Agreements, the Notes and the Pledge Agreement, in each case, as amended or modified. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America. "Governmental Authority" means (a) the government of (i) the United States of America or any State or other political subdivision thereof, or (ii) any jurisdiction in which an Obligor or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of an Obligor or any Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "Guaranty" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness or obligation or any property constituting security therefor; (b) to advance or supply funds (i) for the purchase or payment of such Indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation; (c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of any other Person to make payment of the Indebtedness or obligation; or (d) otherwise to assure the owner of such Indebtedness or obligation against loss in respect thereof. In any computation of the Indebtedness or other liabilities of the obligor under any Guaranty, the Indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "Hazardous Material" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls). "holder" means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Obligors pursuant to Section 13.1. "Indebtedness" with respect to any Person means, at any time, without duplication, (a) its liabilities for borrowed money; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) all liabilities appearing on its balance sheet in accordance with GAAP in respect of Capital Leases; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (e) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money) to the extent, in each case, such letters of credit or instruments have been drawn upon; and (f) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof. Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "Institutional Investor" means (a) any original purchaser of a Note, (b) any holder of a Note holding more than 10% of the aggregate principal amount of the Notes then outstanding, and (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "Intercreditor Agreement" is defined in Section 2.2. "Interest Expense" means, for any period, the interest expense of the Company and its Subsidiaries, other than Special Purpose Subsidiaries, (including imputed interest in respect of Capital Leases), in respect of all Consolidated Total Debt, and all debt discount and expense amortized or required to be amortized in the determination of Consolidated Net Earnings for such period. "Investment" means any investment, made in cash or by delivery of property, by either of the Obligors or any of their Subsidiaries (i) in any Person, whether by acquisition of stock, debt or other obligation or security, or by loan, Guaranty, advance, capital contribution or otherwise, or (ii) in any property. "Lease Rentals" means, with respect to any period, the sum of the rentals and other obligations required to be paid during such period by the Company or any Subsidiary as lessee under all leases of real or personal property (other than Capital Leases), excluding any amount required to be paid by the lessee on the count of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges, provided, that, if at the date of determination, any such rental or other obligations are contingent or not otherwise definitely determinable by the terms of the related lease, the amount of such obligations (i) shall be assumed to be equal to the amount of such obligations for the period of 12 consecutive calendar months immediately preceding the date of determination or (ii) if the related lease was not in effect during such preceding 12-month period, shall be the amount estimated by a Senior Financial Officer of the Company on a reasonable basis and in good faith. "Lien" means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). "Make-Whole Amount" is defined in Section 8.7. "Material" means material in relation to the business, operations, affairs, financial condition, assets, properties, or prospects of the Obligors and their Subsidiaries taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Obligors and their Subsidiaries taken as a whole, or (b) the ability of either Obligor to perform its obligations under any of the Financing Documents, or (c) the validity or enforceability of this Agreement or the Notes. "Memorandum" is defined in Section 5.3. "Multiemployer Plan" means any Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "Net Sales Amount" means, with respect to any Transfer of any property by an Obligor or any Subsidiary, an amount equal to the difference of: (a) the aggregate amount of consideration (valued at the fair market value thereof by such Obligor or such Subsidiary in good faith) received by such Obligor or such Subsidiary in respect of such Transfer minus (b) all ordinary and reasonable out-of-pocket costs and expenses actually incurred by such Obligor or such Subsidiary in connection with such Transfer. "Notes" is defined in Section 1. "Officer's Certificate" means with respect to an Obligor, a certificate of a Senior Financial Officer or of any other officer of such Obligor whose responsibilities extend to the subject matter of such certificate. "Other Agreements" is defined in Section 2. "Other Purchasers" is defined in Section 2. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "Permitted Investments" means and includes: (a) Investments in property to be used in the ordinary course of business of the Obligors and their Subsidiaries; (b) Investments in current assets arising from the sale of goods and services in the ordinary course of business of the Obligors and their Subsidiaries (other than Special Purpose Subsidiaries); (c) Investments existing as of the date of the Note Agreement and described on Schedule 10.5; (d) Investment in or advances to one or more Subsidiaries (other than Special Purpose Subsidiaries) or any Person that concurrently with such investment becomes a Subsidiary (other than Special Purpose Subsidiaries); (e) Investments by the Obligors and their Subsidiaries in Special Purpose Subsidiaries consisting solely of the minimum equity investment reasonably necessary to conduct the Permitted Receivables Securitization Program; (f) Investments by Special Purpose Subsidiaries in receivables purchased by such Special Purpose Subsidiaries from an Obligor or another Subsidiary pursuant to the Permitted Receivables Securitization Program (and the proceeds from such receivables); (g) certificates of deposit and banker's acceptances with final maturities of one year or less issued by U.S., Canadian or South African commercial banks having capital and surplus in excess of $100,000,000; (h) commercial paper with a minimum rating of "A1" or "P1" by either Standard & Poor's Corporation or Moody's Investors Service, respectively, and maturing not more than 270 days from the date acquired; (i) direct obligations of the United States or United States agency obligations with a maturity of one year or less; (j) Investments in repurchase agreements; (k) tax exempt state or municipal general obligation bonds rated "AA" or better by Standard & Poor's Corporation, "Aa2" or better by Moody's Investors Services or an equivalent rating by any other credit rating agency of recognized national standing, provided that such obligations mature within 365 days from the date of acquisition thereof; and (l) other Investments not to exceed, in the aggregate, 15% of Consolidated Net Worth. For purposes of applying the limitations set forth in Section 10.5, Permitted Investments shall be valued at the original cost thereof less any amount repaid or recovered in cash on account of capital or principal. "Permitted Receivables Securitization Program" means one or more transactions wherein the Company and/or a Subsidiary transfers under a true sale transaction receivables of the Company and/or such Subsidiary to a Special Purpose Subsidiary which issues or incurs Indebtedness secured solely by such receivables, provided however, that (i) such Indebtedness is recourse only to such receivables, (ii) the aggregate principal amount of all Indebtedness outstanding of all Special Purpose Subsidiaries pursuant to such transactions shall not at any time exceed $150,000,000 and (iii) at the time of any such transaction and immediately after giving effect thereto, no Default or Event of Default would exist. "Person" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "Plan" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by an Obligor or any ERISA Affiliate or with respect to which an Obligor or any ERISA Affiliate may have any liability. "Pledge Agreement" is defined in Section 2.2. "Priority Debt" means the sum, without duplication, of (i) Indebtedness of the Obligors secured by Liens not otherwise permitted by clauses (a) through (i) of Section 10.8; and (ii) all Indebtedness of all Subsidiaries (other than Financial and any Special Purpose Subsidiary) not otherwise permitted by clauses (a), (b) or (c) of Section 10.7. "property" or "properties" means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate. "Property Reinvestment Application" means, with respect to any Asset Disposition of property, the application of the Net Sales Amount (or a portion thereof) with respect to such Asset Disposition to the acquisition by an Obligor or any Subsidiary (other than a Special Purpose Subsidiary) of operating assets of such Obligor or such Subsidiary to be used in the business of such person. "QPAM Exemption" means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. "Required Holders" means, at any time, the holders of at least 51% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by an Obligor or any of its Affiliates). "Responsible Officer" means, with respect to an Obligor, any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this Agreement. "Secured Parties" has the meaning provided in the Intercreditor Agreement. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Senior Debt" means and includes (i) any Debt of an Obligor owing to any Person which is not a Subsidiary or Affiliate and which is not expressed to be junior or subordinate to any other Debt of such Obligor and (ii) Debt of any Subsidiary (excluding Special Purpose Subsidiaries) due and owing to any Person other than an Obligor, another Subsidiary or an Affiliate. "Senior Financial Officer" means, with respect to an Obligor, the chief financial officer, principal accounting officer, treasurer or comptroller of the Company. "Special Purpose Subsidiary" means a Wholly-Owned Subsidiary organized under the laws of the United States or any State thereof and authorized solely to (i) purchase receivables from the Company or a Subsidiary and issue Indebtedness with recourse solely to such receivables and (ii) engage in activities reasonably necessary to effectuate the transactions referred to in clause (i). "Subsidiary" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. "Transfer" means with respect to any Person, any transaction in which such Person sells, conveys, transfers or leases (as lessor) any of its property, including any disposition of any capital stock of any Subsidiary or the assets of any Subsidiary, whether by merger, consolidation or otherwise. "Voting Stock" means capital stock of any class or classes of a corporation having power under ordinary circumstances to vote for the election of members of the board of directors of such corporation, or persons performing similar functions (irrespective of whether or not at the time stock of any of the class or classes shall have or might have special voting power or rights by reason of the happening of any contingency). "Wholly-Owned Subsidiary" means, at any time, any Subsidiary one hundred percent (100%) of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of an Obligor and the Obligor's other Wholly-Owned Subsidiaries at such time. Subsidiaries of the Obligors and Ownership of Subsidiary Stock Owned Jurisdiction of Organization Percent of Stock Owned AI Development Group, Inc. Minnesota 100 AI Enterprises, Inc. Minnesota 100 American Augers, Inc. Delaware 100 Astec Export Company, Inc. Barbados 100 Astec Financial Services, Inc. Tennessee 100 Astec Holdings, Inc. Tennessee 100 Astec, Inc. Tennessee 100 Astec Investments, Inc. Tennessee 100 Astec Systems, Inc. Tennessee 100 Astec Transportation, Inc. Tennessee 100 Breaker Technology, Inc. Tennessee 100 Breaker Technology, Ltd. Ontario 100 Carlson Paving Products, Inc. Washington 100 CEI Enterprises, Inc. Tennessee 100 Heatec, Inc. Tennessee 100 Johnson Crushers International, Inc. Tennessee 100 Kolberg-Pioneer, Inc. Tennessee 100 Osborn Engineered Products (Pty) Ltd South Africa 88 Production Engineered Products, Inc. Nevada 100 RI Properties, Inc. Minnesota 100 Roadtec, Inc. Tennessee 100 Superior Industries of Morris, Inc. Minnesota 100 TI Services, Inc. Minnesota 100 Telsmith, Inc Delaware 100 Trencor, Inc. Texas 100   Financial Statements Consolidated Financial Statements dated as of the year ended December 31, 2000. Consolidated Financial Statements dated as of June 30, 2001. Existing Indebtedness as of 8/30/01 of Astec and Subsidiaries   Description Balance Astec Industries, Inc. Existing Bank One Credit Agreement $70,500,000 Telsmith, Inc. Industrial Revenue Bonds 2,500,000 Trencor, Inc. Industrial Revenue Bonds 8,000,000 Kolberg-Pioneer, Inc. Industrial Revenue Bonds 9,200,000 Superior Industries of Morris, Inc. Notes Payable 69,128 Astec Industries, Inc. Notes Payable 164,670 Breaker Technology Ltd Toku Notes Payable (as of 7/31/01) 3,289,787 Other Notes Payable   20,500   Contingent Obligations   Guaranty by Astec Industries, Inc. of $1,250,000 line of credit for Pavement Technology, Inc. Guaranty by Astec Industries, Inc. of R30,000,000 ($3,750,000) line of credit for Osborn Engineered Products (Pty) Ltd. Letters of Credit: See attached Schedule. Schedule       CUSTOMER     COMPANY LETTER OF CREDIT NO. MAXIMUM AMOUNT (US Dollars) LETTER OF CREDIT EXPIRATION DATE Haitai International Trencor 00315546 $425,323.08   Bank One-Dallas Trencor 00315672 $8,105,206.00 November 22, 2002 Chuquicamata Breaker Tech 00322183 $38,500.00 April 30, 2002 Diavik Diamond Mines Breaker Tech. 00323653 $17,560.15 April 30, 2004 Gehouba Group Breaker Tech 00323756 $24,202.00 September 30, 2002 Leighton Contractors Trencor 00323759 $282,000.00 December 31, 2001 Jiangsu Sumec American Augers 00323908 $288,876.75 October 30, 2001 Bilfinger+Berger Astec, Inc. 00325167 $480,000.00 October 15, 2001 Royal Bank of Canada Breaker Tech 00325288 $50,113.09 June 27, 2002 (Evergreen) Earth Products Pavement Tech 00325331 $7,700.00 February 28, 2002 Toronto Dominion Bank Breaker Tech 00325332 $36,206.50 October 31, 2002 Luossavaara-Kiirunavaara Breaker Tech 00325513 $50,000.00 January 31, 2002 Luossavaara-Kiirunavaara Breaker Tech 00325514 $50,000.00 June 15, 2001 Luossavaara-Kiirunavaara Breaker Tech 00325515 $50,000.00 April 30, 2002 Luossavaara-Kiirunavaara Breaker Tech 00325516 $50,000.00 March 30, 2002 Sinochem Intern'l Astec, Inc. 00325578 $157,817.30 May 25, 2002 Shandong Machinery Breaker Tech 00325591 $12,000.00 January 10, 2002 First National Bank of Chicago Kolberg-Pioneer 00352637 $9,338,000.00 November 21, 2002 Toronto-Dominion Bank Breaker Tech. 00352868 $169,867.70 August 31, 2002 Corporacion Nacional Breaker Tech 00323392 $21,942.31 July 30, 2002 Corporacion Nacional Breaker Tech 00323394 $34,862.00 August 30, 2002 M & I Telsmith   $2,500,000.00 February 2006             [Form of Note] Astec Industries, Inc. Astec Financial Services, Inc. 7.56% Senior Secured Note due September 10, 2011 No. [_________] [Date] $[____________] PPN 04623# AA 3 For Value Received, the undersigned, Astec Industries, Inc. (herein called the "Company"), a corporation organized and existing under the laws of the State of Tennessee and Astec Financial Services, Inc., a corporation organized and existing under the laws of the State of Tennessee (together with the Company, the "Obligors"), hereby, jointly and severally, promise to pay to [________________], or registered assigns, the principal sum of [________________] Dollars on September 10, 2011, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 7.56% per annum from the date hereof, payable semiannually, on each March 10 and September 10 in each year, commencing with the March 10 or September 10 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 9.56% or (ii) 2.00% over the rate of interest publicly announced by Bank One, N.A. from time to time in Chicago, Illinois as its "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at Bank One, N.A., Chicago, Illinois or at such other place as the Obligors shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of Senior Secured Notes (herein called the "Notes") issued pursuant to separate Note Purchase Agreements, dated as of September 10, 2001 (as from time to time amended, the "Note Purchase Agreements"), between the Obligors and the respective Purchasers named therein and is entitled to the benefits thereof. The payment and performance hereof is secured by that certain Pledge Agreement dated as of September 10, 2001 from the Company to Bank One, N.A., as Pledgee. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreements, provided that such holder may (in reliance upon information provided by the Obligors, which shall not be unreasonably withheld) make a representation to the effect that the purchase by such holder of any Note will not constitute a non-exempt prohibited transaction under section 406(a) of ERISA. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Obligors may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Obligors will not be affected by any notice to the contrary. The Obligors will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreements. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. This Note shall be construed and enforced in accordance with, and the rights and parties shall be governed by, the law of the State of Illinois, excluding choice-of-law principles of the law of such State which would require application of the laws of a jurisdiction other than such State. Astec Industries, Inc.     By Name: Title:   Astec Financial Services, Inc.     By Name: Title: Description of Opinion of Special Counsel to the Obligors The closing opinion of Chambliss, Bahner & Stophel, P.C., Special Counsel for the Obligors, which is called for by Section 4.4(a) of the Note Purchase Agreements, shall be dated the date of the Closing and addressed to the Purchasers, shall be satisfactory in scope and form to the Purchasers and shall be to the effect that: 1. Each Obligor is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Tennessee, has the corporate power and the corporate authority to execute and perform the Note Purchase Agreements and the Pledge Agreement and to issue the Notes and has the full corporate power and the corporate authority to conduct the activities in which it is now engaged and is duly licensed or qualified and is in good standing as a foreign corporation in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business transacted by it makes such licensing or qualification necessary. 2. Each Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and is duly licensed or qualified and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business transacted by it makes such licensing or qualification necessary and all of the issued and outstanding shares of capital stock of each such Subsidiary have been duly issued, are fully paid and non-assessable and are owned by the Company, by one or more Subsidiaries, or by the Company and one or more Subsidiaries. 3. Each Note Purchase Agreement has been duly authorized by all necessary corporate action on the part of each Obligor, has been duly executed and delivered by each Obligor and constitutes the legal, valid and binding contract of each Obligor enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 4. The Notes have been duly authorized by all necessary corporate action on the part of each Obligor, have been duly executed and delivered by each Obligor and constitute the legal, valid and binding obligations of each Obligor enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 5. The Pledge Agreement has been duly authorized by all necessary corporate action of the part of the Company, has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligations of the Company enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). The Pledge Agreement creates a Lien on the Pledged Assets (as defined therein) in favor of the Collateral Agent free and clear of all other Liens. The Pledged Assets have been delivered to the Collateral Agent and/or U.C.C. filings have been made in respect of the security interest of the Collateral Agent and no other delivery, filing or recording is necessary to perfect the Lien of the Pledge Agreement or the Pledged Assets against the creditors of, and purchasers from, the Company. 6. No approval, consent or withholding of objection on the part of, or filing, registration or qualification with, any governmental body, Federal or state, is necessary in connection with the execution and delivery of the Note Purchase Agreements, the Pledge Agreement or the Notes. 7. The issuance and sale of the Notes and the execution, delivery and performance by the Obligors of the Note Purchase Agreements and by the Company of the Pledge Agreements do not conflict with or result in any breach of any of the provisions of or constitute a default under or result in the creation or imposition of any Lien upon any of the property of either Obligor pursuant to the provisions of the Articles of Incorporation or By-laws of either Obligor or any agreement or other instrument known to such counsel to which either Obligor is a party or by which either Obligor may be bound (other than the lien of Pledge Agreement. 8. The issuance, sale and delivery of the Notes under the circumstances contemplated by the Note Purchase Agreements do not, under existing law, require the registration of the Notes under the Securities Act of 1933, as amended, or the qualification of an indenture under the Trust Indenture Act of 1939, as amended. The opinion of Chambliss, Bahner & Stophel, P.C. shall cover such other matters relating to the sale of the Notes as the Purchasers may reasonably request. With respect to matters of fact on which such opinion is based, such counsel shall be entitled to rely on appropriate certificates of public officials and officers of the Obligors. Description of Opinion of Special Counsel to the Purchasers The closing opinion of Chapman and Cutler, special counsel to the Purchasers, called for by Section 4.4(b) of the Note Purchase Agreements, shall be dated the date of the Closing and addressed to the Purchasers, shall be satisfactory in form and substance to the Purchasers and shall be to the effect that: 1. Each Obligor is a corporation, validly existing and in good standing under the laws of the State of Tennessee and has the corporate power and the corporate authority to execute and deliver the Note Purchase Agreements and to issue the Notes. 2. Each Note Purchase Agreement constitutes the legal, valid and binding contract of each Obligor enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 3. The Notes constitute the legal, valid and binding obligations of each Obligor enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 4. The Pledge Agreement constitutes the legal, valid and binding contract of each Obligor enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law) 5. The issuance, sale and delivery of the Notes under the circumstances contemplated by the Note Purchase Agreements do not, under existing law, require the registration of the Notes under the Securities Act of 1933, as amended, or the qualification of an indenture under the Trust Indenture Act of 1939, as amended. The opinion of Chapman and Cutler shall also state that the opinion of Chambliss, Bahner & Stophel, P.C. is satisfactory in scope and form to Chapman and Cutler and that, in their opinion, the Purchasers are justified in relying thereon. In rendering the opinion set forth in paragraph 1 above, Chapman and Cutler may rely solely upon an examination of the Articles of Incorporation certified by, and a certificate of good standing of each Obligor from, the Secretary of State of the State of Tennessee and the By-laws of each Obligor. The opinion of Chapman and Cutler is limited to the laws of the State of Illinois and the Federal laws of the United States. With respect to matters of fact upon which such opinion is based, Chapman and Cutler may rely on appropriate certificates of public officials and officers of the Obligor and upon representations of the Obligors and the Purchasers delivered in connection with the issuance and sale of the Notes.

Exhibit 10.1 EXECUTIVE EMPLOYMENT AGREEMENT              This Executive Employment Agreement is made and entered into by and between Labor Ready, Inc., a Washington corporation, including its subsidiaries ("Company"), and Timothy J. Adams ("Executive"), effective as of May 28, 2001.   RECITALS              WHEREAS, Executive has been serving as Director of Legal Services for the Company;              WHEREAS, Company believes that Executive's experience, knowledge of corporate affairs, reputation and abilities are of great value to Company's future growth and profits; and              WHEREAS, Company wishes to continue to employ Executive and Executive is willing to continue to be employed by Company; and              WHEREAS, the Company’s Board of Directors has elected Executive to the offices of Executive Vice President and General Counsel;              NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the Company and Executive agree as follows:              1.          Employment.  The Company agrees to and hereby does employ Executive, and Executive hereby agrees to continue in the employment of the Company, subject to the supervision and direction of the Chief Executive Officer and the Board of Directors.  Executive’s employment shall be for a period commencing on May 28, 2001 and ending on May 27, 2006, unless such period is extended by written agreement of the parties or is sooner terminated pursuant to the provisions of Paragraphs 4, 11 or 12.              2.          Duties of Executive.  Executive agrees to devote the necessary time, attention, skill and efforts to the performance of his duties as Executive Vice President and General Counsel of the Company and such other duties as may be assigned by the Board of Directors in its discretion.              3.          Compensation.                            (a)         Executive's initial salary shall be at the rate of Two Hundred Twenty Thousand and No/100 Dollars ($220,000) per year, payable biweekly, from May 28, 2001, until changed by the Board of Directors as provided herein.                            (b)        Company, acting through its Board of Directors, may (but shall not be required to) increase, but may not decrease, Executive's compensation and award to Executive such bonuses as the board may see fit, in its sole and unrestricted discretion, commensurate with Executive's performance and the overall performance of the Company.  Executives compensation shall be reviewed annually by the Compensation Committee of the Board of Directors.              4.          Failure to Pay Executive.  The failure of Company to pay Executive his salary as provided in Paragraph 3 may, in Executive's sole discretion, be deemed a breach of this Agreement and, unless such breach is cured within fifteen days after written notice to Company, this Agreement shall terminate.  Executive’s claims against Company arising out of the nonpayment shall survive termination of this Agreement.              5.          Options to Purchase Common Stock.  Executive is granted unvested options to purchase 250,000 shares of the Company’s common stock.  The terms and conditions of the options are set forth in Exhibits A and B.              6.          Reimbursement for Expenses.  Company shall reimburse Executive for reasonable out-of-pocket expenses that Executive shall incur in connection with his services for Company contemplated by this Agreement, on presentation by Executive of appropriate vouchers and receipts for such expenses to Company.  At times it may be in the best interests of the Company for Executive's spouse to accompany him on such business travel.  On such occasions Company shall reimburse Executive for reasonable out-of-pocket expenses incurred for his spouse.  Such occasions shall be determined by guidelines established by the Chief Executive Officer or the Board of Directors, or in the absence of such guidelines, by Executive's sound discretion.              7.          Vacation.  Executive shall be entitled each year during the term of this Agreement to a vacation of twenty (20) business days, no two of which need be consecutive, during which time his compensation shall be paid in full.  The length of annual vacation time shall increase by one day for every year of service to the Company after 2001 to a maximum of 25 business days per year.              8.          Change in Ownership or Control.  In the event of a change in the ownership of Company, effective control of Company, or the ownership of a substantial portion of Company's assets, all unvested stock options shall immediately vest.              9.          Liability Insurance and Indemnification.  The Company shall procure and maintain throughout the term of this Agreement a policy or policies of liability insurance for the protection and benefit of directors and officers of the Company.  Such insurance shall have a combined limit of not less than $10,000,000.00 and may have a deductible of not more than $100,000.00.  To the fullest extent permitted by law, Company shall indemnify and hold harmless Executive for any and all lost, cost, damage and expense including attorneys’ fees and court costs incurred or sustained by Executive, arising out of the proper discharge by Executive of his duties hereunder in good faith.              10.        Other Benefits.  Executive shall be entitled to all benefits offered generally to employees of Company.  Nothing in this Agreement shall be construed as limiting or restricting any benefit to Executive under any pension, profit-sharing or similar retirement plan, or under any group life or group health or accident or other plan of the Company, for the benefit of its employees generally or a group of them, now or hereafter in existence.              11.        Termination by Company.  Company may terminate this Agreement under either of the following circumstances:   (a) Company may terminate this Agreement and Executive’s employment for cause (as defined hereinbelow) at any time upon written notice to Executive. The notice of termination must specify those actions or inactions upon which the termination is based. Cause shall exist if any of the following occurs:         (i) Executive is convicted or indicted of a crime involving dishonesty, fraud or moral turpitude;         (ii) Company believes in good faith that Executive has engaged in fraud, embezzlement, theft or other dishonest acts;         (iii) Executive violates Company’s Drug Free Workplace Policy;         (iv) Executive commits any willful act or omission with an intent to negatively impact Company;         (v) Executive refuses to attempt in good faith to perform his normal duties to the best of his ability, within ten (10) days after written notice from Company;         (vi) Executive is guilty of insubordination which materially hinders the maximization of productivity between Executive and his superiors; or         (vii) Executive breaches this Agreement in any other material respect and does not cure such breach within ten (10) days after written notice from Company.         (b) In the event that Executive shall, during the term of his employment hereunder, fail to perform his duties as the result of illness or other incapacity and such illness or other incapacity shall continue for a period of more than six months, the Company shall have the right, by written notice either personally delivered or sent by certified mail, to terminate Executive's employment hereunder as of a date (not less than 30 days after the date of the sending of such notice) to be specified in such notice.                12.        Termination by Executive.  If Company shall cease conducting its business, take any action looking toward its dissolution or liquidation, make an assignment for the benefit of its creditors, admit in writing its inability to pay its debts as they become due, file a voluntary petition or be the subject of an involuntary petition in bankruptcy, or be the subject of any state or federal insolvency proceeding of any kind, then Executive may, in his sole discretion, by written notice to Company, terminate his employment and Company hereby consents to the release of Executive under such circumstances and agrees that if Company ceases to operate or to exist as a result of such event, the non-competition and other provisions of Paragraph 16 of this Agreement shall terminate.  In addition, Executive shall have the right to terminate this Agreement upon giving three (3) months written notice to Company.              13.        Communications to Company.  Executive shall communicate and channel to Company all knowledge, business, and customer contacts and any other matters of information that could concern or be in any way beneficial to the business of Company, whether acquired by Executive before or during the term of this Agreement; provided, however, that nothing under this Agreement shall be construed as requiring such communications where the information is lawfully protected from disclosure as a trade secret of a third party.              14.        Binding Effect.  This Agreement shall be binding on and shall inure to the benefit of any successor or successors of employer and the personal representatives of Executive.              15.        Confidential Information.                            (a)         As the result of his duties, Executive will necessarily have access to some or all of the confidential information pertaining to Company's business.  It is agreed that "Confidential Information" of Company includes:                            (1)         The ideas, methods, techniques, formats, specifications, procedures, designs, systems, processes, data and software products which are unique to Company;                            (2)         All customer, marketing, pricing and financial information pertaining to the business of Company;                            (3)         All operations, sales and training manuals;                            (4)         All other information now in existence or later developed which is similar to the foregoing; and                            (5)         All information which is marked as confidential or explained to be confidential or which, by its nature, is confidential.                            (b)        Executive understands that he will necessarily have access to some or all of the Confidential Information.  Executive recognizes the importance of protecting the confidentiality and secrecy of the Confidential Information and, therefore, agrees to use his best efforts to protect the Confidential Information from unauthorized disclosure to other persons.  Executive understands that protecting the Confidential Information from unauthorized disclosure is critically important to the success and competitive advantage of Company and that the unauthorized disclosure of the Confidential Information would greatly damage Company.                            (c)         Executive agrees not to disclose any Confidential Information to others or use any Confidential Information for his own benefit.  Executive further agrees that upon request of the Chief Executive Officer of Company, he shall immediately return all Confidential Information, including any copies of Confidential Information in his possession.              16.        Covenants Against Competition.  It is understood and agreed that the nature of the methods employed in Company's business is such that Executive will be placed in a close business and personal relationship with the customers of Company. Thus, during the term of this Executive Employment Agreement and for a period of two (2) years immediately following the termination of Executive's employment, for any reason whatsoever, so long as Company continues to carry on the same business, said Executive shall not, for any reason whatsoever, directly or indirectly, for himself or on behalf of, or in conjunction with, any other person, persons, company, partnership, corporation or business entity:                            (a)         Call upon, divert, influence or solicit or attempt to call, divert, influence or solicit any customer or customers of Company;                            (b)        Divulge the names and addresses or any information concerning any customer of Company;                            (c)         Solicit, induce or otherwise influence or attempt to solicit, induce or otherwise influence any employee of the Company to leave his or her employment;                           (d)        Own, manage, operate, control, be employed by, participate in or be connected in any manner with the ownership, management, operation or control of the same, similar, or related line of business as that carried on by Company within a radius of twenty-five (25) miles from any then existing or proposed office of Company; and              The time period covered by the covenants contained herein shall not include any period(s) of violation of any covenant or any period(s) of time required for litigation to enforce any covenant.  If the provisions set forth are determined to be too broad to be enforceable at law, then the area and/or length of time shall be reduced to such area and time and that shall be enforceable.              17.        Enforcement of Covenants.                            (a)         The covenants set forth herein on the part of Executive shall be construed as an agreement independent of any other provision in this Executive Employment Agreement and the existence of any claim or cause of action of Executive against Company, whether predicated on this Executive Employment Agreement or otherwise, shall not constitute a defense to the enforcement by Company of the covenants contained herein.                            (b)        Executive acknowledges that irreparable damage will result to Company in the event of the breach of any covenant contained herein and Executive agrees that in the event of any such breach, Company shall be entitled, in addition to any and all other legal or equitable remedies and damages, to a temporary and/or permanent injunction to restrain the violation thereof by Executive and all of the persons acting for or with Executive.              18.        Law to Govern Contract.  It is agreed that this Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Washington.              19.        Arbitration.  Company and Executive agree with each other that any claim of Executive or Company arising out of or relating to this Agreement or the breach of this Agreement or Executive’s employment by Company, including, without limitation, any claim for compensation due, wrongful termination and any claim alleging discrimination or harassment in any form shall be resolved by binding arbitration, except for claims in which injunctive relief is sought and obtained.  The arbitration shall be administered by the American Arbitration Association under its Employment Arbitration Rules at the American Arbitration Association Office nearest the place of employment.  The award entered by the arbitrator shall be final and binding in all respects and judgment thereon may be entered in any Court having jurisdiction.              20.        Entire Agreement.  This Agreement shall constitute the entire agreement between the parties and any prior understanding or representation of any kind preceding the date of this Agreement shall not be binding upon either party except to the extent incorporated in this Agreement.              21.        Modification of Agreement.  Any modification of this Agreement or additional obligation assumed by either party in connection with this Agreement shall be binding only if evidenced in writing signed by each party or an authorized representative of each party.              22.        No Waiver.  The failure of either party to this Agreement to insist upon the performance of any of the terms and conditions of this Agreement, or the waiver of any breach of any of the terms and conditions of this Agreement, shall not be construed as thereafter waiving any such terms and conditions, but the same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred.              23.        Attorneys’ Fees.  In the event that any action is filed in relation to this Agreement, the unsuccessful party in the action shall pay to the successful party, in addition to all other required sums, a reasonable sum for the successful party's attorneys' fees.              24.        Notices.  Any notice provided for or concerning this Agreement shall be in writing and shall be deemed sufficiently given when personally delivered or when sent by certified or registered, return receipt requested mail if sent to the respective address of each party as set forth below, or such other address as each party shall designate by notice.              25.        Survival of Certain Terms.  The terms and conditions set forth in Paragraphs 15 through 19 of this Agreement shall survive termination of the remainder of this Agreement.                  IN WITNESS WHEREOF, each party to this Agreement has caused it to be executed on the date indicated below.                   EXECUTIVE:       COMPANY:                             Labor Ready, Inc.,             a Washington corporation                             By:       --------------------------------------------------------------------------------       --------------------------------------------------------------------------------     Timothy J. Adams       Richard L. King               President and CEO                   Date:       Date:     --------------------------------------------------------------------------------       --------------------------------------------------------------------------------   EXHIBIT A Stock Option Grant GRANT DATE:                          May 28, 2001 GRANT PRICE:                          Closing price on the Grant Date TOTAL NUMBER OF SHARES:          150,000 VESTING SCHEDULE:             Options for the specified number of shares shall vest on the                                                      following dates: DATE   NUMBER OF SHARES   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   May 28, 2002   37,500   May 28, 2003   37,500   May 28, 2004   37,500   May 28, 2005   37,500   TERMS AND CONDITIONS OF THE STOCK OPTION GRANT:              1.          Except as otherwise provided herein, all unexercised options shall expire five (5) years from the Grant Date or upon the termination date, whichever is earlier, if the Executive Employment Agreement is terminated for cause.  If the Executive Employment Agreement is terminated by Executive without cause, then all options shall terminate ninety days after termination of employment.  If the Executive Employment Agreement is terminated for any other reason, then all options shall immediately vest and the exercise date shall be extended to a date which is five years after the date of termination.              2.          The options are categorized as non-qualified stock options.  A non-qualified stock option requires payment of income taxes on the difference between the option price and the market value on the date of exercise.  Executive shall be responsible for any income tax consequences and expense associated with the grant or exercise of the options, and is responsible for consulting his individual tax advisor.              3.          Payment for shares purchased through the exercise of options may be made either in cash or its equivalent or by tendering previously acquired shares at market value, or both.              The closing price on May 28, 2001 was $3.74. EXHIBIT B Stock Option Grant GRANT DATE:                          May 28, 2001 GRANT PRICE:                          Closing price on the Grant Date TOTAL NUMBER OF SHARES:          100,000 VESTING SCHEDULE:             Options for the specified number of shares shall vest on the                                                      following dates: DATE   NUMBER OF SHARES   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   November 28, 2005   100,000   TERMS AND CONDITIONS OF THE STOCK OPTION GRANT:              1.          Except as otherwise provided herein, all unexercised options shall expire five (5) years from the Grant Date or upon the termination date, whichever is earlier, if the Executive Employment Agreement is terminated for cause.  If the Executive Employment Agreement is terminated by Executive without cause, then all options shall terminate ninety days after termination of employment.  If the Executive Employment Agreement is terminated for any other reason, then all options shall immediately vest and the exercise date shall be extended to a date which is five years after the date of termination.              2.          The options are categorized as non-qualified stock options.  A non-qualified stock option requires payment of income taxes on the difference between the option price and the market value on the date of exercise.  Executive shall be responsible for any income tax consequences and expense associated with the grant or exercise of the options, and is responsible for consulting his individual tax advisor.              3.          Payment for shares purchased through the exercise of options may be made either in cash or its equivalent or by tendering previously acquired shares at market value, or both.              The closing price on May 28, 2001 was $3.74.

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.19 EMPLOYMENT AGREEMENT     THIS EMPLOYMENT AGREEMENT, dated as of the 1st day of August, 1998, by and between Software Technologies Corporation, a California corporation (the "Company"), and Rangaswamy Srihari, the undersigned executive (the "Executive"). Recital     The Company desires to retain the services of Executive, and Executive desires to be employed by the Company, on the terms and subject to the conditions set forth in this Agreement;     NOW, THEREFORE, in consideration of the foregoing recital and the respective undertakings of the Company and Executive set forth below, the Company and Executive agree as follows:     1.  Employment.       (a) Duties. The Company agrees to employ the Executive as Vice President, and the Executive agrees to perform such reasonable responsibilities and duties as may be required of him by the Company provided, however, that the Board of Directors of the Company (the "Board") shall have the right to revise such responsibilities from time to time as the Board may deem appropriate. The Executive shall carry out his duties and responsibilities hereunder in a diligent and competent manner and shall devote his full business time, attention and energy thereto. Executive shall report directly to the Chairman and Chief Executive Officer of the Company and shall be primarily responsible for all research and development activities.     (b) Employment At-Will. The Company and the Executive acknowledge and agree that the Executive's employment is at-will, as defined under applicable law and may be terminated at any time, with or without Cause. If the Executive's employment terminates for any reason, the Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided in Section 3 of this Agreement.     2.  Compensation and Benefits.       (a) Base Compensation. The Company shall pay the Executive as compensation for his services a base salary of $170,000. Such salary shall be subject to applicable tax withholding and shall be paid periodically in accordance with normal Company payroll practices. The compensation specified in this Section 2, together with any increases in such compensation that the Company may, in its sole discretion, grant from time to time, is referred to in this Agreement as "Base Compensation."     (b) Executive Benefits. Executive shall be eligible to participate in the employee benefit plans which are available or which become available, with the adoption or maintenance of such plans to be in the discretion of the Company, to other executives of the Company of a comparable level, subject in each case to the generally applicable terms and conditions of the plan or program in question and to the determination of any committee administering such plan or program.     (c) Automobile. Executive shall receive a car allowance up to a maximum of $800 per month to lease a car of the Executive's choice.     3.  Severance Payments.       (a) Payments upon Termination. If the Executive's employment terminates as a result of an Involuntary Termination other than for Cause and the Executive signs a Release of Claims, then the Company shall pay Executive's Base Compensation to the Executive for a period of twelve (12) months, or through December 31, 1999, whichever provides the longest period of salary continuation. Such amount shall be payable in monthly installments on the last day of each month. In addition, should such termination occur within the twelve (12) month period immediately -------------------------------------------------------------------------------- following the effective date of this agreement, relocation costs up to $30,000 will be paid to the Executive within 30 days of his termination date.     (b) Benefits. In the event the Executive is entitled to severance benefits pursuant to Section 3(a), then in addition to such severance benefits, the Executive shall receive employee benefits coverage as provided to Executive immediately prior to the Executive's termination (the "Company-Paid Coverage"). If such coverage included the Executive's dependents immediately prior to the Executive's termination, such dependents shall also be covered to the extent covered prior to Executive's termination. Company-Paid Coverage shall continue until the earlier of (i) twelve (12) months following the notice date for the Involuntary Termination, or (ii) the date the Executive becomes covered under another employer's group health, dental or life insurance plan (to the extent covered under such plans). To the extent permissible under the Company's insurance policies, the Executive's rights under the Consolidated Omnibus Budget Reconciliation Act of 1985 shall begin at the end of such twelve (12) month period.     (c) Stock Options: Commission. Executive shall not be entitled to receive any unvested stock options.     (d) Miscellaneous. In addition, (i) the Company shall pay the Executive any unpaid base salary due for periods prior to the date of Executive's termination; (ii) the Company shall pay the Executive all of the Executive's accrued and unused vacation through the date of Executive's termination; and (iii) following submission of proper expense reports by the Executive, the Company shall reimburse the Executive for all expenses reasonably and necessarily incurred by the Executive in connection with the business of the Company prior to termination. These payments shall be made promptly upon termination and within the period of time mandated by applicable law.     (e) Voluntary Resignation: Termination for Cause. If the Executive's employment terminates by reason of Executive's voluntary resignation or if the Executive is terminated for Cause, the Executive shall not be entitled to receive severance payments or other benefits under this Section.     (f)  Death or Disability. If the Executive's employment terminates as a result of his death or disability, neither the Executive or, in the case of death, Executive's beneficiary or estate, shall be entitled to any compensation, severance payments, or any other benefits under this Section except as required by law.     4.  Confidential Information.       (a) Company Information. Executive agrees at all times during the term of Executive's employment and thereafter, to hold in strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm or corporation without written authorization of the Board of Directors of the Company, any Confidential Information of the Company. Executive understands that "Confidential Information" means any Company proprietary information, trade secrets or know-how, including, but not limited to, market research, product plans, products, services, customer lists and customers (including, but not limited to, customers of the Company to whom Executive becomes acquainted during the term of Executive's employment), markets, developments, marketing, finances or other business information disclosed to Executive by the Company either directly or indirectly in writing, orally or by drawings or observation of parts or equipment. Executive further understands that Confidential Information does not include any of the foregoing items which has become publicly known and made generally available through no wrongful act of Executive or of others who were under confidentiality obligations as to the item or items involved.     (b) Third Party Information. Executive recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. Executive agrees to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it -------------------------------------------------------------------------------- except as necessary in carrying out Executive's work for the Company consistent with the Company's agreement with such third party.     5.  Definitions. As used herein, the terms       (a) Cause. "Cause" means the Executive's termination only upon: (i) Executive has engaged in willful and material misconduct, including willful and material failure to perform his duties as an officer or employee of the Company or a material breach of this Agreement and has failed to "cure" such default within thirty (30) days after receipt of written notice of default from the Company; (ii) the commission of an act of fraud or embezzlement which results in loss, damage or injury to the Company, whether directly or indirectly; (iii) Executive's use of narcotics, liquor or illicit drugs has had a detrimental effect on the performance of his employment responsibilities, as determined by the Company's Board of Directors; (iv) Executive's violation of Sections 4 or 5 of this Agreement; (v) the arrest, indictment or filing of charges relating to a felony, either in connection with the performance of the Executive's obligations to the Company or which shall adversely affect the Executive's ability to perform such obligations; (vi) gross negligence, dishonesty, breach of fiduciary duty or material breach of the terms of the Agreement or any other agreement in favor of the Company; or (vii) the commission of an act which constitutes unfair competition with the Company or which induces any customer of the Company to break a contract with the Company.     (b) Change of Control. "Change of Control" shall mean the occurrence of any of the following events; provided, however, that an initial public offering or any transaction for the purpose of providing capital financing to the Company shall not constitute a Change of Control:     (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 the Exchange 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;     (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;     (iii) The approval by the stockholders of the Company of a plan of complete liquidation of the Company;     (iv) An agreement for the sale or disposition by the Company of all or substantially all the Company's assets.     (c) Involuntary Termination. "Involuntary Termination" shall mean: (i) termination by the Company of Executive's employment with the Company for any reason other than Cause; (ii) a five percent (5%) or greater reduction in Executive's Base Compensation (not including bonus), other than any such reduction which is part of, and generally consistent with, a general reduction of officer salaries; (iii) a material reduction by the Company in the kind or level of employee benefits (other than salary and bonus) to which Executive is entitled immediately prior to such reduction with the result that Executive's overall benefits package (other than salary and bonus) is substantially reduced (other than any such reduction applicable to officers of the Company generally); (iv) any material breach by the Company of any material provision of this Agreement which continues uncured for 30 days following notice thereof; provided that none of the foregoing shall constitute Involuntary Termination to the extent Executive has agreed thereto. --------------------------------------------------------------------------------     (d) Release of Claims. "Release of Claims" shall mean a waiver by Executive, in a form satisfactory to the Company, of all employment related obligations of and claims and causes of actions against the Company.     6.  Change of Control.  In the event of a Change of Control, fifty percent (50%) of the unvested portion of any outstanding stock option(s) granted under the Company's stock option plan(s) (the "Options") shall vest and become exercisable. Executive shall have the right to exercise such additional vested portion of the Options in addition to any portion of the Options which was vested and exercisable prior to the application of this Section.     7.  Prior Agreements.  Executive represents that Executive has not entered into any agreements, understandings, or arrangements with any person or entity which would be breached by Executive as a result of, or that would in any way preclude or prohibit Executive from entering into this Agreement with the Company or performing any of the duties and responsibilities provided for in this Agreement.     8.  Conflicting Employment.  Executive agrees that, during the term of Executive's employment with the Company, Executive will not engage in any other employment, occupation, consulting or other business activity directly related to the business in which the Company is now involved or becomes involved during the term of Executive's employment, nor will Executive engage in any other activities that conflict with Executive's obligations to the Company.     9.  Returning Company Documents.  Executive agrees that, at the time of leaving the employ of the Company, Executive will deliver to the Company (and will not keep in Executive's possession, recreate or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, materials, equipment, other documents or property, or reproductions of any aforementioned items developed by Executive pursuant to Executive's employment with the Company or otherwise belonging to the Company, its successors or assigns.     10.  Notices.  Any notice, report or other communication required or permitted to be given hereunder shall be in writing to both parties and shall be deemed given on the date of delivery, if delivered, or three days after mailing, if mailed first-class mail, postage prepaid, to the following addresses: If to the Executive, at the address set forth below the Executive's signature at the end hereof. If to the Company: Software Technologies Corp. 404 East Huntington Drive Monrovia, California 91016 Attn: Chief Executive Officer or to such other address as any party hereto may designate by notice given as herein provided.     11.  Governing Law.  This Employment Agreement shall be governed by and construed and enforced in accordance with the internal substantive laws, and not the choice of law rules of California.     12.  Amendments.  This Employment Agreement shall not be changed or modified in whole or in part except by an instrument in writing signed by each party hereto.     13.  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.     14.  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/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner --------------------------------------------------------------------------------     (b) and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and/or assets which executes and delivers the assumption agreement described in this subsection (a) or which becomes bound by the terms of this Agreement by operation of law.     (c) Executive's Successors. The terms of this Agreement and all rights of the Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive's personal or legal representatives, executors, administrators, successor, heirs, distributees, devisees or legatees.     15.  Entire Agreement.  Except with respect to specific provisions of any prior written agreement between the Executive and the Company relating to the Executive's agreement not to compete with the Company or solicit the Company's employees, this Agreement shall supersede and replace all prior agreements or understandings relating to the subject matter hereof, and no agreement, representations or understandings (whether oral or written or whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the relevant matter hereof     16.  Mediation.  Executive agrees that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach or termination thereof, shall first be submitted to mediation. The mediation shall be conducted within 45 days of Executive notifying the Company of a dispute or controversy regarding this Agreement or Executive's employment relationship with the Company. Unless otherwise provided for by law, the Company and Executive shall each pay half the costs and expenses of the mediation.     17.  Arbitration and Equitable Relief.       (a) In the event that mediation pursuant to Section 16 fails to resolve a dispute or controversy, and except as provided in Section 17(d) below, the Company and Executive agree that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof shall be settled by arbitration to be held in Los Angeles County, California, in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. 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 decision in any court having jurisdiction.     (b) The arbitrator[s] shall apply California law to the merits of any dispute or claim, without reference to rules of conflict of law. Executive hereby expressly consents to the personal jurisdiction of the state and federal courts located in California for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants.     (c) The Company and Executive shall each pay one-half of the costs and expenses of such arbitration, and shall separately pay its counsel fees and expenses unless, otherwise required by law or determined by the arbitrator.     (d) The parties may apply to any court of competent jurisdiction for a temporary restraining order, preliminary injunction, or other interim or conservatory relief, as necessary, without breach of this arbitration agreement and without abridgment of the powers of the arbitrator.     (e) Executive understands that nothing in this Section modifies Executive's at-will status. Either the Company or Executive can terminate the employment relationship at any time, with or without cause.     (f)  EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES, EXCEPT AS PROVIDED IN SUBSECTION (d) OF THIS SECTION, TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF, RELATING TO, -------------------------------------------------------------------------------- OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH, OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:     (i)  ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.     (ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et seq;     (iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.     18.  Counterparts.  This Employment Agreement may be executed in several counterparts,   each of which shall be an original, but all of which together shall constitute one and the same agreement.     19.  Effect of Headings.  The section headings herein are for convenience only and shall not affect the construction or interpretation of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above.     SOFTWARE TECHNOLOGIES CORPORATION     By:   --------------------------------------------------------------------------------         EXECUTIVE         /s/ James T. Demetriades -------------------------------------------------------------------------------- (Signature)         /s/ Rangaswamy Srihari -------------------------------------------------------------------------------- Rangaswamy Srihari         --------------------------------------------------------------------------------         -------------------------------------------------------------------------------- (Print Address)         -------------------------------------------------------------------------------- (Print Telephone Number) -------------------------------------------------------------------------------- [SIGNATURE PAGE OF RANGASWAMY SRIHARI EMPLOYMENT AGREEMENT] -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.19 EMPLOYMENT AGREEMENT [SIGNATURE PAGE OF RANGASWAMY SRIHARI EMPLOYMENT AGREEMENT]

      REVOLVING CREDIT AGREEMENT Dated as of October 30, 2000 Among ALLIANCE CAPITAL MANAGEMENT L. P., as Borrower BANK OF AMERICA, N.A., as Administrative Agent, BANC OF AMERICA SECURITIES LLC, as Arranger, THE CHASE MANHATTAN BANK, as Syndication Agent, DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES, as Documentation Agent BANK OF AMERICA, N.A. THE CHASE MANHATTAN BANK and DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES, individually and as Co-Agents, and THE BANKS WHOSE NAMES APPEAR ON THE SIGNATURE PAGES HEREOF   TABLE OF CONTENTS 1. DEFINITIONS AND RULES OF INTERPRETATION   1.1 Definitions   1.2 Rules of Interpretation 2. THE REVOLVING CREDIT FACILITY   2.1 Commitment to Lend   2.2 Facility Fee   2.3 Utilization Fee   2.4 Reduction of Total Commitment   2.5 The Notes   2.6 Interest on Loans     2.6.1     Interest Rates     2.6.2     Interest Payment Dates   2.7 Requests for Loans   2.8 Loans to Cover Reimbursement Obligations   2.9 Conversion Options     2.9.1     Conversion to LIBOR Loan     2.9.2     Continuation of Type of Loan     2.9.3     LIBOR Loans     2.9.4     Conversion Requests   2.10 Funds for Loans     2.10.1     Funding Procedures     2.10.2     Advances by Administrative Agent   2.11 Limit on Number of LIBOR Loans 3. REPAYMENT OF LOANS   3.1 Maturity   3.2 Mandatory Repayments of Loans     3.2.1     Loans in Excess of Commitment     3.2.2     Change of Control   3.3 Optional Repayments of Loans 4. LETTERS OF CREDIT   4.1 Letter of Credit Commitments     4.1.1     Commitment to Issue Letters of Credit     4.1.2     Letter of Credit Applications     4.1.3     Terms of Letters of Credit     4.1.4     Reimbursement Obligations of Banks     4.1.5     Participations of Banks   4.2 Reimbursement Obligation of the Borrower   4.3 Letter of Credit Payments   4.4 Obligations Absolute   4.5 Reliance by Issuer   4.6 Letter of Credit Fee   4.7 Additional Cash Collateral Provisions 5. CERTAIN GENERAL PROVISIONS   5.1 Application of Payments   5.2 Funds for Payments     5.2.1     Payments to Co-Agents, Administrative Agent     5.2.2     No Offset, Etc.     5.2.3     Fees Non-Refundable   5.3 Computations   5.4 Inability to Determine LIBOR Rate Basis   5.5 Illegality   5.6 Additional Costs, Etc.   5.7 Capital Adequacy   5.8 Certificate   5.9 Indemnity   5.10 Interest After Default 6. REPRESENTATIONS AND WARRANTIES   6.1 Corporate Authority     6.1.1     Incorporation; Good Standing     6.1.2     Authorization     6.1.3     Enforceability     6.1.4     Equity Securities   6.2 Governmental Approvals   6.3 Liens; Leases   6.4 Financial Statements   6.5 No Material Changes, Etc.   6.6 Permits   6.7 Litigation   6.8 Material Contracts   6.9 Compliance with Other Instruments. Laws, Etc.   6.10 Tax Status   6.11 No Event of Default   6.12 Holding Company and Investment Company Acts   6.13 Insurance   6.14 Certain Transactions   6.15 Employee Benefit Plans   6.16 Regulations U and X   6.17 Environmental Compliance   6.18 Subsidiaries, Etc.   6.19 Funded Debt   6.20 General 7. AFFIRMATIVE COVENANTS OF THE BORROWER   7.1 Punctual Payment   7.2 Maintenance of Office   7.3 Records and Accounts   7.4 Financial Statements, Certificates, and Information   7.5 Notices     7.5.1     Defaults     7.5.2     Environmental Events     7.5.3     Notice of Proceedings and Judgments     7.5.4     Notice of Change of Control   7.6 Existence; Business; Properties     7.6.1     Legal Existence     7.6.2     Conduct of Business     7.6.3     Maintenance of Properties     7.6.4     Status Under Securities Laws   7.7 Insurance   7.8 Taxes   7.9 Inspection of Properties and Books, Etc.     7.9.1     General     7.9.2     Communication with Accountants   7.10 Compliance with Government Mandates, Contracts, and Permits   7.11 Use of Proceeds   7.12 Restricted Subsidiaries   7.13 Certain Changes in Accounting Principles 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER   8.1 Disposition of Assets   8.2 Mergers and Reorganizations   8.3 Acquisitions   8.4 Restrictions on Liens   8.5 Guaranties   8.6 Restrictions on Investments   8.7 Restrictions on Funded Debt   8.8 Distributions   8.9 Transactions with Affiliates   8.10 Fiscal Year   8.11 Compliance with Environmental Laws   8.12 Employee Benefit Plans   8.13 Amendments to Certain Documents 9. FINANCIAL COVENANTS OF THE BORROWER   9.1 Ratio of Consolidated Adjusted Funded Debt to Consolidated Adjusted Cash Flow   9.2 Minimum Net Worth   9.3 Miscellaneous 10. CLOSING CONDITIONS   10.1 Financial Statements and Material Changes   10.2 Loan Documents   10.3 Certified Copies of Charter Documents   10.4 Partnership and Corporate Action   10.5 Consents   10.6 Opinions of Counsel   10.7 Proceedings   10.8 Incumbency Certificate   10.9 Fees   10.10 Representations and Warranties True; No Defaults 11. CONDITIONS TO ALL BORROWINGS   11.1 No Default   11.2 Representations True   11.3 Loan Request or Letter of Credit Application   11.4 Payment of Fees   11.5 No Legal Impediment 12. EVENTS OF DEFAULT; ACCELERATION; ETC.   12.1 Events of Default and Acceleration   12.2 Termination of Commitments   12.3 Remedies   12.4 Application of Monies 13. SETOFF 14. THE ADMINISTRATIVE AGENT   14.1 Authorization   14.2 Employees and Agents   14.3 No Liability   14.4 No Representations   14.5 Payments     14.5.1    Payments to Administrative Agent     14.5.2    Distribution by Administrative Agent     14.5.3    Delinquent Banks   14.6 Holders of Notes   14.7 Indemnity   14.8 Administrative Agent and Co-Agents as Banks   14.9 Resignation   14.10 Notification of Defaults and Events of Default   14.11 Duties in the Case of Enforcement 15. EXPENSES 16. INDEMNIFICATION 17. SURVIVAL OF COVENANTS, ETC. 18. ASSIGNMENT AND PARTICIPATION   18.1 Conditions to Assignment by Banks   18.2 Certain Representations and Warranties; Limitations; Covenants   18.3 Register   18.4 New Notes   18.5 Participations   18.6 Disclosure   18.7 Assignee or Participant Affiliated with the Borrower   18.8 Miscellaneous Assignment Provisions   18.9 Assignment by Borrower 19 NOTICES, ETC. 20. GOVERNING LAW 21. HEADINGS 22. COUNTERPARTS 23. ENTIRE AGREEMENT, ETC. 24. WAIVER OF JURY TRIAL 25. CONSENTS, AMENDMENTS, WAIVERS, ETC. 26. SEVERABILITY     Schedules Schedule 1 - Banks and Commitments Schedule 6.2 - Governmental Approvals Schedule 6.18 - Subsidiaries Schedule 6.19 - Funded Debt Schedule 8.4 - Certain Permitted Liens Schedule 8.6 - Certain Investments   Exhibits Exhibit A - Form of Assumption Agreement Exhibit B - Form of Note Exhibit C - Form of Loan Request Exhibit D - Form of Confirmation of Loan Request Exhibit E - Form of Conversion Request Exhibit F - Form of Confirmation of Conversion Request Exhibit G - Letter of Credit Application Exhibit H - Form of Compliance Certificate Exhibit I - Opinion Letter Exhibit J - Form of Assignment and Acceptance     REVOLVING CREDIT AGREEMENT           THIS REVOLVING CREDIT AGREEMENT, dated as of October 30, 2000 (this “Credit Agreement”), by and among ALLIANCE CAPITAL MANAGEMENT L.P., a Delaware limited partnership (together with its permitted successors, the “Borrower”), and the lending institutions listed on Schedule 1 (collectively, the “Banks”), and BANK OF AMERICA, N.A., THE CHASE MANHATTAN BANK and DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES, as co-agents for the Banks (as defined hereinbelow) (in such capacity, the “Co-Agents”), BANK OF AMERICA, N.A., as administrative agent for the Banks (in such capacity, the “Administrative Agent”), THE CHASE MANHATTAN BANK, as syndication agent (in such capacity, the “Syndication Agent”), and DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES, as documentation agent for the Banks (in such capacity, the “Documentation Agent”); W I T N E S S E T H:           WHEREAS, the Borrower desires to obtain from the Banks certain credit facilities as described in this Credit Agreement for working capital and for other purposes as provided below;           WHEREAS, the Banks are willing to provide such credit facilities to the Borrower upon the terms and conditions set forth in this Credit Agreement; and           WHEREAS, the Co-Agents are willing to act as co-agents, and the Administrative Agent is willing to act as administrative agent, for the Banks in connection with such credit facilities as provided in this Credit Agreement;           NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements set forth hereinbelow, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereto do hereby agree as follows: 1.       DEFINITIONS AND RULES OF INTERPRETATION.           1.1     Definitions .  The following terms shall have the meanings set forth in this Section 1.1 or elsewhere in the provisions of this Credit Agreement referred to below:           Acquisition.  As defined in Section 8.3.           Administrative Agent.  Bank of America, acting as administrative agent for the Banks.           Administrative Agent’s Head Office.  The Administrative Agent’s head office located at 101 North Tryon Street, Charlotte, North Carolina 28255, or at such other location as the Administrative Agent may designate in a written notice to the other parties hereto from time to time.           Administrative Agent’s Overnight Investment Rate.  The annual rate of interest in effect from time to time that is equal to the interest rate received by the Administrative Agent from time to time with respect to funds invested in overnight repurchase agreements.           Affiliate.  As defined under Rule 144 (a) under the Securities Act of 1933, as amended, but not including any Restricted Subsidiary or any investment fund which is managed or advised by the Borrower.           Alliance Distributors.  Alliance Fund Distributors, Inc., a Delaware corporation.           Applicable Margin.  An annual percentage rate determined by the Administrative Agent, as of any date of determination, in accordance with the Borrower’s S&P Rating and Moody’s Rating in effect as of any date of determination as follows:   Borrower’s S&P Rating/Moody’s Rating Applicable Margin A-1+/P-1 0.170% A-1/P-1 0.210% A-1/P-2 or A-2/P-1 0.225% A-2/P-2 0.350% Less than A-2/P-2 0.550% Notwithstanding the foregoing, if the Borrower loses both its Moody’s Rating and its S&P Rating at any time, the Applicable Margin shall be 0.550%, in any such case subject, as applicable, to the provisions of Section 5.10 hereof.  If, subsequent to losing such ratings, the Borrower is able to again obtain such ratings, the above table shall, from and after the date of such occurrence (until such time, if any, that the Borrower again loses such ratings), govern the Applicable Margin.           Assignment and Acceptance.  As defined in Section 18.1.           Assumption Agreement.  An Assumption Agreement in the form of Exhibit A hereto with appropriate completions and insertions and with such non–substantive changes as may be required to reflect the specific nature of the transaction giving rise to the execution and delivery of such Assumption Agreement.           AXA Group.  AXA, a societe anonyme organized under the laws of France, and its Subsidiaries.           Bank of America.  Bank of America, N.A., a national banking association.           Banks.  Bank of America, N.A., The Chase Manhattan Bank and Deutsche Bank AG, New York and/or Cayman Islands Branches, as listed on Schedule 1 hereto and any other Person who becomes an assignee of any rights and obligations of a Bank pursuant to Section 18.1.           Borrower.  As defined in the preamble hereto.           Borrower Partnership Agreement. The Amended and Restated Agreement of Limited Partnership of the Borrower, dated as of October 29, 1999, by and among the General Partner and those other Persons who became partners of the Borrower as provided therein, as such agreement has been amended and exists at the date of this Credit Agreement and may be amended or modified from time to time in compliance with the provisions of this Credit Agreement.           Business.  With respect to any Person, the assets, properties, business, operations and condition (financial and otherwise) of such Person.           Business Day.  Any day on which banking institutions in Charlotte, North Carolina and New York, New York, are open for the transaction of banking business and, in the case of LIBOR Loans, also a day which is a LIBOR Business Day.           Capital Assets.  Fixed assets, both tangible (such as land, buildings, fixtures, machinery and equipment) and intangible (such as Permits, deferred sales commissions and good will); provided that Capital Assets shall not include any item customarily charged directly to expense or depreciated over a useful life of twelve (12) months or less in accordance with GAAP.           Capital Expenditures.  Amounts paid or indebtedness incurred by the Borrower or any of its Consolidated Subsidiaries in connection with the purchase or lease by the Borrower or any of such Subsidiaries of Capital Assets that would be required to be capitalized and shown on the balance sheet of such Person in accordance with GAAP.           Capitalized Leases.  Leases under which the Borrower or any of its Consolidated Subsidiaries is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with GAAP.           CERCLA.  As defined in Section 6.17.           Change of Control.  Each and every (a) issue, sale, or other disposition of Voting Equity Securities of the Borrower that results in any Person or group of Persons acting in concert (other than any of AXA Financial, Inc. and its Subsidiaries, and any member of the AXA Group) beneficially owning or controlling, directly or indirectly, more than eighty percent (80%) (by number of votes) of the Voting Equity Securities of the Borrower or (b) issue, sale, or other disposition of Voting Equity Securities of the General Partner which results in any Person or group of Persons acting in concert (other than any of AXA Financial, Inc. and its Subsidiaries, and any member of the AXA Group) beneficially owning or controlling, directly or indirectly, more than fifty percent (50%) (by number of votes) of the Voting Equity Securities of the General Partner.           Change of Control Date.  Any date upon which a Change of Control occurs.           Closing Date.  The date, not later than November 20, 2000, on which each of the conditions set forth in Section 10 is satisfied or waived.           Co-Agents.   Bank of America, The Chase Manhattan Bank and Deutsche Bank AG, New York and/or Cayman Islands Branches, acting as co-agents for the Banks.           Co-Agents Head Office.  In the case of Bank of America, 101 Tryon Street, Charlotte, North Carolina 28225, in the case of The Chase Manhattan Bank, 270 Park Avenue, 36th Floor, New York, New York 10017, and in the case of Deutsche Bank AG, New York and/or Cayman Islands Branches, 31 West 52nd Street, New York, New York 10019, or at such other location as any Co-Agent may designate in a written notice to the other parties hereto from time to time.           Code.  The Internal Revenue Code of 1986, as amended.           Commitment.  With respect to each Bank, the amount set forth on Schedule 1 hereto as the amount of such Bank’s obligation to make Loans to the Borrower and to participate in the issuance, extension, and renewal of Letters of Credit for the account of the Borrower, as the same may be reduced from time to time; or if such commitment is terminated pursuant to the provisions hereof, zero.           Commitment Percentage.  With respect to each Bank, the percentage set forth on Schedule 1 hereto as such Bank’s percentage of the aggregate Commitments of all of the Banks.           Consolidated or consolidated.  With reference to any term defined herein, shall mean that term as applied to the accounts of the Borrower and the Consolidated Subsidiaries, consolidated in accordance with GAAP.           Consolidated Adjusted Cash Flow.  As defined in Section 9.1.           Consolidated Adjusted Funded Debt.  As defined in Section 9.1.           Consolidated Net Income (or Loss).  The consolidated net income (or loss) of the Borrower, determined in accordance with GAAP, but excluding in any event:                               (a)      to the extent provided by Section 8.8, any portion of the net earnings of any Restricted Subsidiary that, by virtue of a restriction or Lien binding on such Restricted Subsidiary under a Contract or Government Mandate, is unavailable for payment of dividends to the Borrower or any other Restricted Subsidiary;                               (b)      earnings resulting from any reappraisal, revaluation, or write-up of assets; and                               (c)      any reversal of any contingency reserve, except to the extent that such provision for such contingency reserve shall have been made from income arising during the period subsequent to December 31, 1999, through the end of the period for which Consolidated Net Income (or Loss) is then being determined, taken as one accounting period.           Consolidated Net Worth.  The excess of Consolidated Total Assets over Consolidated Total Liabilities, less, to the extent otherwise includable in the computations of Consolidated Net Worth, any subscriptions receivable with respect to Equity Securities of the Borrower or its Consolidated Subsidiaries (with such adjustments as may be appropriate so as not to double count intercompany items).           Consolidated Subsidiaries.  At any point in time, the Subsidiaries of the Borrower that are consolidated with the Borrower for financial reporting purposes with respect to the fiscal period of the Borrower in which such point in time occurs.           Consolidated Total Assets.  All assets of the Borrower determined on a consolidated basis in accordance with GAAP.           Consolidated Total Liabilities.  All liabilities of the Borrower determined on a consolidated basis in accordance with GAAP.           Contracts.  Contracts, agreements, mortgages, leases, bonds, promissory notes, debentures, guaranties, Capitalized Leases, indentures, pledges, powers of attorney, proxies, trusts, franchises, or other instruments or obligations.           Conversion Request.  A notice given by the Borrower to the Administrative Agent of the Borrower’s election to convert or continue a Loan in accordance with Section 2.9.           Credit Agreement.  This Revolving Credit Agreement, including the Schedules and Exhibits hereto.           Default.  As defined in Section 12.           Distribution.  With respect to any Entity, the declaration or payment (without duplication) of any dividend or distribution on or in respect of any Equity Securities of such Entity, other than dividends payable solely in Equity Securities of such Entity that are not required to be classified as liabilities on the balance sheet of such Entity under GAAP; the purchase, redemption, or other retirement of any Equity Securities of such Entity, directly or indirectly through a Subsidiary of such Entity or otherwise; or the return of capital by such Entity to the holders of its Equity Securities as such.           Documentation Agent.  Deutsche Bank AG, New York and/or Cayman Islands Branches, acting as documentation agent.           Dollars or $.  Dollars in lawful currency of the United States of America.           Domestic Lending Office.  Initially, the office of each Bank designated as such in Schedule 1 hereto; thereafter, such other office of such Bank, if any, located within the United States that will be making or maintaining Federal Funds Rate Loans.           Drawdown Date.  The date on which any Loan is made or is to be made, and the date on which any Loan is converted or continued in accordance with Section 2.9.           EBITDA.  The Consolidated Net Income (or Loss) for any period, plus provision for any income taxes, interest (whether paid or accrued, but without duplication of interest accrued for previous periods), depreciation, or amortization for such period, in each case to the extent deducted in determining such Consolidated Net Income (or Loss).           Eligible Assignee.  Any of (a) a commercial bank or finance company organized under the laws of the United States, any State thereof, or the District of Columbia, and having total assets in excess of One Billion Dollars ($1,000,000,000); (b) a commercial bank organized under the laws of any other country that is a member of the Organization for Economic Cooperation and Development (the “OECD”), or a political subdivision of any such country, and having total assets in excess of One Billion Dollars ($1,000,000,000), provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; and (c) the central bank of any country which is a member of the OECD.           Employee Benefit Plan.  Any employee benefit plan within the meaning of §3(2) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate, other than a Multiemployer Plan.           Entity.  Any corporation, partnership, trust, unincorporated association, joint venture, limited liability company, or other legal or business entity.           Environmental Laws.  As defined in Section 6.17(a).           Equity Securities.  With respect to any Entity, all equity securities of such Entity, including any (a) common or preferred stock, (b) limited or general partnership interests, (c) limited liability company member interests, (d) options, warrants, or other rights to purchase or acquire any equity security, or (e) securities convertible into any equity security.           ERISA.  The Employee Retirement Income Security Act of 1974, as amended.           ERISA Affiliate.  Any Person that is treated as a single employer together with the Borrower under §414 of the Code.           ERISA Reportable Event.  A reportable event with respect to a Guaranteed Pension Plan within the meaning of §4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived.           Event of Default.  As defined in Section 12.           Federal Funds Rate. A simple interest rate equal to the sum of the Federal Funds Rate Basis plus the Applicable Margin.  The Federal Funds Rate shall be adjusted automatically as of the opening of business of the effective date of each change in the Federal Funds Rate Basis to account for such change.           Federal Funds Rate Basis. For any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three funds brokers of recognized standing selected by the Administrative Agent.           Federal Funds Rate Loan.  A Loan which bears interest at the Federal Funds Rate.           Fully Effective.  With respect to any Contract, that (a) such Contract is the legal, valid, and binding obligation of the Borrower or its Subsidiary, as the case may be, enforceable against such party according to its terms, and (b) if such Contract exists on or before the date of this Credit Agreement, such Contract shall remain in full force and effect notwithstanding the execution and delivery of the Loan Documents and the consummation of the transactions contemplated by the Loan Documents.           Funded Debt.  With respect to the Borrower or any Consolidated Subsidiary, (a) all indebtedness for money borrowed of such Person, (b) every obligation of such Person in respect of Capitalized Leases, (c) all reimbursement obligations of such Person with respect to letters of credit, bankers’ acceptances, or similar facilities issued for the account of such Person, (d) Indebtedness that constitutes Funded Debt as provided in Section 8.1(d), and (e) all guarantees, endorsements, acceptances, and other contingent obligations of such Person, whether direct or indirect, in respect of indebtedness for borrowed money of others, including any obligation to supply funds to or in any manner to invest in, directly or indirectly, the debtor, to purchase indebtedness for borrowed money, or to assure the owner of indebtedness for borrowed money against loss, through an agreement to purchase goods, supplies, or services for the purpose of enabling the debtor to make payment of the indebtedness held by such owner or otherwise, provided, however, that each guaranty of Indebtedness of, keepwell obligation for, or obligation to make funds available for, any Consolidated Subsidiary that acts as general partner of one or more partnerships sponsored or established by the Borrower or any of its Subsidiaries shall constitute Funded Debt from and after such time as such guaranty, keepwell, or other obligation is no longer contingent, whereupon such guaranty, keepwell, or other obligation will constitute Funded Debt in an amount equal to the liability of such Person in respect of such guaranty, keepwell, or other obligation to the extent such guaranty, keepwell or other obligation is non–contingent.           General Partner.  (a) Alliance Capital Management Corporation, a Delaware corporation, in its capacity as general partner of the Borrower and (b) any other Persons who satisfy the requirements for admitting general partners without causing a Default or an Event of Default as set forth in Section 12.1(n) and who are so admitted, each in its capacity as a general partner of the Borrower, and their respective successors.           GAAP.  Subject to Section 7.13, (a) when used in Section 9, whether directly or indirectly through reference to a capitalized term used therein, means (i) principles that are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, in effect for the fiscal year ended on December 31, 1999, and (ii) to the extent consistent with such principles, the accounting practices of the Borrower reflected in its consolidated financial statements for the year ended on December 31, 1999, and (b) when used in general, other than as provided above, means principles that are (i) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time and (ii) consistently applied with past financial statements of the Borrower adopting the same principles, provided that in each case referred to in this definition of “GAAP” a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in GAAP) as to financial statements in which such principles have been properly applied.           Government Authority.  The United States of America or any state, district, territory, or possession thereof, any local government within the United States of America or any of its territories and possessions, any foreign government having appropriate jurisdiction or any province, territory, or possession thereof, or any court, tribunal, administrative or regulatory agency, taxing or revenue authority, central bank or banking regulatory agency, commission, or body of any of the foregoing.           Government Mandate.  With respect to (a) any Person, any statute, law, rule, regulation, code, or ordinance duly adopted by any Government Authority, any treaty or compact between two (2) or more Government Authorities, and any judgment, order, decree, ruling, finding, determination, or injunction of any Government Authority, in each such case that is, pursuant to appropriate jurisdiction, legally binding on such Person, any of its Subsidiaries or any of their respective properties, and (b) the Administrative Agent, any Co-Agent or any Bank, in addition to subsection (a) hereof, any policy, guideline, directive, or standard duly adopted by any Government Authority with respect to the regulation of banks, monetary policy, lending, investments, or other financial matters.           Guaranteed Pension Plan.  Any employee pension benefit plan within the meaning of §3(2) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a -Multiemployer Plan.           Hazardous Substances.  As defined in Section 6.17(b).           Indebtedness.  All obligations, contingent and otherwise, that in accordance with GAAP should be classified upon the obligor’s balance sheet as liabilities, or to which reference should be made by footnotes thereto in accordance with GAAP, including: (a) all debt and similar monetary obligations, whether direct or indirect; (b) all liabilities secured by any Lien existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed; (c) all obligations in respect of hedging contracts, including, without limitation, interest rate and currency swaps, caps, collars and other financial derivative products; and (d) all guarantees, endorsements, and other contingent obligations whether direct or indirect in respect of indebtedness of others, including any obligation to supply funds to or in any manner to invest in, directly or indirectly, the debtor, to purchase indebtedness, or to assure the owner of indebtedness against loss, through an agreement to purchase goods, supplies, or services for the purpose of enabling the debtor to make payment of the indebtedness held by such owner or otherwise, and the obligations to reimburse the issuer in respect of any letters of credit.           Interest Payment Date.  (a) As to any Federal Funds Rate Loan, the last day of each calendar quarter during all or a portion of which such Federal Funds Rate Loan is outstanding and the maturity of such Federal Funds Rate Loan; (b) as to any LIBOR Loan, the last day of each Interest Period with respect to such LIBOR Loan, the maturity of such LIBOR Loan, and, if the Interest Period of such LIBOR Loan is longer than three (3) months, the date that is three (3) months from the first day of such Interest Period and the last day of each successive three (3) month period during such Interest Period.           Interest Period. With respect to any LIBOR Loan, (a) initially, the period commencing on the Drawdown Date of such Loan and ending on the last day of, as selected by the Borrower in a Loan Request, one (1), two (2), or three (3) weeks, or one (1), two (2), three (3), four (4), five (5), or six (6) months, if available in readily ascertainable markets; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by the Borrower in a Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following:                     (i)       if any Interest Period for a LIBOR Loan would otherwise end on a day that is not a LIBOR Business Day, that Interest Period shall be extended to the next succeeding LIBOR Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding LIBOR Business Day; and                     (ii)      any Interest Period commencing prior to the Maturity Date that would otherwise extend beyond the Maturity Date shall end on the Maturity Date.           Investments.  All expenditures made and all liabilities incurred (contingently or otherwise) for the acquisition of Equity Securities or Funded Debt of, or for loans, advances, or capital contributions, or in respect of any guaranties (or other commitments as described under Indebtedness) of, any Person.  In determining the aggregate amount of Investments outstanding at any particular time: (a) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding and the amount of Indebtedness represented by a keepwell obligation shall be taken at not less than the maximum amount of the keepwell obligation, as the case may be; (b) there shall be deducted in respect of each such Investment any amount received as a return of capital; (c) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest, or otherwise; and (d) there shall not be added to or deducted from the aggregate amount of Investments any increase or decrease in the value thereof.  For purposes of determining the amount of Investments by the Borrower and the Consolidated Subsidiaries outstanding at any time, investments (defined as aforesaid) by an Unrestricted Subsidiary in an Entity that is not a Subsidiary of the Borrower shall not be counted as Investments hereunder to the extent that they do not exceed the aggregate amount of Investments by the Borrower and the Consolidated Subsidiaries in such Unrestricted Subsidiary.           Letter of Credit.  As defined in Section 4.1.1.                     Letter of Credit Application.  As defined in Section 4.1.1.                     Letter of Credit Commitment.  As defined in Section 4.1.1.                     Letter of Credit Fee.  As defined in Section 4.6.                     Letter of Credit Participation.  As defined in Section 4.1.1.           LIBOR Business Day.  Any day on which commercial banks are open for international business (including dealings in Dollar deposits) in London, England.           LIBOR Lending Office.  Initially, the office of each Bank designated as such in Schedule 1 hereto; thereafter, such other office of such Bank, if any, that shall be making or maintaining LIBOR Loans.           LIBOR Loan.  A Loan which bears interest at the LIBOR Rate.           LIBOR Rate. A simple per annum interest rate equal to the sum of (a) the quotient of (i) the LIBOR Rate Basis divided by (ii) one minus the LIBOR Reserve Percentage, stated as a decimal, plus (b) the Applicable Margin.  The LIBOR Rate shall be rounded upward to four decimal places and shall apply to the applicable Interest Period, and, once determined, shall be subject to the provisions of this Credit Agreement and shall remain unchanged during the applicable Interest Period, except for changes to reflect adjustments in the LIBOR Reserve Percentage.           LIBOR Rate Basis.  For any Interest Period, the interest rate per annum equal to the offered rate for deposits in United States dollars (rounded to four decimal places) in amounts comparable to the principal amount of, and for a length of time comparable to and commencing on the first day of the Interest Period for, the LIBOR Loan to be made by the Banks, which interest rate appears on Telerate Page 3750 as of 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period; provided, however, that (i) if more than one such offered rate appears on Telerate Page 3750, the LIBOR Rate Basis shall be the arithmetic average (rounded to four decimal places) of such offered rates, or (ii) if no such offered rates appear on such page, the LIBOR Rate Basis shall be the interest rate per annum (rounded to four decimal places) at which United States dollar deposits are offered to the Administrative Agent in the London interbank borrowing market at approximately 9:00 a.m. (Charlotte, North Carolina time) on the date two (2) Business Days prior to the first day of such Interest Period in an amount comparable to and commencing on the first day of the principal amount of, and for a length of time comparable to the Interest Period for, the LIBOR Loan to be made by the Banks.           LIBOR Reserve Percentage.  The percentage which is in effect from time to time under Regulation D of the Board of Governors of the Federal Reserve System, as such regulation may be amended from time to time, as the actual reserve requirement applicable with respect to Eurocurrency Liabilities (as that term is defined in Regulation D), to the extent that any Lender has any Eurocurrency Liabilities subject to such reserve requirement at that time. The LIBOR Rate for any LIBOR Loan shall be adjusted as of the effective date of any change in the LIBOR Reserve Percentage.           Lien.  Any lien, mortgage, security interest, pledge, charge, beneficial or equitable interest or right, hypothecation, collateral assignment, easement, or other encumbrance.           Loan Documents.  This Credit Agreement, the Notes, the Letter of Credit Applications, the Letters of Credit, any Assumption Agreements and any instrument or document designated by the parties thereto as a “Loan Document” for purposes hereof.           Loan Request.  As defined in Section 2.7.           Loans.  Revolving credit loans made or to be made by the Banks to the Borrower pursuant to Section 2.           Majority Banks.  The Banks whose aggregate Commitments constitute at least sixty-six and two thirds percent (66-2/3%) of the Total Commitment.           Mandatory Borrowing.  As defined in Section 2.12.           Material Effect.  A material adverse effect on (a) the ability of the Borrower or any Other Obligor to enter into and to perform and observe its Obligations under the Loan Documents, or (b) the Business of the Borrower and its Consolidated Subsidiaries taken as a whole.           Material Subsidiary.  Any Subsidiary of the Borrower, any Other Obligor, or Alliance Distributors that, singly or together with any other such Subsidiaries then subject to one or more of the conditions described in Section 12.1(h), Section 12.1(i), or Section 12.1(m), either (a) at the date of determination owns Significant Assets, or (b) has total assets as of the date of determination equal to not less than five percent (5%) of the Consolidated Total Assets of the Borrower as set forth in the consolidated balance sheet of the Borrower included in the most recent available annual or quarterly report of the Borrower.           Maturity Date.  October 30, 2002.           Maximum Drawing Amount.  The maximum aggregate amount from time to time that the beneficiaries may draw under outstanding Letters of Credit, as such aggregate amount may be reduced from time to time pursuant to the terms of the Letters of Credit.           Moody’s Rating.  With respect to any Entity which is the issuer or obligor with respect to commercial paper, the rating assigned to such entity by Moody’s Investors Service, Inc. from time to time in effect.           Multiemployer Plan.  Any multiemployer plan within the meaning of §3(37) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate.           1940 Act.  The Investment Company Act of 1940, as amended.           Notes.  The Notes of the Borrower to the Banks in respect of the Borrower’s Obligations under this Credit Agreement of even date herewith, substantially in the form of Exhibit B, as amended, modified and renewed from time to time.           Obligations.  All indebtedness, obligations, and liabilities of any of the Borrower, its Subsidiaries, and Other Obligors to any of the Banks, any Co-Agent and the Administrative Agent, individually or collectively, existing on the date of this Credit Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising or incurred under this Credit Agreement or any of the other Loan Documents or in respect of any of the Loans made or Reimbursement Obligations incurred or any of the Notes, Letter of Credit Applications, Letters of Credit or other instruments at any time evidencing any thereof.           Other Obligor.  As defined in the Assumption Agreements.           Outstanding.  With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination.           PBGC.  The Pension Benefit Guaranty Corporation created by §4002 of ERISA and any successor entity or entities having similar responsibilities.           Permits.  Permits, licenses, franchises, patents, copyrights, trademarks, trade names, approvals, clearances, and applications for or rights in respect of the foregoing of any Government Authority.           Permitted Acquisitions.  Acquisitions permitted under clauses (a) through (f) of Section 8.3.           Permitted Liens.  Liens permitted by Section 8.4.           Person.  Any individual, Entity, or Government Authority.           Proceedings.  Any (a) actions at law, (b) suits in equity, (c) bankruptcy, insolvency, receivership, dissolution, or reorganization cases or proceedings, (d) administrative or regulatory hearings or other proceedings, (e) arbitration and mediation proceedings, (f) criminal prosecutions, (g) judgment levies, foreclosure proceedings, pre-judgment security procedures, or other enforcement actions, and (h) other litigation, actions, suits, and proceedings conducted by, before, or on behalf of any Government Authority.           Readily Marketable Securities.  Equity Securities or Indebtedness for which an established public or private trading market exists, such that they may reasonably be expected to be liquidated within five (5) Business Days.           Real Estate.  All real property at any time owned or leased (as lessee or sublessee) by the Borrower or any of its Subsidiaries.           Record.  The grid attached to a Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Bank with respect to any Loan referred to in such Note.           Reimbursement Obligation.  The Borrower’s obligation to reimburse the Co-Agents and the Banks on account of any drawing under any Letter of Credit as provided in Section 4.2.           Reorganization and Reorganize.  As defined in Section 8.2.           Restricted Subsidiary.  Each (a) Subsidiary of the Borrower designated as a “Restricted Subsidiary” on Schedule 6.18 (and by such designation the Borrower represents and warrants to the Administrative Agent, the Co-Agents and the Banks that such Subsidiary meets the qualifications of a Restricted Subsidiary as specified in this definition), and (b) other Subsidiary of the Borrower that the principal financial or accounting officer or treasurer of the Borrower may after the date of this Credit Agreement certify to the Administrative Agent, the Co-Agents and the Banks meets the qualifications of a Restricted Subsidiary as specified in this definition (and at the time of any such certification the Borrower shall provide the Administrative Agent and the Banks with a current list of all Restricted Subsidiaries).  The qualifications of a Restricted Subsidiary are as follows: (a) at least fifty-one percent (51%) of the issued and outstanding Equity Securities of a Restricted Subsidiary shall be owned of record and beneficially by the Borrower or one or more other Restricted Subsidiaries free of Liens other than Permitted Liens, and (b) no Restricted Subsidiary shall be a general partner of any partnership, be a party to any joint venture in respect of which liability is not limited to the amount of such Restricted Subsidiary’s capital contribution or other equity investment, or have any contingent obligations established by Contract in respect of Funded Debt that are not by their terms limited to a specific dollar amount; provided, however, that, notwithstanding the foregoing, a Restricted Subsidiary may be a general partner in a partnership which is wholly owned by the Borrower or one or more other Restricted Subsidiaries.           Significant Assets.  At the date of any sale, transfer, assignment, or other disposition of assets of the Borrower or any of its Subsidiaries (or as of the date of any Default or Event of Default), assets of the Borrower or any of its Subsidiaries (including Equity Securities of Subsidiaries of the Borrower) which generated thirty-three and one-third percent (33 1/3%) or more of the consolidated revenues of the Borrower during the four (4) fiscal quarters of the Borrower most recently ended (the “Measuring Period”), provided that assets of the Borrower or any of its Subsidiaries (including Equity Securities of Subsidiaries of the Borrower) which do not meet the definition of Significant Assets in the first part of this sentence shall nonetheless be deemed to be Significant Assets if such assets generated revenues for the Measuring Period that if subtracted from the consolidated revenues of the Borrower for the Measuring Period would result in consolidated revenues of the Borrower for the Measuring Period of less than $400,000,000.           S&P Rating.  With respect to any Entity which is the issuer or obligor with respect to commercial paper, the rating assigned to such entity by Standard & Poor’s Ratings Group from time to time in effect.           Subsidiary.  Any Entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding Voting Equity Securities.           Syndication Agent.  The Chase Manhattan Bank, acting as syndication agent.           Total Commitment.  The sum of the Commitments of the Banks, as in effect from time to time.  As of the Closing Date the Total Commitment is $250,000,000.           12b-1 Fees.  All or any portion of (a) the compensation or fees paid, payable, or expected to be payable to the Borrower or any of its Subsidiaries for acting as the distributor of securities as permitted under Rule 12b-l under the 1940 Act, (b) the contingent deferred sales charges or redemption fees paid, payable, or expected to be paid to the Borrower or any of its Subsidiaries, and (c) any right, title, or interest in or to any such compensation or fees.           Type.  As to any Loan, its nature as a Federal Funds Rate Loan or LIBOR Loan, as the case may be.           Uniform Customs.  With respect to any Letter of Credit, the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, or any successor version thereof adopted by any of the Co-Agents in the ordinary course of its business as a letter of credit issuer, upon notice to the Borrower, and in effect at the time of issuance of such Letter of Credit.           Units.  Units representing assignments of beneficial ownership of limited partnership interests in the Borrower.           Unpaid Reimbursement Obligation.  Any Reimbursement Obligation for which the Borrower does not reimburse the Co-Agents and the Banks on the date specified in, and in accordance with, Section 4.2 and that is not covered by a Loan as provided in Section 2.8.           Unrestricted Subsidiary.  A Subsidiary that is not a Restricted Subsidiary.           Voting Equity Securities.  Equity Securities of any class or classes (however designated), the holders of which are at the time entitled, as such holders, to vote for the election of a majority of the directors (or persons performing similar functions) of the Entity that issued such Equity Securities.           1.2     Rules of Interpretation.                     (a)      A reference to any Contract or other document shall include such Contract or other document as amended, modified, or supplemented from time to time in accordance with its terms and the terms of this Credit Agreement.                     (b)      The singular includes the plural and the plural includes the singular.                     (c)      A reference to any Government Mandate includes any amendment or modification to such Government Mandate or any successor Government Mandate.                     (d)      A reference to any Person includes its permitted successors and permitted assigns.  Without limiting the generality of the foregoing, a reference to any Bank shall include any Person that succeeds generally to its assets and liabilities.                     (e)      Accounting terms not otherwise defined herein have the meanings assigned to them by GAAP.                     (f)       The words “include”, “includes”, and “including” are not limiting.                     (g)      All terms not specifically defined herein or by GAAP, which terms are defined in the Uniform Commercial Code as in effect in The State of New York, have the meanings assigned to them therein.                     (h)      Reference to a particular “§”, Section, Schedule, or Exhibit refers to that Section, Schedule, or Exhibit of this Credit Agreement unless otherwise indicated.                     (i)       The words “herein”, “hereof”, and “hereunder” and words of like import shall refer to this Credit Agreement as a whole and not to any particular section or subdivision of this Credit Agreement. 2.       THE REVOLVING CREDIT FACILITY           2.1     Commitment to Lend                     (a)      Subject to the terms and conditions set forth in Section 11 hereof, each of the Banks severally shall lend to the Borrower, and the Borrower may borrow, repay, and reborrow from time to time between the Closing Date and the Maturity Date upon notice by the Borrower to the Administrative Agent given in accordance with Section 2.7, such sums as are requested by the Borrower up to a maximum aggregate principal amount outstanding (after giving effect to all amounts requested) at any one time equal to such Bank’s Commitment minus an amount equal to such Bank’s Commitment Percentage multiplied by the sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations, provided that the sum of (i) the outstanding amount of the Loans (after giving effect to all amounts requested) plus (ii) the Maximum Drawing Amount plus (iii) all Unpaid Reimbursement Obligations shall not at any time exceed the Total Commitment.  The Loans shall be made pro rata in accordance with each Bank’s Commitment Percentage; provided that the failure of any Bank to lend in accordance with this Credit Agreement shall not release any other Bank or the Administrative Agent from their obligations hereunder, nor shall any Bank have any responsibility or liability in respect of a failure of any other Bank to lend in accordance with this Credit Agreement.  Each request for a Loan and each borrowing hereunder shall constitute a representation and warranty by the Borrower that the conditions set forth in Section 11 have been satisfied on the date of such request.                     (b)      In the event that, at any time when the conditions precedent for any Loan have been satisfied, a Bank or the Administrative Agent, as the case may be, fails or refuses to fund its portion of such Loan, then, until such time as such Bank or the Administrative Agent, as the case may be, has funded its portion of such Loan, or all of the other Banks and/or the Administrative Agent, as the case may be, have received payment in full of the principal and interest due in respect of such Loan, such non-funding Bank or Administrative Agent, as the case may be, shall not have the right to receive payment of any principal, interest or fees from the Borrower in respect of its Loans.           2.2     Facility Fee.  The Borrower shall pay to the Administrative Agent for the accounts of the Banks in accordance with their respective Commitment Percentages a facility fee on the daily average amount of the Total Commitment as of the most recently completed calendar quarter calculated at the rate per annum, on the basis of a 360-day year for the actual number of days elapsed, as determined in accordance with the chart below with respect to the Borrower’s commercial paper rating as of the last Business Day of each calendar quarter.  The facility fee shall be payable quarterly in arrears on the first Business Day of each calendar quarter for the immediately preceding calendar quarter commencing on the first such date following the date hereof, with a final payment on the Maturity Date or any earlier date on which the Total Commitment shall terminate.  In no case shall any portion of the facility fee be refundable.           The facility fee shall be calculated based upon the Borrower’s S&P Rating and Moody’s Rating in effect as of any date of determination as follows:   Borrower’s S&P Rating/Moody’s Rating Facility Fee A-1+/P-1 0.080% A-1/P-1 0.090% A-1/P-2 or A-2/P-1 0.125% A-2/P-2 0.150% Less than A-2/P-2 0.200% Notwithstanding the foregoing, if the Borrower loses both its Moody’s Rating, and its S&P Rating at any time, the facility fee shall be 0.200%.  If, subsequent to losing such ratings, the Borrower is able to again obtain such ratings, the above table shall, from and after the date of such occurrence (until such time, if any, that the Borrower again loses such ratings), govern the facility fee.           2.3     Utilization Fee.  For any calendar quarter in which the sum of (i) the average aggregate daily outstanding balance of the Loans plus (ii) the average aggregate Maximum Drawing Amount of all Letters of Credit outstanding plus (iii) the average aggregate daily outstanding balance of Unpaid Reimbursement Obligations (to the extent not included under (i) or (ii)) is greater than 33 1/3% but less than 66 2/3% of the daily average amount of the Total Commitment for such quarter, the Borrower shall pay to the Administrative Agent for the accounts of the Banks in accordance with their respective Commitment Percentages, a utilization fee calculated at a rate per annum equal to 0.100% of the sum of (i) the average aggregate outstanding amount of the Loans during such calendar quarter plus (ii) the average aggregate Maximum Drawing Amount of all Letters of Credit outstanding during such quarter plus (iii) the average aggregate daily outstanding balance of Unpaid Reimbursement Obligations during such quarter (to the extent not included under (i) or (ii)).  For any calendar quarter in which the sum of (i) the average aggregate daily outstanding balance of the Loans plus (ii) the average aggregate Maximum Drawing Amount of all Letters of Credit outstanding plus (iii) the average aggregate daily outstanding balance of Unpaid Reimbursement Obligations (to the extent not included under (i) or (ii)) is greater than or equal to 66 2/3% of the daily average amount of the Total Commitment for such quarter, the Borrower shall pay to the Administrative Agent for the accounts of the Banks in accordance with their respective Commitment Percentages, a utilization fee calculated at a rate per annum equal to 0.200% of the sum of (i) the average aggregate outstanding amount of the Loans during such calendar quarter plus (ii) the average aggregate Maximum Drawing Amount of all Letters of Credit outstanding plus (iii) the average aggregate daily outstanding balance of Unpaid Reimbursement Obligations (to the extent not included under (i) or (ii)).  The utilization fee shall be payable on the earlier of five (5) Business Days after the end of any calendar quarter in which such fee shall be due and owing in accordance with this Section 2.3 or the Maturity Date or any earlier date on which the Total Commitment shall terminate.  In no case shall any portion of the utilization fee be refundable.           2.4     Reduction of Total Commitment .  The Borrower shall have the right at any time and from time to time upon three (3) Business Days’ prior written notice to the Administrative Agent to reduce by at least $1,000,000 or integral multiples of $1,000,000 in excess thereof, or to terminate entirely, the unborrowed portion of the Total Commitment, whereupon the Commitments of the Banks shall be reduced pro rata in accordance with their respective Commitment Percentages of the amount specified in such notice or, as the case may be, terminated.  Promptly after receiving any notice of the Borrower delivered pursuant to this Section 2.4, the Administrative Agent will notify the Banks of the substance thereof.  Upon the effective date of any such reduction or termination, the Borrower shall pay to the Administrative Agent for the respective accounts of the Banks the full amount of any facility fee then accrued on the amount of the reduction.  No reduction or termination of the Commitments may be reinstated.           2.5     The Notes.  The Loans shall be evidenced by separate promissory notes of the Borrower in substantially the form of Exhibit B hereto (each a “Note”), dated as of the Closing Date and completed with appropriate insertions. One Note shall be payable to the order of each Bank in a principal amount equal to such Bank’s Commitment or, if less, the outstanding amount of all Loans made by such Bank, plus interest accrued thereon, as set forth below.  The Borrower irrevocably authorizes each Bank to make or cause to be made, at or about the time of the Drawdown Date of any Loan or at the time of receipt of any payment of principal on such Bank’s Note, an appropriate notation on such Bank’s Record reflecting the making of such Loan or (as the case may be) the receipt of such payment.  The outstanding amount of the Loans set forth on such Bank’s Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Bank, but the failure to record, or any error in so recording, any such amount on such Bank’s Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Note to make payments of principal of or interest on any Note when due.           2.6     Interest on Loans.                     2.6.1  Interest Rates.  Except as otherwise provided in Section 5.10, the Loans shall bear interest as follows:                     (a)      Each Federal Funds Rate Loan shall bear interest at an annual rate equal to the Federal Funds Rate as in effect from time to time while such Federal Funds Rate Loan is outstanding.                     (b)      Each LIBOR Loan shall bear interest for each Interest Period at an annual rate equal to the LIBOR Rate for such Interest Period in effect from time to time during such Interest Period.                     2.6.2  Interest Payment Dates.  The Borrower shall pay all accrued interest on each Loan in arrears on each Interest Payment Date with respect thereto.           2.7     Requests for Loans.  The Borrower shall give to the Administrative Agent written notice in the form of Exhibit C hereto (or telephonic notice confirmed in a writing in the form of Exhibit D hereto) of each Loan requested hereunder (a “Loan Request”) no later than (a) 11:00 a.m. (Charlotte, North Carolina time) on the proposed Drawdown Date of any Federal Funds Rate Loan and (b) two (2) LIBOR Business Days prior to the proposed Drawdown Date of any LIBOR Loan.  Each such notice shall specify (i) the principal amount of the Loan requested, (ii) the proposed Drawdown Date of such Loan, (iii) the Type of such Loan, and (iv) the Interest Period for such Loan if such Loan is a LIBOR Loan.  Promptly upon receipt of any such Loan Request, the Administrative Agent shall notify each of the Banks thereof.  Each Loan Request shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept the Loan requested from the Banks on the proposed Drawdown Date.  Each Loan Request shall be in a minimum aggregate amount of $1,000,000 or in an integral multiple of $1,000,000 in excess thereof.           2.8     Loans to Cover Reimbursement Obligations .  Notwithstanding the notice and minimum amount requirements set forth in Section 2.7, the Banks shall, according to their Commitment Percentages and subject to the satisfaction of the conditions set forth herein, make Loans to the Borrower as provided in Section 2.10.1 on the date that any draft presented under any Letter of Credit is honored by any Co-Agent, or any date on which any Co-Agent otherwise makes a payment with respect thereto, in an amount sufficient to pay in full the obligations of the Borrower under Section 4.2 in respect of the honor of such draft or the making of such payment.  The Borrower hereby requests and authorizes the Banks to make from time to time such Loans.  The Borrower acknowledges and agrees that the making of such Loans shall, in each case, be subject in all respects to the provisions of this Credit Agreement as if they were Loans covered by a Loan Request, including the limitations set forth in Section 2.1 and the requirement that the applicable provisions of Sections 10 and 11 be satisfied.  Each Co-Agent may (but shall not be required to) assume that each Bank will make available to it on a timely basis funds for any Loan under this Section 2.8 and each Bank shall reimburse such Co-Agent for any such amounts so advanced on its behalf, all on the terms and conditions set forth in Section 2.10.2.  Absent manifest error on the part of such Co-Agent or the Banks, all actions taken by such Co-Agent or the Banks pursuant to the provisions of this Section 2.8 shall be conclusive and binding on the Borrower.  Loans made pursuant to this Section 2.8 shall be Federal Funds Rate Loans until converted in accordance with the provisions of this Credit Agreement.           2.9     Conversion Options.                     2.9.1  Conversion to LIBOR Loan.  The Borrower may elect from time to time, subject to Section 2.11, to convert any outstanding Federal Funds Rate Loan to a LIBOR Loan, provided that (a) the Borrower shall give the Administrative Agent at least two (2) LIBOR Business Days’ prior written notice of such election; and (b) no Federal Funds Rate Loan may be converted into a LIBOR Loan when any Default or Event of Default has occurred and is continuing.  Each notice of election of such conversion, and each acceptance by the Borrower of such conversion, shall be deemed to be a representation and warranty by the Borrower that no Default or Event of Default has occurred and is continuing.  The Administrative Agent shall notify the Banks promptly of any such notice.  On the date on which such conversion is being made, each Bank shall take such action as is necessary to transfer its Commitment Percentage of such Loans to its LIBOR Lending Office.  All or any part of outstanding Federal Funds Rate Loans may be converted into a LIBOR Loan as provided herein, provided that any partial conversion shall be in an aggregate principal amount of $1,000,000 or an integral multiple of $1,000,000 in excess thereof.                     2.9.2  Continuation of Type of Loan.                     (a)      All Federal Funds Rate Loans shall continue as Federal Funds Rate Loans until converted into LIBOR Loans as provided in Section 2.9.1.                     (b)      Any LIBOR Loan may, subject to Section 2.11, be continued, in whole or in part, as a LIBOR Loan upon the expiration of the Interest Period with respect thereto, provided that (i) the Borrower shall give the Administrative Agent at least two (2) LIBOR Business Days’ prior written notice of such election; (ii) no LIBOR Loan may be continued as such when any Default or Event of Default has occurred and is continuing, but shall be automatically converted to a Federal Funds Rate Loan on the last day of the first Interest Period relating thereto ending during the continuance of any Default or Event of Default; and (iii) any partial continuation of a LIBOR Loan shall be in an aggregate principal amount of $1,000,000 or an integral multiple of $1,000,000 in excess thereof.  Each notice of election of such continuance of a LIBOR Loan, and each acceptance by the Borrower of such continuance, shall be deemed to be a representation and warranty by the Borrower that no Default or Event of Default has occurred and is continuing.                     (c)      If the Borrower shall fail to give any notice of continuation of a LIBOR Loan as provided under this Section 2.9.2, the Borrower shall be deemed to have requested a conversion of the affected LIBOR Loan to a Federal Funds Rate Loan on the last day of the then current Interest Period with respect thereto.                     (d)      The Administrative Agent shall notify the Banks promptly when any such continuation or conversion contemplated by this Section 2.9.2 is scheduled to occur.  On the date on which any such continuation or conversion is to occur, each Bank shall take such action as is necessary to transfer its Commitment Percentage of such Loans to its Domestic Lending Office or its LIBOR Lending Office as appropriate.                     2.9.3  LIBOR Loans.  Any conversion to or from LIBOR Loans shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of all LIBOR Loans having the same Interest Period shall not be less than $1,000,000 or an integral multiple of $1,000,000 in excess thereof.                     2.9.4  Conversion Requests.  All notices of the conversion or continuation of a Loan provided for in this Section 2.9 shall be in writing in the form of Exhibit E hereto (or shall be given by telephone and confirmed by a writing in the form of Exhibit F hereto).  Each such notice shall specify (a) the principal amount and Type of the Loan subject thereto, (b) the date on which the current Interest Period of such Loan ends if such Loan is a LIBOR Loan, and (c) the new Interest Period for such Loan if such Loan is a LIBOR Loan. Promptly upon receipt of any such notice, the Administrative Agent shall notify each of the Banks thereof.  Each such notice shall be irrevocable and binding on the Borrower.           2.10   Funds for Loans.                     2.10.1           Funding Procedures.  Not later than 1:00 p.m. (Charlotte, North Carolina time) on the proposed Drawdown Date of any Loan or the Drawdown Date of any Loan under Section 2.8, each of the Banks will make available to the Administrative Agent, at the Administrative Agent’s Head Office, in immediately available funds, the amount of such Bank’s Commitment Percentage of the amount of the requested Loan.  Upon receipt from each Bank of such amount, and upon receipt of the documents required by Section 11 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Administrative Agent will make available to the Borrower the aggregate amount of such Loan made available to the Administrative Agent by the Banks.  The failure or refusal of any Bank to make available to the Administrative Agent at the aforesaid time and place on any Drawdown Date the amount of its Commitment Percentage of the requested Loan shall not relieve any other Bank from its several obligation hereunder to make available to the Administrative Agent the amount of such other Bank’s Commitment Percentage of any requested Loan, but no other Bank shall be liable in respect of the failure of such Bank to make available such amount.                     2.10.2           Advances by Administrative Agent.  The Administrative Agent may, unless notified to the contrary by any Bank prior to a Drawdown Date, assume that such Bank has made available to the Administrative Agent on such Drawdown Date the amount of such Bank’s Commitment Percentage of the Loans to be made on such Drawdown Date, and the Administrative Agent may (but it shall not be required to), in reliance upon such assumption, make available to the Borrower a corresponding amount.  If any Bank makes available to the Administrative Agent such amount on a date after such Drawdown Date, such Bank shall pay to the Administrative Agent on demand an amount equal to the weighted average interest rate paid by the Administrative Agent for federal funds acquired by the Administrative Agent during each day included in such period, times the amount of such Bank’s Commitment Percentage of such Loans calculated on the basis of a 360-day year for the actual number of days elapsed.  A statement of the Administrative Agent submitted to such Bank with respect to any amounts owing under this paragraph shall be prima facie evidence of the amount due and owing to the Administrative Agent by such Bank.  If the amount of such Bank’s Commitment Percentage of such Loans is not made available to the Administrative Agent by such Bank within three (3) Business Days following such Drawdown Date, the Administrative Agent shall be entitled to recover such amount from the Borrower within one (1) Business Day after demand therefor, with interest thereon at the rate per annum applicable to the Loans made on such Drawdown Date.           2.11   Limit on Number of LIBOR Loans.   At no time shall there be outstanding LIBOR Loans having more than twenty-five (25) different Interest Periods. 3.       REPAYMENT OF LOANS.           3.1     Maturity.  The Borrower shall pay on the Maturity Date, and there shall become absolutely due and payable on the Maturity Date, all of the Loans outstanding on such date, together with any and all accrued and unpaid interest thereon. The Commitment shall terminate on the Maturity Date.           3.2     Mandatory Repayments of Loans.                     3.2.1  Loans in Excess of Commitment.  If at any time the sum of the outstanding amount of the Loans, the Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the Total Commitment, then the Borrower shall immediately pay the amount of such excess to the Administrative Agent for application first, to any Unpaid Reimbursement Obligations; second, to the Loans; and third, to provide the Administrative Agent cash collateral for Reimbursement Obligations as contemplated by Sections 4.2(b) and (c).  Each payment of any Unpaid Reimbursement Obligations or prepayment of Loans shall be allocated among the Banks in proportion, as nearly as practicable, to each Reimbursement Obligation or (as the case may be) the respective unpaid principal amount of each Bank’s Note, with adjustments to the extent practicable to equalize any prior payments or repayments not exactly in proportion.                     3.2.2  Change of Control.  Upon the occurrence of a Change of Control or impending Change of Control:                     (a)      the Borrower shall notify the Administrative Agent and each Bank of such Change of Control or impending Change of Control as provided in Section 7.5.4;                     (b)      the Commitments (but not the right of the Borrower to convert and continue Types of Loans under Section 2.9) shall be suspended for the period from the date of such notice (or any Change of Control Notice given by the Administrative Agent or a Bank as provided in Section 7.5.4) through the later to occur of (i) the Change of Control Date or (ii) the date forty (40) days after the date of such notice from the Borrower (the “Suspension Period”) and neither the Banks nor the Administrative Agent shall have any obligations to make Loans to the Borrower;                     (c)      each Bank shall have the right within fifteen (15) days after the date of such Bank’s receipt of a Change of Control Notice under clause (a) above to demand payment in full of its pro rata share of the outstanding principal of all Loans, Unpaid Reimbursement Obligations, all accrued and unpaid interest thereon, and any other amounts owing under the Loan Documents, as well as payment of cash collateral for such Bank’s Letter of Credit Participation, as more particularly described in clause (e) below;                     (d)      in the event that any Bank shall have made a demand under clause (c) above the Borrower shall promptly, but in no event later than five (5) Business Days after such demand, deliver notice to each Bank (which notice shall identify the Bank making such demand) and, notwithstanding the provisions of clause (c) above, the right of each Bank to demand repayment shall remain in effect through the fifteenth (15th) day next succeeding receipt by such Bank of any notice required to be given pursuant to this clause (d), provided that the provisions of this clause (d) shall only apply with respect to demands given by Banks prior to the expiration of the period specified in clause (c); and                     (e)      in the event any Bank makes a demand under clause (c) or clause (d) above, the Borrower shall on the last day of the Suspension Period pay to the Administrative Agent for the credit of such Bank its pro rata share of the outstanding principal of all Loans, all accrued and unpaid interest thereon, any Unpaid Reimbursement Obligations and any other amounts owing under the Loan Documents, (provided that (i) any Bank may require the Borrower to postpone prepayment of a LIBOR Loan until the last day of the Interest Period with respect to such LIBOR Loan, and (ii) if any Bank elects to require prepayment of a LIBOR Loan that has an Interest Period ending less than sixty (60) days after the date of such demand on a date that is not the last day of the Interest Period for such LIBOR Loan, such Bank shall not be entitled to receive any amounts payable under Section 5.9 in respect of the prepayment of such LIBOR Loan) and the Borrower shall on the last day of the Suspension Period pay to the Administrative Agent an amount equal to such Bank’s pro rata share of the then Maximum Drawing Amount on all Letters of Credit, which amount shall be held by the Administrative Agent as cash collateral for the benefit of such Bank for its share of all Reimbursement Obligations.  Notwithstanding the immediately preceding sentence, so long as no Event of Default has occurred and is continuing, if at any time (whether before or after the date at which the Borrower provides cash collateral for any Letters of Credit) any Bank, or any other financial institution reasonably satisfactory to the Administrative Agent which meets the requirements of an Eligible Assignee, agrees to purchase the Letter of Credit Participation of one or more Banks that have made demand pursuant to clause (c) or clause (d) above, and such Person has executed the documentation necessary to consummate such purchase, (x) the Borrower shall be relieved of the obligation to provide cash collateral with respect to Letters of Credit and (y) such selling Bank shall be relieved of the obligation to fund an advance with respect to Letters of Credit, but only to the extent in each case that such purchasing Bank or other financial institution has purchased such Letter of Credit Participation.  If the Borrower has provided such cash collateral prior to such purchase, the Administrative Agent shall refund to the Borrower a portion of such cash collateral equal to the amount of Letter of Credit Participation so purchased.           Upon any demand for payment by any Bank under this Section 3.2.2, the Commitment hereunder provided by such Bank shall terminate, and such Bank shall be relieved of all further obligations to make Loans to the Borrower or participate in the risk of Letters of Credit issued, extended, or renewed after the date of such demand.  At the end of the Suspension Period referred to above, the Commitments shall be restored from all Banks that have not made a demand for payment under this Section 3.2.2, and this Credit Agreement and the other Loan Documents shall remain in full force and effect among the Borrower, such Banks, the Co-Agents and the Administrative Agent, with such changes as may be necessary to reflect the termination of the credit provided by the Banks that made a demand for payment under this Section 3.2.2.           3.3     Optional Repayments of Loans . The Borrower shall have the right, at its election, to repay the outstanding amount of the Loans, as a whole or in part, at any time without penalty or premium, provided that any full or partial repayment of the outstanding amount of any LIBOR Loans pursuant to this Section 3.3 made on a date other than the last day of the Interest Period relating thereto shall be subject to customary breakage charges as provided in Section 5.9.  The Borrower shall give the Administrative Agent, no later than 10:00 a.m., Charlotte, North Carolina time, at least one (1) Business Day’s prior written notice, of any proposed repayment pursuant to this Section 3.3 of Federal Funds Rate Loans, and two (2) LIBOR Business Days’ notice of any proposed repayment pursuant to this Section 3.3 of LIBOR Loans, in each case, specifying the proposed date of payment of Loans and the principal amount to be paid.  Each such partial repayment of the Loans shall be in an amount of $1,000,000 or an integral multiple of $1,000,000 in excess thereof, shall be accompanied by the payment of accrued interest on the principal repaid to the date of payment, and shall be applied, in the absence of instruction by the Borrower, first to the principal of Federal Funds Rate Loans and then to the principal of LIBOR Loans (in inverse order of the last days of their respective Interest Periods).  Each partial repayment shall be allocated among the Banks, in proportion, as nearly as practicable, to the respective unpaid principal amount of each Bank’s Loans, with adjustments to the extent practicable to equalize any prior repayments not exactly in proportion.  Any amounts repaid under this Section 3.3 may be reborrowed prior to the Maturity Date as provided in Section 2.7, subject to the conditions of Section 11. 4.       LETTERS OF CREDIT           4.1     Letter of Credit Commitments.                     4.1.1  Commitment to Issue Letters of Credit.  Subject to the terms and conditions hereof and the execution and delivery by the Borrower of a letter of credit application on the Co-Agent’s customary form attached hereto as Exhibit G, or such other form as may be reasonably acceptable to the Borrower and the Co-Agent issuing such Letter of Credit (a “Letter of Credit Application”), the Co-Agent receiving such Letter of Credit Application on behalf of the Banks and in reliance upon the agreement of the Banks set forth in Section 4.1.4 and upon the representations and warranties of the Borrower contained herein, each Bank agrees, in its individual capacity, to issue, extend, and renew for the account of the Borrower one or more standby letters of credit (individually, a “Letter of Credit”), in such form as may be requested from time to time by the Borrower and agreed to by either of the Co-Agents; provided, however, that, after giving effect to such request, (i) the Maximum Drawing Amount on all Letters of Credit shall not exceed $80,000,000 (the “Letter of Credit Commitment”), and (ii) the sum of (A) the Maximum Drawing Amount on all Letters of Credit, (B) all Unpaid Reimbursement Obligations, and (C) the amount of all Loans outstanding shall not exceed the Total Commitment.                     4.1.2  Letter of Credit Applications.  Each Letter of Credit Application shall be completed to the reasonable satisfaction of the Borrower and the Co-Agent to which it is delivered.  In the event that any provision of any Letter of Credit Application shall be inconsistent with any provision of this Credit Agreement, then the provisions of this Credit Agreement shall, to the extent of any such inconsistency, govern.                     4.1.3  Terms of Letters of Credit.  Each Letter of Credit issued, extended, or renewed hereunder shall, among other things, (a) provide for the payment of sight drafts for honor thereunder when presented in accordance with the terms thereof and when accompanied by the documents described therein, and (b) have an expiry date no later than the date which is fourteen (14) days prior to the Maturity Date.  Each Letter of Credit so issued, extended, or renewed shall be subject to the Uniform Customs.                     4.1.4  Reimbursement Obligations of Banks.  Each Bank severally agrees that it shall be absolutely liable, without regard to the occurrence of any Default or Event of Default or any other condition precedent whatsoever, to the extent of such Bank’s Commitment Percentage, to reimburse the Co-Agent issuing any Letter of Credit on demand for the amount of each draft paid by such Co-Agent under each such Letter of Credit to the extent that such amount is not reimbursed by the Borrower pursuant to Section 4.2 (such agreement for a Bank being called herein the “Letter of Credit Participation” of such Bank); provided, however, that no Bank shall be required to reimburse the Co-Agent issuing such Letter of Credit, if at the time that such Co-Agent issued such Letter of Credit, such Co-Agent had actual knowledge of the existence of a Default.                     4.1.5  Participations of Banks.  Each such payment under this Section 4.1 made by a Bank shall be treated as the purchase by such Bank, to the extent of such Bank’s Commitment Percentage, of a participating interest in the Borrower’s Reimbursement Obligation under Section 4.2 in an amount equal to such payment.  Each Bank shall share in accordance with its participating interest in any interest which accrues pursuant to Section 4.2.           4.2     Reimbursement Obligation of the Borrower.  In order to induce the Co-Agents to issue, extend, and renew each Letter of Credit and the Banks to participate therein, the Borrower hereby agrees to reimburse or pay to the Co-Agent issuing such Letter of Credit, for the account of such Co-Agent or (as the case may be) the Banks, with respect to each Letter of Credit issued, extended, or renewed by such Co-Agent hereunder,                     (a)      except as otherwise expressly provided in Section 4.2(b) and (c), on each date that any draft presented under such Letter of Credit is honored by either Co-Agent, or either Co-Agent otherwise makes a payment under or pursuant to such Letter of Credit, the amount paid by such Co-Agent under or with respect to such Letter of Credit;                     (b)      upon the reduction (but not termination) of the Total Commitment or the Letter of Credit Commitment to an amount less than the Maximum Drawing Amount, an amount equal to such difference, which amount shall be held by the Administrative Agent for the benefit of the Banks and the Co-Agents as cash collateral for all Reimbursement Obligations, subject to the provisions of Section 3.2.2; and                     (c)      upon the termination of the Total Commitment or the Letter of Credit Commitment or the acceleration of the Reimbursement Obligations with respect to all Letters of Credit in accordance with Section 12, an amount equal to one hundred percent (100%) of the then Maximum Drawing Amount on all such Letters of Credit plus projected Letter of Credit Fees, based upon the Borrower’s then effective commercial paper rating, which amount shall be held by the Administrative Agent for the benefit of the Banks and the Co-Agents as cash collateral for all Reimbursement Obligations.           Each such payment shall be made to the Administrative Agent at the Administrative Agent’s Head Office or to the relevant Co-Agent at such Co-Agent’s Head Office, as the case may be, in immediately available funds or from the direct application of the proceeds of a Loan made pursuant to Section 2.8.  To the extent not paid pursuant to Section 2.8, interest on any and all amounts remaining unpaid by the Borrower under this Section 4.2 at any time from the date such amounts become due and payable (whether as stated in this Section 4.2, by acceleration, or otherwise) until payment in full (whether before or after judgment) shall be payable to the relevant Co-Agent on demand at the rate specified in Section 5.10 for overdue principal of the Federal Funds Rate Loans.           4.3     Letter of Credit Payments.  If any draft shall be presented or other demand for payment shall be made under any Letter of Credit, the Co-Agent receiving such draft or demand shall notify the Borrower and the Banks of the date and amount of the draft presented or demand for payment and of the date and time when it expects to pay such draft or honor such demand for payment.  If the Borrower fails to reimburse the relevant Co-Agent as provided in Section 4.2 on or before the date that such draft is paid or other payment is made by such Co-Agent (and the draft or other payment is not covered by a Loan as provided in Section 2.8), such Co-Agent shall promptly thereafter, but not later than 1:00 p.m. (Dallas, Texas time) on the date such draft is paid or other payment is made by such Co-Agent, notify the Banks of the amount of any such Unpaid Reimbursement Obligation.  As soon as possible following such notice, but in no event later than 3:00 p.m. (Dallas, Texas time) on the date of such notice, each Bank shall make available to such Co-Agent, at its Head Office, in immediately available funds, an amount equal to the product of such Bank’s Commitment Percentage and such Bank’s Unpaid Reimbursement Obligation, together with an amount equal to the product of (a) the average, computed for the period referred to in clause (c) below, of the weighted average interest rate paid by such Co-Agent for federal funds acquired by such Co-Agent during each day included in such period, times (b) the amount equal to such Bank’s Commitment Percentage multiplied by such Bank’s Unpaid Reimbursement Obligation, times (c) a fraction, the numerator of which is the number of days that elapse from and including the date such Co-Agent paid the draft presented for honor or otherwise made payment to the date on which such Bank’s Commitment Percentage of such Unpaid Reimbursement Obligation shall become immediately available to such Co-Agent, and the denominator of which is 360.  The responsibility of such Co-Agent to the Borrower and the Banks shall be only to determine that the documents (including each draft) delivered under each Letter of Credit in connection with such presentment shall be in conformity in all material respects with such Letter of Credit.           4.4     Obligations Absolute.  The Borrower’s obligations under this Section 4 shall be absolute and unconditional under any and all circumstances and irrespective of the occurrence of any Default or Event of Default or any condition precedent whatsoever or any setoff, counterclaim, or defense to payment which the Borrower may have or have had against the Administrative Agent, any Co-Agent, any Bank, or any beneficiary of a Letter of Credit.  The Borrower further agrees with the Administrative Agent, each Co-Agent and the Banks that the Administrative Agent, each Co-Agent and the Banks shall not be responsible for, and the Borrower’s Reimbursement Obligations under Section 4.2 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent, or forged, or any dispute between or among the Borrower, the beneficiary of any Letter of Credit, or any financing institution or other party to which any Letter of Credit may be transferred or any claims or defenses whatsoever of the Borrower against the beneficiary of any Letter of Credit or any such transferee.  The Administrative Agent, each Co-Agent and the Banks shall not be liable for any error, omission, interruption, or delay in transmission, dispatch, or delivery of any message or advice, however transmitted, in connection with any Letter of Credit.  The Borrower agrees that any action taken or omitted by the Administrative Agent, any Co-Agent or any Bank under or in connection with each Letter of Credit and the related drafts and documents, if done in good faith, shall be binding upon the Borrower and shall not result in any liability on the part of the Administrative Agent, any Co-Agent or any Bank to the Borrower.           4.5     Reliance by Issuer.  To the extent not inconsistent with Section 4.4, each Co-Agent shall be entitled to rely, and shall be fully protected in relying upon, any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex, or teletype message, statement, order, or other document believed by it to be genuine and correct and to have been signed, sent, or made by the proper Person and upon advice and statements of legal counsel, independent accountants, and other experts selected by such Co-Agent. Each of the Banks hereby indemnifies and holds each of the Co-Agents harmless from and against any and all claims, liability, damages, costs and expenses incurred by such Co-Agent in connection with any and all actions taken with respect to any Letter of Credit or any draft presented pursuant to any such Letter of Credit, so long as such action is taken in good faith.  Each Co-Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Credit Agreement in accordance with a request of the Majority Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Banks and all future holders of the Notes or of a Letter of Credit Participation.           4.6     Letter of Credit Fee.  The Borrower shall, on the date of issuance of any Letter of Credit and each anniversary thereof, pay in advance a fee (in each case, collectively with the fee described below in this Section 4.6, a “Letter of Credit Fee”) to the Co-Agent issuing such Letter of Credit, for the account of the Banks (including Bank of America, the Chase Manhattan Bank and Deutsche Bank AG, New York and/or Cayman Islands Branches, in their capacity as a Bank) on a pro rata basis, in respect of such Letter of Credit equal to the Applicable Margin. In addition to the foregoing fee, the Borrower shall pay in advance to the Co-Agent issuing such Letter of Credit, at the times specified above in this Section 4.6, for such Co-Agent’s own account, an additional fee equal to one-eighth of one percent (1/8%) per annum on the Maximum Drawing Amount of such Letter of Credit. In the event that any Letter of Credit shall be terminated or cancelled prior to the anniversary of the issuance thereof, the Letter of Credit Fees for such period shall be recalculated, and, to the extent any excess Letter of Credit Fees were paid as a result of such termination or cancellation, the Borrower shall receive a credit (to be applied in such manner as the Borrower and the applicable Co-Agent may agree) in the amount of such excess.           4.7     Additional Cash Collateral Provisions.  A pro rata portion of any cash collateral securing Letters of Credit not otherwise refunded or applied in accordance with this Credit Agreement shall in any event be refunded to the Borrower upon cancellation, or fourteen (14) days following expiration, of any Letter of Credit secured by such cash collateral.  In the event of refunding of any cash collateral, or any portion thereof, to the Borrower as provided in or pursuant to this Credit Agreement, the Administrative Agent shall refund to the Borrower an amount equal to the full amount of such cash collateral provided by the Borrower, or the applicable portion thereof, as the case may be, plus accrued interest thereon for the period from the most recent date on which such interest has been paid to, but not including, the date of such refund.  Interest on cash collateral shall accrue to the benefit of the Borrower, at a rate equal to the Administrative Agent’s Overnight Investment Rate, and shall be paid to the Borrower quarterly in arrears five (5) Business Days following the end of each calendar quarter and, in any case, on the date of refund as to any portion of cash collateral being refunded, as set forth above. 5.       CERTAIN GENERAL PROVISIONS.           5.1     Application of Payments .  Except as otherwise provided in this Credit Agreement, all payments in respect of any Loan shall be applied first to accrued and unpaid interest on such Loan and second to the outstanding principal of such Loan.           5.2     Funds for Payments.                     5.2.1  Payments to Co-Agents, Administrative Agent.  All payments of principal, interest, commitment fees, Reimbursement Obligations, Letter of Credit Fees and any other amounts due hereunder or under any of the other Loan Documents shall be made to any of the Co-Agents or Administrative Agent, for the respective accounts of the Banks, the Co-Agents and the Administrative Agent, at the Co-Agent’s Head Office or the Administrative Agent’s Head Office, as the same may be, or at such other location that the Co-Agents or the Administrative Agent may from time to time designate, in each case in immediately available funds or directly from the proceeds of Loans.                     5.2.2  No Offset, Etc.  All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions, or conditions of any nature now or hereafter imposed or levied by any Government Authority unless the Borrower is compelled by Government Mandate to make such deduction or withholding.  If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents (other than with respect to taxes on the income or profits of any Bank, the Co-Agents or the Administrative Agent), the Borrower will pay to the Administrative Agent, for the account of the Banks or (as the case may be) the Co-Agents or the Administrative Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Banks, the Co-Agent or the Administrative Agent to receive the same net amount which the Banks, the Co-Agent or the Administrative Agent would have received on such due date had no such obligation been imposed upon the Borrower.  The Borrower will deliver promptly to the Administrative Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document.  If a refund is received (either in cash or by means of a credit against future tax obligations) by any of the Co-Agents, the Administrative Agent or any Bank in respect of an amount previously paid by the Borrower pursuant to the immediately preceding sentence, such refund shall be promptly paid over to the Borrower.           5.2.3  Fees Non-Refundable.  Except as expressly set forth herein, all fees payable hereunder are non-refundable, provided that (a) if any of the Banks is finally adjudicated or is found in final arbitration proceedings to have been grossly negligent or to have committed willful misconduct with respect to the transactions contemplated hereby, then no facility fee shall be payable to such Bank after the date of such final adjudication or arbitration (and such Bank shall refund any facility fee paid to it and attributable to the period from and after the date on which such grossly negligent conduct or willful misconduct occurred), and (b) if the Administrative Agent is finally adjudicated or is found in final arbitration proceedings to have been grossly negligent or to have committed willful misconduct with respect to the transactions contemplated hereby, then no administrative agent’s fee will be due and payable after the date of such final adjudication or arbitration.  If the Administrative Agent is finally found to have been grossly negligent or to have committed willful misconduct, the amount of any administrative agent’s fee paid or prepaid by the Borrower and attributable to the period from and after the date on which such grossly negligent conduct or willful misconduct occurred shall be refunded.           5.3     Computations.  All computations of interest with respect to both Federal Funds Rate Loans and LIBOR Loans (including, without limitation, interest computations with respect to any Letter of Credit Fees) shall be based on a year of 360 days and paid for the actual number of days elapsed. Except as otherwise provided in the definition of the term “Interest Period” with respect to LIBOR Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension.           5.4     Inability to Determine LIBOR Rate Basis .  In the event, prior to the commencement of any Interest Period relating to any LIBOR Loan, the Administrative Agent shall determine that adequate and reasonable methods do not exist for ascertaining the LIBOR Rate Basis that would otherwise determine the rate of interest to be applicable to any LIBOR Loan during any Interest Period, the Administrative Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower and the Banks) to the Borrower and the Banks.  In such event (a) any Loan Request or Conversion Request with respect to LIBOR Loans shall be automatically withdrawn and shall be deemed a request for Federal Funds Rate Loans, (b) each LIBOR Loan will automatically, on the last day of the then current Interest Period relating thereto, become a Federal Funds Rate Loan, and (c) the obligations of the Banks to make LIBOR Loans shall be suspended until the Administrative Agent determines that the circumstances giving rise to such suspension no longer exist, whereupon the Administrative Agent shall so notify the Borrower and the Banks.           5.5     Illegality.  Notwithstanding any other provisions herein, if any present or future Government Mandate shall make it unlawful for any Bank to make or maintain LIBOR Loans, such Bank shall forthwith give notice of such circumstances to the Borrower and the other Banks and thereupon (a) the commitment of such Bank to make LIBOR Loans or convert Federal Funds Rate Loans to LIBOR Loans shall forthwith be suspended, and (b) such Bank’s Loans then outstanding as LIBOR Loans, if any, shall be converted automatically to Federal Funds Rate Loans on the last day of each then existing Interest Period applicable to such LIBOR Loans or within such earlier period after the occurrence of such circumstances as may be required by Government Mandate.  The Borrower shall promptly pay the Administrative Agent for the account of such Bank, upon demand by such Bank, any additional amounts necessary to compensate such Bank for any costs incurred by such Bank in making any conversion in accordance with this Section 5.5 other than on the last day of an Interest Period, including any interest or fees payable by such Bank to lenders of funds obtained by it in order to make or maintain its LIBOR Loans hereunder.           5.6     Additional Costs, Etc.    If any present or future applicable Government Mandate (whether or not having the force of law), shall:                     (a)      subject any Bank, any of the Co-Agents or the Administrative Agent to any tax, levy, impost, duty, charge, fee, deduction, or withholding of any nature with respect to this Credit Agreement, the other Loan Documents, and Letters of Credit, such Bank’s Commitment, or the Loans (other than taxes based upon or measured by the income or profits of such Bank, such Co-Agent or the Administrative Agent), or                     (b)      materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Bank of the principal of or the interest on any Loans or any other amounts payable to any Bank, any of the Co-Agents or the Administrative Agent under this Credit Agreement or the other Loan Documents, or                     (c)      impose, increase, or render applicable (other than to the extent specifically provided for elsewhere in this Credit Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy, or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or commitments of an office of any Bank, or                     (d)      impose on any Bank, any of the Co-Agents or the Administrative Agent any other conditions or requirements with respect to this Credit Agreement, the other Loan Documents, any Letters of Credit, the Loans, such Bank’s Commitment, or any class of loans or commitments of which any of the Loans or such Bank’s Commitment forms a part, and the result of any of the foregoing is:           (i)       to increase by an amount deemed by such Bank to be material with respect to the cost to any Bank of making, funding, issuing, renewing, extending, or maintaining any of the Loans or such Bank’s Commitment or any Letter of Credit, or           (ii)      to reduce, by an amount deemed by such Bank, such Co-Agent or the Administrative Agent, as the case may be, to be material, the amount of principal, interest, or other amount payable to such Bank, such Co-Agent or the Administrative Agent hereunder on account of such Bank’s Commitment, any Letter of Credit or any of the Loans, or           (iii)     to require such Bank, such Co-Agent or the Administrative Agent to make any payment that, but for such conditions or requirements described in clauses (a) through (d), would not be payable hereunder, or forego any interest, Reimbursement Obligations or other sum that, but for such conditions or requirements described in clauses (a) through (d), would be payable to such Bank, such Co-Agent or the Administrative Agent hereunder, in any case the amount of which payment or foregone interest, Reimbursement Obligation or other sum is deemed by such Bank, such Co-Agent or the Administrative Agent, as the case may be, to be material and is calculated by reference to the gross amount of any sum receivable or deemed received by such Bank, such Co-Agent or (as the case may be) the Administrative Agent from the Borrower hereunder, then, and in each such case, (aa) the Borrower will, upon demand made by such Bank, such Co-Agent or (as the case may be) the Administrative Agent at any time and from time to time (such demand to be made in any case not later than the first to occur of (I) the date one year after such event described in clause (i), (ii), or (iii) giving rise to such demand, and (II) the date ninety (90) days after both the payment in full of all outstanding Loans and Unpaid Reimbursement Obligations, and the termination of any Letters of Credit and the Commitments) and as often as the occasion therefor may arise, pay to such Bank, such Co-Agent or the Administrative Agent such additional amounts as will be sufficient to compensate such Bank, such Co-Agent or the Administrative Agent for such additional cost, reduction, payment, foregone interest, Reimbursement Obligation or other sum, (bb) the Borrower shall be entitled, upon notice to the Administrative Agent, each Co-Agent and each Bank given within ninety (90) days of any demand by a Bank under clause (aa), to repay in cash in full all, but not less than all, of the Loans and Unpaid Reimbursement Obligations of such Bank, together with all accrued and unpaid interest on such Loans and any other amounts owing to such Bank under the Loan Documents and terminate (in full and not in part) such Bank’s Commitment and pay to the Administrative Agent an amount equal to, but not less than such Bank’s pro rata share of the then Maximum Drawing Amount on all Letters of Credit, which amount shall be held by the Administrative Agent as cash collateral for the benefit of such Bank and the relevant Co-Agent for its share of all Reimbursement Obligations, and, (cc) in the event the Borrower elects to repay the Loans of any Bank under clause (bb), each other Bank shall be entitled, by notice to the Administrative Agent and the Borrower given within thirty (30) days after receipt of the notice referred to in clause (bb), to require the Borrower to repay in cash in full, within thirty (30) days of such notice under this clause (cc), all, but not less than all, of the Loans and Unpaid Reimbursement Obligations of such other Bank, together with all accrued and unpaid interest thereon and any other amounts owing to such other Bank under the Loan Documents, and require the Borrower to pay to the Administrative Agent an amount equal to, but not less than, such Bank’s pro rata share of the then Maximum Drawing Amount on all Letters of Credit, which amount shall be held by the Administrative Agent as cash collateral for the benefit of such Bank and the relevant Co-Agent for its share of all Reimbursement Obligations.  Subject to the terms specified above in this Section 5.6, the obligations of the Borrower under this Section 5.6 shall survive repayment of the Loans and all Unpaid Reimbursement Obligations and termination of any Letters of Credit and the Commitments.           5.7     Capital Adequacy.  If after the date hereof any Bank, any Co-Agent or the Administrative Agent determines that (a) the adoption of or change in any Government Mandate (whether or not having the force of law) regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by any Government Authority with appropriate jurisdiction, or (b) compliance by such Bank, such Co-Agent, or the Administrative Agent, or any corporation controlling such Bank, such Co-Agent or the Administrative Agent, with any Government Mandate (whether or not having the force of law) has the effect of reducing the return on such Bank’s, such Co-Agent’s or the Administrative Agent’s commitment with respect to any Loans to a level below that which such Bank , such Co-Agent or (as the case may be) the Administrative Agent could have achieved but for such adoption, change, or compliance (taking into consideration such Bank’s, such Co-Agent’s or the Administrative Agent’s then existing policies with respect to capital adequacy and assuming full utilization of such Entity’s capital) by any amount reasonably deemed by such Bank, such Co-Agent or (as the case may be) the Administrative Agent to be material, then such Bank, such Co-Agent or the Administrative Agent may notify the Borrower of such fact.  To the extent that the amount of such reduction in the return on capital is not reflected in the Federal Funds Rate, (aa) the Borrower shall pay such Bank, such Co-Agent or (as the case may be) the Administrative Agent for the amount of such reduction in the return on capital as and when such reduction is determined upon presentation by such Bank, such Co-Agent or (as the case may be) the Administrative Agent of a certificate in accordance with Section 5.8 hereof (but in any case not later than the first to occur of (I) the date one year after such adoption, change, or compliance causing such reduction, and (II) as to adoptions of or changes in Government Mandates occurring prior to the repayment of the Loans and the termination of the Commitments the date ninety (90) days after both the payment in full of all outstanding Loans and termination of the Commitments), (bb) the Borrower shall be entitled, upon notice to the Administrative Agent, each Co-Agent and each Bank given within ninety (90) days of any notice by such Bank under the next preceding sentence, to repay in cash in full all, but not less than all, of the Loans of such Bank and/or such Co-Agent, together with all accrued and unpaid interest on such Loans and any other amounts owing to such Bank and/or such Co-Agent under the Loan Documents and terminate (in full and not in part) such Bank’s Commitment, and, (cc) in the event the Borrower elects to repay the Loans of any Bank and/or any Co-Agent under clause (bb), each other Bank and Co-Agent shall be entitled, by notice to the Administrative Agent and the Borrower given within thirty (30) days after receipt of the notice referred to in clause (bb), to require the Borrower to repay in cash in full, within thirty (30) days of the notice under this clause (cc), all, but not less than all, of the Loans of such other Bank and Co-Agent, together with all accrued and unpaid interest on such Loans and any other amounts owing to such other Bank or Co-Agent under the Loan Documents.  Each Bank and each Co-Agent shall allocate such cost increases among its customers in good faith and on an equitable basis.  Subject to the terms specified above in this Section 5.7, the obligations of the Borrower under this Section 5.7 shall survive repayment of the Loans and termination of the Commitments.           5.8     Certificate.  A certificate setting forth any additional amounts payable pursuant to Section 5.6 or Section 5.7 and a brief explanation of such amounts which are due and in reasonable detail the basis of the calculation and allocation thereof, submitted by any Bank, any of the Co-Agents or the Administrative Agent to the Borrower, shall be conclusive evidence, absent manifest error, that such amounts are due and owing.           5.9     Indemnity.  The Borrower shall indemnify and hold harmless each Bank from and against any loss, cost, or expense (excluding loss of anticipated profits) that such Bank may sustain or incur as a consequence of (a) default by the Borrower in payment of the principal amount of or any interest on any LIBOR Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain its LIBOR Loans, (b) default by the Borrower in making a borrowing or conversion after the Borrower has given (or is deemed to have given) a Loan Request or a Conversion Request; or (c) except as otherwise expressly provided in Section 3.2.2, the making of any payment of a LIBOR Loan or the making of any conversion of any such Loan to a Federal Funds Rate Loan on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain any such Loans.  The obligations of the Borrower under this Section 5.9 shall survive repayment of the Loans and termination of the Commitments.           5.10   Interest After Default.  All amounts outstanding under the Loan Documents that are not paid when due, including all overdue principal, Unpaid Reimbursement Obligations and (to the extent permitted by applicable Government Mandate) interest and all other overdue amounts (after giving effect to any applicable grace period), shall to the extent permitted by applicable Government Mandate bear interest until such amount shall be paid in full (after as well as before judgment) at a rate per annum equal to two percent (2%) above the interest rate otherwise applicable to such amounts.  Any interest accruing under this section on overdue principal or interest shall be due and payable upon demand. 6.       REPRESENTATIONS AND WARRANTIES.           The Borrower represents and warrants to the Banks, the Co-Agents and the Administrative Agent as follows:           6.1     Corporate Authority.                     6.1.1  Incorporation ; Good Standing.  Each of the Borrower, its Subsidiaries, and the General Partner (a) is a corporation, limited partnership or general partnership, as the case may be, duly organized, validly existing, and in good standing under the laws of its state of organization, (b) has all requisite corporate or partnership power to own its material property and conduct its material business as now conducted and as presently contemplated, and (c) is in good standing as a foreign corporation, limited partnership or general partnership, as the case may be, and is duly authorized to do business in each jurisdiction where it owns or leases properties or conducts any business so as to require such qualification except where a failure to be so qualified would not be likely to have a Material Effect.                     6.1.2  Authorization .  The execution, delivery, and performance of this Credit Agreement and the other Loan Documents to which the Borrower, any of its Subsidiaries, or the General Partner is or is to become a party and the transactions contemplated hereby and thereby (a) are within the corporate or partnership power of each such Entity, (b) have been duly authorized by all necessary corporate or partnership proceedings on behalf of each such Entity, (c) do not conflict with or result in any breach or contravention of any Government Mandate to which any such Entity is subject, (d) do not conflict with or violate any provision of the corporate charter or bylaws, or the limited partnership certificate or agreement, or its governing documents in the case of any general partnership, as the case may be, of any such Entity, and (e) do not violate, conflict with, constitute a default or event of default under, or result in any rights to accelerate or modify any obligations under any Contract to which any such Entity is party or subject, or to which any of its respective assets are subject, except, as to the foregoing clauses (c) and (e) only, where the same would not be likely to have a Material Effect.                     6.1.3  Enforceabilit y.  The execution and delivery of this Credit Agreement and the other Loan Documents to which the Borrower, any of its Subsidiaries, or the General Partner is or is to become a party will result in valid and legally binding obligations of such Person enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium, or other laws relating to or affecting generally the enforcement of creditors’ rights and by general principles of equity, regardless of whether enforcement is sought in a Proceeding in equity or at law.                     6.1.4  Equity Securities.  The General Partner is the only general partner of the Borrower.  All of the outstanding Equity Securities of the Borrower are validly issued, fully paid, and non-assessable.           6.2     Governmental Approvals.  The execution, delivery, and performance by the Borrower, its Subsidiaries, and the General Partner of this Credit Agreement and the other Loan Documents to which the Borrower, any of its Subsidiaries, or the General Partner is or is to become a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any Government Authority other than those already obtained and set forth on Schedule 6.2.           6.3     Liens; Leases.  The assets reflected in the consolidated balance sheet of the Borrower dated as of December 31, 1999, and delivered to the Administrative Agent and the Banks under Section 6.4 are subject to no Liens except Permitted Liens.  Each of the Borrower and its Subsidiaries enjoys quiet possession under all leases relating to Real Estate or personal property to which it is party as a lessee, and each such lease is Fully Effective.           6.4     Financial Statements.    There has been furnished to the Administrative Agent and each of the Banks (a) a consolidated balance sheet of the Borrower as at December 31, 1999, and a consolidated statement of income and cash flow of the Borrower for the fiscal year then ended, certified by the Borrower’s independent certified public accountants, and (b) unaudited interim condensed consolidated balance sheets of the Borrower and the Consolidated Subsidiaries as at June 30, 2000, and interim condensed consolidated statements of income and of cash flow of the Borrower and the Consolidated Subsidiaries for the respective fiscal periods then ended and as set forth in the Borrower’s Quarterly Reports on Form 10-Q for such fiscal quarters.  With respect to the financial statement prepared in accordance with clause (a) above, such balance sheet and statement of income have been prepared in accordance with GAAP and present fairly in all material respects the financial position of the Borrower and the Consolidated Subsidiaries as at the close of business on the respective dates thereof and the results of operations of the Borrower and the Consolidated Subsidiaries for the fiscal periods then ended; or, in the case of the financial statements referred to in clause (b), have been prepared in accordance with Rule 10-01 of Regulation S-X of the Securities and Exchange Commission, and contain all adjustments necessary for a fair presentation of (A) the results of operations of the Borrower for the periods covered thereby, (B) the financial position of the Borrower at the date thereof, and (C) the cash flows of the Borrower for periods covered thereby (subject to year-end adjustments).  There are no contingent liabilities of the Borrower or the Consolidated Subsidiaries as of such dates involving material amounts, known to the executive management of the Borrower that (aa) should have been disclosed in said balance sheets or the related notes thereto in accordance with GAAP and the rules and regulations of the Securities and Exchange Commission, and (bb) were not so disclosed.           6.5     No Material Changes, Etc .   No change in the Business of the Borrower and its Consolidated Subsidiaries, taken as a whole, has occurred since June 30, 2000 that has resulted in a Material Effect.           6.6     Permits.   The Borrower and its Subsidiaries have all Permits necessary or appropriate for them to conduct their Business, except where the failure to have such Permits would not be likely to have a Material Effect.  All of such Permits are in full force and effect.  Without limiting the foregoing, the Borrower is duly registered as an “investment adviser” under the Investment Advisers Act of 1940 and under the applicable laws of each state in which such registration is required in connection with the investment advisory business of the Borrower and in which the failure to obtain such registration would be likely to have a Material Effect; Alliance Distributors is duly registered as a “broker/dealer” under the Securities Exchange Act of 1934 and under the securities or blue sky laws of each state in which such registration is required in connection with the business conducted by Alliance Distributors and where a failure to obtain such registration would be likely to have a Material Effect, and is a member in good standing of the National Association of Securities Dealers, Inc.; no Proceeding is pending or threatened with respect to the suspension, revocation, or termination of any such registration or membership, and the termination or withdrawal of any such registration or membership is not contemplated by the Borrower or Alliance Distributors, except, only with respect to registrations by the Borrower and Alliance Distributors required under state law, as would not be likely to have a Material Effect.           6.7     Litigation.   There is no Proceeding of any kind pending or threatened, in writing, against the Borrower, any of its Subsidiaries, or the General Partner that questions the validity of this Credit Agreement or any of the other Loan Documents, or any action taken or to be taken pursuant hereto or thereto.  There is no Proceeding of any kind pending or threatened, in writing, against the Borrower, any of its Subsidiaries, or the General Partner that is reasonably likely to, either in any case or in the aggregate, impair or prevent the Borrower’s performance and observance of its obligations under this Credit Agreement or the other Loan Documents.           6.8     Material Contracts.    Except as would not be likely to have a Material Effect, each Contract to which any of the Borrower and its Subsidiaries is party or subject, or by which any of their respective assets are bound (including investment advisory contracts and investment company distribution plans) (a) is Fully Effective, (b) is not subject to any default or event of default with respect to the Borrower, any of its Subsidiaries or, to the best knowledge of the executive management of the Borrower, any other party, (c) is not subject to any notice of termination given or received by the Borrower or any of its Subsidiaries, and (d) is, to the best knowledge of the executive management of the Borrower, the legal, valid, and binding obligation of each party thereto other than the Borrower and its Subsidiaries enforceable against such parties according to its terms.           6.9     Compliance with Other Instruments. Laws, Etc .  None of the Borrower, its Subsidiaries, and the General Partner is, in any respect material to the Borrower and its Consolidated Subsidiaries taken as a whole, in violation of or default under (a) any provision of its certificate of incorporation or by-laws, or its certificate of limited partnership or agreement of limited partnership, or its governing documents in the case of any general partnership, as the case may be, (b) any Contract to which it is or may be subject or by which it or any of its properties are or may be bound, or (c) any Government Mandate, including Government Mandates relating to occupational safety and employment matters.           6.10   Tax Status.   The Borrower and its Subsidiaries (a) have made or filed all federal and state income and all other tax returns, reports, and declarations required by any Government Authority to which any of them is subject, except where the failure to make or file the same would not be likely to have a Material Effect, (b) have paid all taxes and other governmental assessments and charges due, except those being contested in good faith and by appropriate Proceedings or those where a failure to pay is not reasonably likely to have a Material Effect, and (c) have set aside on their books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports, or declarations apply.  There are no unpaid taxes in any material amount claimed to be due from the Borrower or any of its Subsidiaries by any Government Authority, and the executive management of the Borrower knows of no basis for any such claim.           6.11   No Event of Default.   No Default or Event of Default has occurred and is continuing.           6.12   Holding Company and Investment Company Acts.   Neither the Borrower nor any of its Subsidiaries is a “holding company”, or a “subsidiary company” of a “holding company”, as such terms are defined in the Public Utility Holding Company Act of 1935.  Neither the Borrower nor any of its Subsidiaries (excluding investment companies in which the Borrower or a Consolidated Subsidiary has made “seed money” investments permitted by Section 8.6(b)) is an “investment company”, as such term is defined in the 1940 Act.           6.13   Insurance.   The Borrower and its Subsidiaries maintain insurance with financially sound and reputable insurers in such coverage amounts, against such risks, with such deductibles and upon such other terms, or are self-insured in respect of such risks (with appropriate reserves to the extent required by GAAP), as is reasonable and customary for firms engaged in businesses similar to those of the Borrower and its Subsidiaries.  All policies of insurance maintained by the Borrower or its Subsidiaries are Fully Effective.  All premiums due on such policies have been paid or accrued on the books of the Borrower or its Subsidiaries, as appropriate.           6.14   Certain Transactions.   Except in connection with transactions occurring in the ordinary course of business, and, taking into account the totality of the relationships involved, with respect to transactions occurring on fair and reasonable terms no less favorable to the Borrower and its Consolidated Subsidiaries taken as a whole than would be obtained in comparable arms’ length transactions with Persons that are not Affiliates of the Borrower or its Subsidiaries, none of the officers, directors, partners, or employees of the Borrower or any of its Subsidiaries, or, to the knowledge of the executive management of the Borrower, any Entity (other than a Subsidiary) in which any such officer, director, partner, or employee has a substantial interest or is an officer, director, trustee, or partner, is at present a party to any transaction with the Borrower or any of its Subsidiaries (other than for or in connection with services as officers, directors, partners, or employees, as the case may be), including any Contract providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director, partner, employee, or Entity.           6.15   Employee Benefit Plans.  Each contribution required to be made to a Guaranteed Pension Plan, whether required to be made to avoid the incurrence of an accumulated funding deficiency, the notice or lien provisions of §302(f) of ERISA, or otherwise, has been timely made.  No waiver of an accumulated funding deficiency or extension of amortization periods has been received with respect to any Guaranteed Pension Plan.  No liability to the PBGC (other than required insurance premiums, all of which have been paid) has been incurred by the Borrower or any ERISA Affiliate with respect to any Guaranteed Pension Plan and there has not been any ERISA Reportable Event, or any other event or condition which presents a material risk of termination of any Guaranteed Pension Plan by the PBGC.  Based on the latest valuation of each Guaranteed Pension Plan (which in each case occurred within fifteen (15) months of the date of the representation), and on the actuarial methods and assumptions employed for that valuation, the aggregate benefit liabilities of all such Guaranteed Pension Plans within the meaning of §4001 of ERISA did not exceed the aggregate value of the assets of all such Guaranteed Pension Plans by more than $20,000,000, disregarding for this purpose the benefit liabilities and assets of any Guaranteed Pension Plan with assets in excess of benefit liabilities.           6.16   Regulations U and X.  The proceeds of the Loans shall be used by the Borrower (i) to finance the payment by the Borrower of certain commissions to brokers in connection with the sale of “B” shares of investment companies and mutual funds managed or advised by the Borrower or one of its subsidiaries, (ii) for general partnership purposes and working capital purposes, including, without limitation, acquisitions and (iii) capital expenditures. The Borrower will obtain Letters of Credit solely for the purposes set forth in the immediately preceding clauses (i) through (iii). No portion of any Loan is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of purchasing or carrying any “margin security” or “margin stock” as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.           6.17   Environmental Compliance.   To the best of the Borrower’s knowledge:                     (a)      none of the Borrower, its Subsidiaries, the General Partner, and any operator of the Real Estate or any operations thereon is in violation, or alleged violation, of any Government Mandate or Permit pertaining to environmental, safety or public health matters, including the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), the Federal Clean Water Act, the Federal Clean Air Act, and the Toxic Substances Control Act (hereinafter “Environmental Laws”), which violation would be likely to have a material adverse effect on the environment or a Material Effect;                     (b)      neither the Borrower nor any of its Subsidiaries has received notice from any third party, including any Government Authority, (i) that any one of them has been identified by the United States Environmental Protection Agency (“EPA”) as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous waste, as defined by 42 U.S.C. §9601(5), any hazardous substances as defined by 42 U.S.C. §9601(14), any pollutant or contaminant as defined by 42 U.S.C. §9601(33) and any toxic substances, oil, hazardous materials, or other chemicals or substances regulated by any Environmental Laws (“Hazardous Substances”) that any one of them has generated, transported, or disposed of has been found at any site at which a Government Authority or other third party has conducted, or has ordered that other parties conduct, a remedial investigation, removal, or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any Proceeding (in each case, contingent or otherwise) arising out of any third party’s incurrence of costs, expenses, losses, or damages of any kind whatsoever in connection with the release of Hazardous Substances; and                     (i)       no portion of the Real Estate has been used for the handling, processing, storage, or disposal of Hazardous Substances except in accordance with applicable Environmental Laws;                     (ii)      no underground tank or other underground storage receptacle for Hazardous Substances is located on any portion of the Real Estate;                     (iii)     in the course of any activities conducted by any of the Borrower, its Subsidiaries, the General Partner, and operators of any Real Estate, no Hazardous Substances have been generated or are being used on the Real Estate except in accordance with applicable Environmental Laws;                     (iv)     there have been no releases (i.e. any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing, or dumping) or threatened releases of Hazardous Substances on, upon, into, or from the Real Estate that would have a material adverse effect on the value of the Real Estate or the environment;                     (v)      there have been no releases of Hazardous Substances on, upon, from, or into any real property in the vicinity of any of the Real Estate that (A) may have come to be located on the Real Estate through soil or groundwater contamination, and, (B) if so located, would have a material adverse effect on the value of the Real Estate or the environment; and                     (vi)     any Hazardous Substances that have been generated by any of the Borrower and its Subsidiaries, or on the Real Estate by any other Person, have been transported offsite only by carriers having an identification number issued by the EPA, treated or disposed of only by treatment or disposal facilities maintaining valid Permits as required under applicable Environmental Laws, which transporters and facilities have been and are, to the best of the Borrower’s knowledge, operating in compliance with such Permits and applicable Environmental Laws.           6.18   Subsidiaries, Etc.  Schedule 6.18 sets forth a list of (a) each Subsidiary of the Borrower (in which each Restricted Subsidiary at the date hereof is specifically identified as such), (b) the number of authorized and outstanding Equity Securities of each class of each Subsidiary of the Borrower and the number and percentage thereof owned, directly or indirectly, by the Borrower, and (c) any partnership or joint venture in which the Borrower or any of its Subsidiaries is engaged with any other Person.  Those Equity Securities of each Subsidiary of the Borrower which are owned directly or indirectly by the Borrower are validly issued, fully paid, and non-assessable.           6.19   Funded Debt.   Schedule 6.19 sets forth as of the end of the calendar month immediately preceding the Closing Date all outstanding Funded Debt of the Borrower and its Subsidiaries.           6.20   General.  The Borrower’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and Quarterly Reports on Form 10-Q referred to in Section 6.4 (a) conform in all material respects to the requirements of the Securities Exchange Act of 1934, as amended, and to all applicable rules and regulations of the Securities and Exchange Commission, and (b) as amended by interim filings, do not contain an untrue statement of any material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. 7.       AFFIRMATIVE COVENANTS OF THE BORROWER.           The Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit, or Note is outstanding or any Bank or Co-Agent has any obligation to make any Loans or any Co-Agent has any obligation to issue, extend, or renew any Letters of Credit:           7.1     Punctual Payment.  The Borrower will duly and punctually pay or cause to be paid the principal and interest on the Loans, all Reimbursement Obligations, the Letter of Credit Fees, the facility fee, the utilization fee, and all other amounts provided for in this Credit Agreement and the other Loan Documents to which the Borrower is party, all in accordance with the terms of this Credit Agreement and such other Loan Documents.           7.2     Maintenance of Office.  The Borrower will maintain its chief executive office in New York, New York, or at such other place in the United States of America as the Borrower shall designate upon prior written notice to the Administrative Agent, where notices, presentations, and demands to or upon the Borrower in respect of the Loan Documents may be given or made.           7.3     Records and Accounts.  The Borrower will, and will cause each of its Subsidiaries to, keep complete and accurate records and books of account.           7.4     Financial Statements, Certificates, and Information .  The Borrower will deliver to each of the Banks:                     (a)      as soon as practicable, but in any event not later than ninety-five (95) days after the end of each fiscal year of the Borrower:                               (i)       the consolidated balance sheet of the Borrower as at the end of such fiscal year;                               (ii)      the consolidating balance sheet of the Borrower as at the end of such fiscal year;                               (iii)     the consolidated statement of income and consolidated statement of cash flows of the Borrower for such fiscal year; and                               (iv)     the consolidating statement of income and consolidating statement of cash flows of the Borrower for such fiscal year. Each of the balance sheets and statements delivered under this Section 7.4(a) shall (i) set forth in comparative form the figures for the previous fiscal year; (ii) be in reasonable detail and prepared in accordance with GAAP based on the records and books of account maintained as provided in Section 7.3; (iii) as to items (i) and (iii) above, be accompanied by a certification by the principal financial or accounting officer of the Borrower that the information contained in such financial statements presents fairly in all material respects the financial position of the Borrower and the Consolidated Subsidiaries on the date thereof and results of operations and cash flows of the Borrower and the Consolidated Subsidiaries for the periods covered thereby; and (iv) as to items (i) and (iii) above, be certified, without limitation as to scope, by KPMG Peat Marwick LLP or another firm of independent certified public accountants reasonably satisfactory to the Administrative Agent, and shall be accompanied by a written statement from such accountants to the effect that in connection with their audit of such financial statements nothing has come to their attention that caused them to believe that the Borrower has failed to comply with the terms, covenants, provisions or conditions of Section 7.3, Section 8, and Section 9 of this Credit Agreement as to accounting matters (provided that such accountants may also state that the audit was not directed primarily toward obtaining knowledge of such noncompliance), or, if such accountants shall have obtained knowledge of any such noncompliance, they shall disclose in such statement any such noncompliance; provided that such accountants shall not be liable to the Banks for failure to obtain knowledge of any such noncompliance;                     (b)      as soon as practicable, but in any event not later than fifty (50) days after the end of the first three fiscal quarters of each fiscal year of the Borrower, (i) the unaudited interim condensed consolidated balance sheet of the Borrower as at the end of such fiscal quarter, and (ii) the unaudited interim condensed consolidated statement of income and unaudited interim condensed consolidated statement of cash flow of the Borrower for such fiscal quarter and for the portion of the Borrower’s fiscal year then elapsed, all in reasonable detail and prepared in accordance with Rule 10-01 of Regulation S-X of the Securities and Exchange Commission, together with a certification by the principal financial or accounting officer of the Borrower that, in the opinion of management of the Borrower, all adjustments necessary for a fair presentation of (A) the results of operations of the Borrower for the periods covered thereby, (B) the financial position of the Borrower at the date thereof, and (C) the cash flows of the Borrower for periods covered thereby have been made (subject to year-end adjustments);                     (c)      simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a statement certified by the principal financial officer, treasurer or general counsel of the Borrower in substantially the form of Exhibit H hereto and setting forth in reasonable detail computations evidencing compliance with the covenants contained in Section 9 and (if applicable) reconciliations to reflect changes in GAAP since December 31, 1999;                     (d)      promptly after the filing or mailing thereof, copies of all material filed with the Securities and Exchange Commission or sent to the holders of the Equity Securities of the Borrower; and                     (e)      from time to time such other financial data and information (including accountants’ management letters) as the Administrative Agent (having been requested to do so by any Bank) may reasonably request; provided, however, that each of the Administrative Agent, the Co-Agents and the Banks agrees that with respect to any data and information obtained by it as a result of any request pursuant to this clause (e) (and with respect to any other data and information that is by the terms of this Credit Agreement to be held subject to this Section 7.4(e)), to the extent that such data and information has not theretofore otherwise been disclosed in such a manner as to render such data and information no longer confidential, each of the Administrative Agent, the Co-Agents and the Banks will use its reasonable efforts (consistent with its established procedures) to reasonably maintain (and cause its employees and officers to maintain) the confidential nature of the data and information therein contained; provided, however, that anything herein contained to the contrary notwithstanding, each of the Administrative Agent, the Co-Agents and the Banks may, to the extent necessary, disclose or disseminate such data and information to: (i) its employees, Affiliates, directors, agents, attorneys, accountants, auditors, and other professional advisers who would ordinarily have access to such data and information in the normal course of the performance of their duties in accordance with the Administrative Agent’s, such Co-Agent’s or such Bank’s customary procedures relating to confidential information; (ii) such third parties as it may, in its discretion, deem reasonably necessary or desirable (A) in connection with or in response to any Government Mandate or request of any Government Authority, or (B) in connection with any Proceeding pending (or on its face purported to be pending) before any Government Authority (including Proceedings involving the Borrower); (iii) any prospective purchaser, participant or investment banker in connection with the resale or proposed resale of any portion of the Loans, or of a participation therein, who shall agree in writing to accept such information subject to the provisions of this clause (e); (iv) any Person holding the Equity Securities or Funded Debt of the Administrative Agent, such Co-Agent or such Bank who, subject to the provisions of this clause (e), shall have requested to inspect such information; and (v) any Entity utilizing such information to rate or classify the Equity Securities or Funded Debt of the Administrative Agent, such Co-Agent or such Bank or to report to the public concerning the industry of which the Administrative Agent or such Bank is a part; provided, however, that none of the Administrative Agent, the Co-Agents and the Banks shall be liable to the Borrower or any other Person for damages arising hereunder from the disclosure of non-public information despite its reasonable efforts in accordance with the provisions of this clause (e) or from a failure by any other party to perform and observe its covenants in this clause (e).           7.5     Notices.                     7.5.1  Defaults .  The Borrower will promptly after the executive management of the Borrower (which for purposes of this covenant shall mean the chairman of the board, president, principal financial officer, treasurer or general counsel of the Borrower) becomes aware thereof (and in any case within three (3) Business Days after the executive management becomes aware thereof) notify the Administrative Agent and each of the Banks in writing of the occurrence of any Default or Event of Default.  If any Person shall give any notice in writing of a claimed default (whether or not constituting an Event of Default) under the Loan Documents or any other Contract relating to Funded Debt equal to or in excess of $50,000,000 to which or with respect to which the Borrower or any of its Subsidiaries is a party or obligor, whether as principal, guarantor, surety, or otherwise, the Borrower shall forthwith give written notice thereof to the Administrative Agent and each of the Banks, describing the notice or action and the nature of the claimed default.                     7.5.2  Environmental Events.  The Borrower will promptly give notice to the Administrative Agent and each of the Banks (a) of any violation of any Environmental Law that the Borrower or any of its Subsidiaries reports in writing, or that is reportable by any such Person in writing (or for which any written report supplemental to any oral report is made) to any Government Authority, and (b) upon becoming aware thereof, of any Proceeding, including a notice from any Government Authority of potential environmental liability, that has the potential, in the Borrower’s reasonable judgment, to have a Material Effect.                     7.5.3  Notice of Proceedings and Judgments.   The Borrower will give notice to the Administrative Agent and each of the Banks in writing within ten (10) Business Days of the executive management of the Borrower (as defined in Section 7.5.1) becoming aware of any Proceedings pending affecting the Borrower or any of its Subsidiaries or to which the Borrower or any of its Subsidiaries is or becomes a party that could reasonably be expected by the Borrower to have a Material Effect (or of any material adverse change in any such Proceedings of which the Borrower has previously given notice).  Any such notice will state the nature and status of such Proceedings.  The Borrower will give notice to the Administrative Agent and each of the Banks, in writing, in form and detail satisfactory to the Administrative Agent, within ten (10) Business Days of any settlement or any judgment, final or otherwise, against the Borrower or any of its Subsidiaries where the amount payable by the Borrower or any of its Subsidiaries, after giving effect to insurance, is in excess of the lesser of $30,000,000 or 10% of Consolidated Net Worth as at the end of the most recent fiscal quarter.                     7.5.4  Notice of Change of Control.  In the event the Borrower obtains knowledge of a Change of Control or an impending Change of Control, the Borrower will promptly give written notice (a “Borrower Control Change Notice”) of such fact to the Administrative Agent and the Banks at least forty (40) days prior to the proposed Change of Control Date; provided, however, that in no event shall such a Borrower Control Change Notice be delivered to the Administrative Agent and the Banks more than three (3) Business Days after the Change of Control Date.  Without limiting the foregoing, upon obtaining actual knowledge of any Change of Control or impending Change of Control, any of the Administrative Agent and the Banks may (but in no case shall any of them be obligated to) deliver written notice to the Borrower of such event, indicating that such event requires the Borrower to prepay the Loans pursuant to Section 3.2.2 (and in any such notice a Bank may make demand for payment of its Loans under Section 3.2.2).  Promptly upon receipt of such notice, but in no event later than five (5) Business Days after actual receipt thereof, the Borrower will give written notice (such notice, together with a Borrower Control Change Notice, a “Control Change Notice”) of such fact to the Administrative Agent and the Banks (including the Bank that has so notified the Borrower).  Any Control Change Notice shall (a) describe the principal facts and circumstances of such Change of Control known to the Borrower in reasonable detail (including the Change of Control Date or, if the Borrower does not have knowledge of the Change of Control Date, the Borrower’s best estimate of such Change of Control Date), (b) make reference to Section 3.2.2 and the rights of the Banks to require the Borrower to prepay the Loans on the terms and conditions provided for therein, and (c) state that each Bank may make a demand for payment of its Loans by providing written notice to the Borrower within fifteen (15) days after the effective date of such Control Change Notice.  In the event the Borrower shall not have designated the Change of Control Date in its Control Change Notice, the Borrower shall keep the Administrative Agent and the Banks informed as to any changes in the estimated Change of Control Date and shall provide written notice to the Administrative Agent and the Banks specifying the Change of Control Date promptly upon obtaining knowledge thereof.           7.6     Existence; Business; Properties.                     7.6.1  Legal Existence.  The Borrower will, and will cause each of its Consolidated Subsidiaries to do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights and franchises as a limited partnership, general partnership or corporation, as the case may be, except, with respect to rights and franchises, where the failure to preserve and keep in full force and effect such rights and franchises would not be likely to have a Material Effect, provided, however, this section shall not prohibit any merger, consolidation, or reorganization of the Borrower or any of its Subsidiaries permitted pursuant to Section 8.2.                     7.6.2  Conduct of Business.  Except as otherwise disclosed to the Administrative Agent and the Banks in the Borrower’s Form 8-Ks for the period prior to the Closing Date, the Borrower will, and will cause each of its Consolidated Subsidiaries to, engage in business related to investment management.                     7.6.3  Maintenance of Properties.  The Borrower will, and will cause each of its Consolidated Subsidiaries to, cause its properties used or useful in the conduct of its business and which are material to the Business of the Borrower and its Consolidated Subsidiaries taken as a whole to be maintained and kept in good condition, repair, and working order and supplied with all necessary equipment, ordinary wear and tear excepted; provided that nothing in this Section 7.6.3 shall prevent the Borrower or any of its Consolidated Subsidiaries from discontinuing the operation and maintenance of any properties if such discontinuance (i) is, in the judgment of the Borrower or such Subsidiary, desirable in the conduct of its business, and (ii) does not have a Material Effect.                     7.6.4  Status Under Securities Laws.  The Borrower shall maintain its status as a registered “investment adviser”, under (a) the Investment Advisers Act of 1940 and (b) under the laws of each state in which such registration is required in connection with the investment advisory business of the Borrower and, as to (b) only, where a failure to obtain such registration would be likely to have a Material Effect.  The Borrower shall cause Alliance Distributors to maintain its status as a registered “broker/dealer” under the Securities Exchange Act of 1934 and under the laws of each state in which such registration is required in connection with the business of Alliance Distributors and where a failure to obtain such registration would be likely to have a Material Effect, and to maintain its membership in the National Association of Securities Dealers, Inc.           7.7     Insurance.  The Borrower will, and will cause each of its Consolidated Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business against such casualties and contingencies, in such amounts, containing such terms, in such forms, and for such periods, or shall be self-insured in respect of such risks (with appropriate reserves to the extent required by GAAP), as shall be customary in the industry for companies engaged in similar activities in similar geographic areas.           7.8     Taxes.  The Borrower will, and will cause each of its Consolidated Subsidiaries to, duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments, and other governmental charges imposed upon it or its real property, sales, and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid (a) might by law become a Lien upon any of its property and (b) would be reasonably likely to result in a Material Effect; provided that any such tax, assessment, charge, levy, or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Borrower or such Subsidiary shall have set aside on its books, if and to the extent permitted by GAAP, adequate accruals with respect thereto.           7.9     Inspection of Properties and Books, Etc.                     7.9.1  General .  The Borrower shall, and shall cause each of its Subsidiaries to, permit the Banks, through the Administrative Agent or any of the Banks’ other designated representatives, to visit and inspect any of the properties of the Borrower or any of its Subsidiaries, to examine the books of account of the Borrower and its Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss the affairs, finances, and accounts of the Borrower and its Subsidiaries with, and to be advised as to the same by, its and their officers, all at such reasonable times and intervals as the Administrative Agent or any Bank may request.  The costs incurred by the Administrative Agent and the Banks in connection with any such inspection shall be borne by the Banks making or requesting the inspection (or, if the Administrative Agent makes an inspection on its own initiative after notice to the Banks, by the Banks jointly, on a pro rata basis according to their outstanding Loans and Letter of Credit Participations or, if no Loans or Letters of Credit are outstanding, their respective Commitments), except as otherwise provided by Section 15(f).  Any data and information that is obtained by the Administrative Agent or any Bank pursuant to this Section 7.9.1 shall be held subject to Section 7.4(e).                     7.9.2  Communication with Accountants.  The Borrower authorizes the Administrative Agent and, if accompanied by the Administrative Agent, the Banks to communicate directly with the Borrower’s independent certified public accountants and authorizes such accountants to disclose to the Administrative Agent and the Banks any and all financial statements and other supporting financial documents and schedules, including copies of any management letter with respect to the Business of the Borrower or any of its Subsidiaries.  The Borrower shall be entitled to reasonable prior notice of any such meeting with its independent certified public accountants and shall have the opportunity to have its representatives present at any such meeting.  At the request of the Administrative Agent, the Borrower shall deliver a letter addressed to such accountants instructing them to comply with the provisions of this Section 7.9.2.  Any data and information that is obtained by the Administrative Agent or any Bank pursuant to this Section 7.9.2 shall be held subject to Section 7.4(e).           7.10   Compliance with Government Mandates, Contracts, and Permits.  The Borrower will and will cause each of its Consolidated Subsidiaries to, comply (if and to the extent that a failure to comply would be likely to have a Material Effect) with (a) all applicable Government Mandates wherever the business of the Borrower or any such Subsidiary is conducted, including all Environmental Laws and all Government Mandates relating to occupational safety and employment matters; (b) the provisions of the certificate of incorporation and by-laws, or the agreement of limited partnership and certificate of limited partnership, or its governing documents in the case of any general partnership, as the case may be, of the Borrower and such Subsidiary; (c) all Contracts to which the Borrower or any such Subsidiary is party, by which the Borrower or any such Subsidiary is or may be bound, or to which any of their respective properties are or may be subject; and (d) the terms and conditions of any Permit used in the Business of the Borrower or any such Subsidiary.  If any Permit shall become necessary or required in order that the Borrower may fulfill any of its obligations hereunder or under any of the other Loan Documents to which the Borrower is a party, the Borrower will immediately take or cause its Subsidiaries to take all reasonable steps within the power of the Borrower and its Subsidiaries to obtain and maintain in full force and effect such Permit and furnish the Administrative Agent and the Banks with evidence thereof.           7.11   Use of Proceeds.  The Borrower will use the proceeds of the Loans solely as provided in Section 6.16.  The Borrower will obtain Letters of Credit solely for the purposes set forth in Section 6.16.           7.12   Restricted Subsidiaries.  The Borrower shall cause each Restricted Subsidiary to continue at all times to satisfy the qualifications of a Restricted Subsidiary as set forth in the definition of “Restricted Subsidiary” in Section 1.1.           7.13   Certain Changes in Accounting Principles.  In the event of a change after the date of this Credit Agreement in (a) GAAP (as in effect from time to time, rather than as defined in Section 1.1) or (b) any regulation issued by the Securities and Exchange Commission (either such event being referred to herein as an “Accounting Change”), that results in a material change in the calculations as to compliance with any financial covenant contained in Section 9 or in the calculation of any item to be taken into account in the calculations as to compliance with any such covenant (the “Affected Computation”) in such a manner and to such an extent that, in the good faith judgment of the Chief Financial Officer of the Borrower or the Majority Banks, as evidenced by notice from such Majority Banks to the Borrower and the Administrative Agent (the “Accounting Notice”), the application of the Accounting Change to the Affected Computation would no longer reflect the intention of the parties to this Credit Agreement, then and in any such event:                     (a)      the Borrower shall, promptly after either a determination by its Chief Financial Officer as provided above or receipt of an Accounting Notice, give written notice thereof to the Administrative Agent and each Bank, which notice shall be accompanied by a copy of any Accounting Notice and a certificate of the Chief Financial Officer of the Borrower:                     (i)       describing the Accounting Change in question and the particular covenant or covenants that will be affected by such Accounting Change;                     (ii)      setting forth in reasonable detail (including detailed calculations) the manner and extent to which the covenant or covenants listed in such certificate are affected by such Accounting Change; and                     (iii)     setting forth in reasonable detail (including detailed calculations) the information required in order to establish that the Borrower would be in compliance with the requirements of the covenant or covenants listed in such certificate if such Accounting Change was not effective (or, if the Borrower would not be so in compliance, setting forth in reasonable detail calculations of the extent of such non-compliance);                     (b)      the Borrower and the Banks will enter into good faith negotiations with each other for an equitable amendment of such covenant or covenants, and the definition of GAAP set forth in Section 1.1, pursuant to Section 25 so as to place the parties, insofar as possible, in the same relative position as if such Accounting Change had not occurred;                     (c)      for the period from the date on which such Accounting Change becomes effective (the “Effective Date”) to the effective date of an amendment to this Credit Agreement pursuant to Section 25, the Borrower shall be deemed to be in compliance with the covenant or covenants listed in such certificate if and so long as (but only if and so long as) the Borrower would be in compliance with such covenant or covenants if such Accounting Change had not occurred; and                     (d)      if no amendment to this Credit Agreement has become effective within ninety (90) days after the Effective Date of such Accounting Change, then all accounting computations required to be made for purposes of this Credit Agreement thereafter shall be made in accordance with GAAP as in effect immediately prior to such Effective Date. 8.       CERTAIN NEGATIVE COVENANTS OF THE BORROWER.           The Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit, or Note is outstanding or any Bank or Co-Agent has any obligation to make any Loans or any Co-Agent has any obligation to issue, extend, or renew any Letters of Credit:           8.1     Disposition of Assets.  The Borrower will not, and will not cause, permit, or suffer any of its Consolidated Subsidiaries to, in any single transaction or in multiple transactions within any fiscal year of the Borrower, sell, transfer, assign, or otherwise dispose of all of the business or assets of the Borrower and its Consolidated Subsidiaries, any Significant Assets, or any 12b-1 Fees, or enter into any Contract for any such sale, transfer, assignment, or disposition, provided, however:                     (a)      Subsidiaries of the Borrower may sell, transfer, assign, or dispose of assets (including 12b-1 Fees) to the Borrower;                     (b)      Subsidiaries of the Borrower may sell, transfer, assign, or dispose of assets (including 12b-1 Fees) to any Restricted Subsidiary;                     (c)      the Borrower may sell, transfer, assign, or dispose of assets (including 12b-1 Fees) to any Restricted Subsidiary, provided such Restricted Subsidiary shall have prior to the effective date of such sale, transfer, assignment, or disposition executed and delivered to the Administrative Agent an Assumption Agreement (and all of the conditions set forth in such Assumption Agreement shall have been satisfied and such Assumption Agreement (A) shall not be subject to any default or event of default with respect to any party, (B) shall not be subject to any notice of termination given or received by the Borrower or any of its Subsidiaries, and (C) shall be the legal, valid, and binding obligation of each party thereto enforceable against such party according to its terms);                     (d)      the Borrower and any Subsidiary of the Borrower may sell, transfer or assign, or dispose of 12b-1 Fees to Persons other than the Borrower and Restricted Subsidiaries.  Any Indebtedness in respect of obligations of the Borrower and its Subsidiaries arising out of such transactions shall constitute “Funded Debt”; and                     (e)      the sale, transfer, assignment or other disposition of all or substantially all of the business or assets of the Borrower and its Consolidated Subsidiaries in connection with a transaction permitted under Section 8.2 shall not be subject to the provisions of this Section 8.1.           This covenant is not intended to restrict the conversion of a short-term investment of the Borrower into cash or into another investment which remains an asset of the Borrower.           8.2     Mergers and Reorganizations .  The Borrower will not, and will not cause, permit, or suffer any of its Consolidated Subsidiaries to, become a party to any merger, consolidation, or reorganization (any such transaction, a “Reorganization” and the term “Reorganize”shall have a correlative meaning) or enter into any Contract providing for any Reorganization, provided, however:                     (a)      the Borrower may Reorganize solely with any Restricted Subsidiary, and any Restricted Subsidiary may Reorganize solely with the Borrower or any other Restricted Subsidiary, provided (i) if the Borrower is party to such Reorganization, it is the sole surviving Entity, and (ii) if a Restricted Subsidiary that has previously executed and delivered to the Administrative Agent an Assumption Agreement is party to such Reorganization, each Entity (other than the Borrower or a Restricted Subsidiary that has previously executed and delivered to the Administrative Agent an Assumption Agreement) surviving such Reorganization shall execute and deliver to the Administrative Agent an Assumption Agreement (and all of the conditions set forth in such Assumption Agreement shall have been satisfied and such Assumption Agreement (x) shall not be subject to any default or event of default with respect to any party, (y) shall not be subject to any notice of termination given or received by the Borrower or any of its Subsidiaries, and (z) shall be the legal, valid, and binding obligation of each party thereto enforceable against such party according to its terms);                     (b)      the Borrower may Reorganize with other Entities in connection with any Permitted Acquisition, provided (i) the Borrower is the sole surviving Entity of such Reorganization; (ii) no Default or Event of Default, or breach by the Borrower of any of its covenants in the Loan Documents, shall have occurred and be continuing at the time of such Reorganization; (iii) no Default or Event of Default, or breach by the Borrower of any of its covenants in the Loan Documents, shall occur as a result of, or after giving effect to, such Reorganization; and (iv) such Reorganization does not result in a Change of Control; and                     (c)      the Borrower may Reorganize with any other Entity (including Reorganizations in connection with a conversion of the Borrower to corporate form and other transactions permitted under Section 2.05 of the Borrower Partnership Agreement), provided:                     (i)       no Default or Event of Default shall have occurred and be continuing at the time of such Reorganization;                     (ii)      no Default or Event of Default shall occur as a result of, or after giving effect to, such Reorganization;                     (iii)     each surviving Entity (other than the Borrower if it survives), and each Person that in connection with such Reorganization acquires or succeeds to any of the business or assets of the Borrower shall, as a condition of the effectiveness of such Reorganization, execute and deliver to the Administrative Agent an Assumption Agreement (and all of the conditions set forth in such Assumption Agreement shall have been satisfied and such Assumption Agreement (A) shall not be subject to any default or event of default with respect to any party, (B) shall not be subject to any notice of termination given or received by the Borrower or any of its Subsidiaries, and (C) shall be the legal, valid, and binding obligation of each party thereto enforceable against such party according to its terms).  Notwithstanding the foregoing, Persons that in connection with such Reorganization in the aggregate acquire or succeed to assets generating less than twenty percent (20%) of the consolidated revenues of the Borrower and the Consolidated Subsidiaries during the four (4) fiscal quarters of the Borrower most recently ended shall not be required to enter into an Assumption Agreement as provided above in this clause (iii) in connection with such Reorganization so long as each surviving Entity (other than the Borrower if it survives) and Persons that in connection with such Reorganization in the aggregate acquire or succeed to assets generating not less than $400,000,000 of consolidated revenues of the Borrower and the Consolidated Subsidiaries during the four (4) fiscal quarters of the Borrower most recently ended shall, as a condition to the effectiveness of such Reorganization, execute and deliver to the Administrative Agent an Assumption Agreement and the other conditions specified above with respect to such Assumption Agreement shall be satisfied;                     (iv)     such Reorganization does not result in a Change of Control;                     (v)      after giving effect to such Reorganization, investment management contracts, together with agreements associated with distribution revenues and shareholder servicing fees, with respect to at least seventy-five percent (75%) of the consolidated revenues, less “other revenues” (as such term is used in the Borrower’s consolidated statements of income as filed with the Securities and Exchange Commission), of the Borrower and its Consolidated Subsidiaries during the four (4) fiscal quarters most recently ended prior to such Reorganization (A) shall remain in full force and effect, and (B) shall, if held by the Borrower or one or more of its Consolidated Subsidiaries prior to such Reorganization, be held by the Borrower or one or more of its Consolidated Subsidiaries or shall have been duly assigned to or otherwise held by Persons executing and delivering to the Administrative Agent Assumption Agreements pursuant to clause (iii) above or one or more of any such Person’s Consolidated Subsidiaries;                     (vi)     any diminution in the aggregate net worth of the Borrower (if it survives) and any Persons executing and delivering to the Administrative Agent Assumption Agreements pursuant to clause (iii) above and the consolidated Subsidiaries of each thereof (after elimination of intercompany items and without double counting), when compared with the Consolidated Net Worth of the Borrower as of the date of the most recently completed fiscal quarter immediately prior to such Reorganization, is not more than twenty percent (20%) of such Consolidated Net Worth; and                     (vii)    that the Borrower has given the Administrative Agent and the Banks written notice of such Reorganization at least ten (10) business days prior to such Reorganization, which notice shall include current revised projections with respect to the Borrower and its Subsidiaries reflecting such Reorganization.           8.3     Acquisitions.  The Borrower will not, and will not cause, permit, or suffer any of its Subsidiaries to, become a party to, contract for, or effect any purchase, exchange, or acquisition of Equity Securities or assets (any such transaction, an “Acquisition”), other than an Acquisition of assets that do not constitute all or a material part of a business, provided, however, the Borrower or any of its Subsidiaries may become a party to, contract for, or effect an Acquisition if each of the following conditions are satisfied:                     (a)      no Default or Event of Default, or breach by the Borrower of any of its covenants in the Loan Documents, shall have occurred and be continuing at the time of such Acquisition;                     (b)      no Default or Event of Default, or breach by the Borrower of any of its covenants in the Loan Documents, shall occur as a result of, or after giving effect to, such Acquisition;                     (c)      such Acquisition relates solely to (i) Equity Securities in another Person engaged primarily in, or assets of another Person used primarily for, businesses related to investment management, (ii) goods or services that will be used in the business of the Borrower or any of its Subsidiaries, or (iii) additional Equity Securities issued by an Entity, the Equity Securities of which have previously been purchased by the Borrower or one of its Subsidiaries under this Section 8.3;                     (d)      if such Acquisition relates to Equity Securities of another Entity, after giving effect to such Acquisition, at least a majority of the Equity Securities, and at least a majority of the Voting Equity Securities, of such Entity are held directly by the Borrower or indirectly by the Borrower through one or more Restricted Subsidiaries (but not through any Subsidiary that is not a Restricted Subsidiary);                     (e)      any Entity that issued Equity Securities purchased in such Acquisition and any Entity through which the Borrower effected an Acquisition of Equity Securities or assets, becomes, upon the consummation of the Acquisition, a Consolidated Subsidiary subject to the terms and conditions of this Credit Agreement; and                     (f)       except as permitted by Section 8.6, any Entity that issued Equity Securities purchased in such Acquisition and any Entity through which the Borrower effected an Acquisition of Equity Securities or assets is not upon consummation of such Acquisition (and the Borrower will not thereafter cause, permit, or suffer any such Entity to become) a general partner in any partnership, a party to a joint venture, or subject to any contingent obligations established by Contract that are not by their terms limited to a specific dollar amount; provided, however, that any such Entity may be a general partner in a partnership which is wholly owned by the Borrower or its Restricted Subsidiaries.           8.4     Restrictions on Liens.  The Borrower will not, and will not cause, permit, or suffer any of its Consolidated Subsidiaries to, (a) create or incur, or cause, permit, or suffer to be created or incurred or to exist, any Lien upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (b) transfer any of such property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (c) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device, or arrangement; (d) suffer to exist any Indebtedness or claim or demand for a period of time such that the same by Government Mandate or upon bankruptcy or insolvency, or otherwise, would be given any priority whatsoever over its general creditors; or (e) assign, pledge, or otherwise transfer any accounts, contract rights, general intangibles, chattel paper, or instruments, with or without recourse, other than a transfer or assignment in connection with a sale permitted under Section 8.1 or Reorganization permitted under Section 8.2 or an Investment permitted under Section 8.6; provided that the Borrower and any Subsidiary of the Borrower may create or incur, or cause, permit, or suffer to be created or incurred or to exist:                     (i)       Liens imposed by Government Mandate to secure taxes, assessments, and other government charges in respect of obligations not overdue;                     (ii)      statutory Liens of carriers, warehousemen, mechanics, suppliers, laborers, and materialmen, and other like Liens, in each case in respect of obligations not overdue;                     (iii)     pledges or deposits made in connection with, or to secure payment of, workers’ compensation, unemployment insurance, old age pensions, or other social security obligations;                     (iv)     Liens on Real Estate consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property, defects and irregularities in the title thereto, and other minor Liens, provided, (A) none of such Liens in the reasonable opinion of the Borrower interferes materially with the use of the affected property in the ordinary conduct of the business of the Borrower and its Subsidiaries, and (B) such Liens individually or in the aggregate do not have a Material Effect;                     (v)      the rights and interests of landlords and lessors under leases of Real Estate leased by the Borrower or one of its Subsidiaries, as lessee;                     (vi)     Liens outstanding on the Closing Date and set forth on Schedule 8.4;                     (vii)    Liens in favor of either the Borrower or a Restricted Subsidiary on all or part of the assets of any Subsidiary of the Borrower securing Indebtedness owing by such Subsidiary to the Borrower or such Restricted Subsidiary, as the case may be;                     (viii)    Liens on interests of the Borrower or its Subsidiaries in partnerships or joint ventures consisting of binding rights of first refusal, rights of first offer, take-me-along rights, third-party offer provisions, buy-sell provisions, other transfer restrictions and conditions relating to such partnership or joint venture interests, and Liens granted to other participants in such partnership or joint venture as security for the performance by the Borrower or its Subsidiaries of their obligations in respect of such partnership or joint venture;                     (ix)     UCC notice filings in connection with non-recourse sales of 12b-1 Fees (other than sales constituting a collateral security device); and                     (x)      Liens (in addition to those specified in clauses (i) through (ix) above) securing Indebtedness in an aggregate amount for the Borrower and all of its Consolidated Subsidiaries taken together not in excess of $80,000,000 outstanding at any point in time (but excluding from the amount of any such Indebtedness that portion which is fully covered by insurance and as to which the insurance company has acknowledged to the Administrative Agent its coverage obligation in writing).           8.5     Guaranties.  The Borrower shall not, and shall not cause, permit, or suffer any of its Consolidated Subsidiaries to, either (a) guaranty, endorse, accept, act as surety for, or otherwise become liable in respect of, Indebtedness of (or undertake to maintain working capital or other balance sheet condition of, or otherwise to advance or make funds available for the purchase of Indebtedness of) other Persons unless such obligation of the Borrower or its Subsidiary is expressly limited by the instrument establishing the same to a specified amount, or (b) voluntarily incur, create, assume, or otherwise become liable for any contingent obligations that are not by their terms limited to a specific dollar amount.  For purposes of this Section 8.5 “contingent obligation” means contingent obligations of the Borrower or any of its Consolidated Subsidiaries, whether direct or indirect, in respect of Indebtedness of other Persons. This Section 8.5 shall not apply to (a) contingent obligations of a Subsidiary of the Borrower that is not a Restricted Subsidiary in its capacity as general partner of a partnership, or contingent obligations of a Restricted Subsidiary in its capacity as a general partner of a partnership which is wholly owned by the Borrower or its Restricted Subsidiaries, or (b) guaranties by the Borrower or any Consolidated Subsidiary of obligations of Restricted Subsidiaries (other than obligations in respect of Funded Debt) incurred in the ordinary course of business (including, without limitation, guaranties incurred to comply with conditions and requirements imposed by any applicable law, rule or regulation or otherwise customary and appropriate to operate an investment management business in any jurisdiction outside of the United States).           8.6     Restrictions on Investments .  The Borrower will not, and will not cause, permit, or suffer any of its Consolidated Subsidiaries to, make or permit to exist or to remain outstanding any Investment except:                     (a)      Investments in marketable securities, liquid investments, and other financial instruments that are acquired for investment purposes and that have a value that may be readily established, including any such Investment that may be readily sold or otherwise liquidated in any mutual fund for which the Borrower or one of its Subsidiaries serves as investment manager or adviser;                     (b)      Investments consisting of seed money contributions to open-end and closed-end investment companies for which the Borrower or one of its Subsidiaries serves as investment manager or adviser, provided in each case the amount of such Investment will not exceed the minimum seed money contribution required by the 1940 Act or other applicable law, regulation, or custom (provided that when seed money contributions are made pursuant to “custom”, in no event shall the amount contributed to any single investment company exceed $3,000,000);                     (c)      Investments existing on the Closing Date and set forth on Schedule 8.6;                     (d)      Investments made by the Borrower or any Restricted Subsidiary in the Borrower or any Restricted Subsidiary;                     (e)      Investments made after the Closing Date in Consolidated Subsidiaries that act as general partner of one or more partnerships in an aggregate amount not to exceed $20,000,000 at any point in time;                     (f)       Investments consisting of inter-company advances made in the ordinary course of business by the Borrower or any Subsidiary to any Consolidated Subsidiary, provided each such advance is settled within ninety-two (92) days after it is made (for purposes of this provision, settlement shall mean repayment of an advance in full in cash and without renewal of such advance, and without a substitute advance from the Borrower or another Subsidiary, for at least twenty-four (24) hours after such cash payment);                     (g)      Investments made in connection with a Reorganization permitted under Section 8.2 hereof; and                     (h)      Investments (in addition to those specified in clauses (a) through (f) above) in an aggregate amount for the Borrower and all of its Subsidiaries taken together not in excess of $150,000,000 outstanding at any time.           Notwithstanding any provisions to the contrary in the definition of “Investments” in Section 1.1, the Dollar amount of any Investment for purposes of clauses (e) and (g) above shall be reduced by the amount of any dividend, interest, or other return in respect of such Investment that is actually received in cash by the Borrower or a Restricted Subsidiary.           8.7     Restrictions on Funded Debt .  The Borrower will not cause, permit, or suffer any of the Consolidated Subsidiaries to, create, incur, assume, guarantee, or be or remain liable, contingently or otherwise, with respect to any Funded Debt, provided, however, that (a) this covenant shall not apply to Funded Debt owing solely to the Borrower or another Consolidated Subsidiary of the Borrower, and (b) Consolidated Subsidiaries of the Borrower other than Alliance Capital Management Corporation of Delaware and Alliance Distributors may, subject to the other terms and conditions of the Loan Documents, create, incur, assume, guarantee, or be or remain liable with respect to Funded Debt in an aggregate principal amount (for all such Subsidiaries) that does not exceed fifteen percent (15%) of the Borrower’s Consolidated Net Worth, at any time during any calendar year, as set forth in the most recently delivered annual or quarterly report of the Borrower.           8.8     Distributions.  The Borrower shall not cause, permit, or suffer any restriction or Lien on the ability of any Consolidated Subsidiary to (a) pay, directly or indirectly, any Distributions to the Borrower or any other Subsidiary of the Borrower, (b) make any payments, directly or indirectly, in respect of any Indebtedness or other obligation owed to the Borrower or any of its Subsidiaries, (c) make loans or advances to the Borrower or any other Subsidiary of the Borrower, or (d) sell, transfer, assign, or otherwise dispose of any property or assets to the Borrower or any other Subsidiary of the Borrower, except, in each such case, restrictions or Liens (aa) that exist under or by reason of applicable Government Mandates, including any net capital rules, (bb) that are imposed only, as to Indebtedness of the Borrower or any Consolidated Subsidiary incurred prior to the date hereof, upon a failure to pay when due any of such Indebtedness, or, as to Indebtedness of the Borrower or any Consolidated Subsidiary incurred on or after the date hereof, upon an acceleration of such Indebtedness or a failure to pay the full amount of such Indebtedness at maturity, or (cc) that arise by reason of the maintenance by any Subsidiary that is not a Restricted Subsidiary of a level of net worth for the purpose of ensuring that limited partnerships for which it serves as general partner will be treated as partnerships for federal income tax purposes.  Notwithstanding the foregoing, any portion of net earnings of any Restricted Subsidiary that is unavailable for payment of dividends to the Borrower or any other Restricted Subsidiary by reason of a restriction or Lien permitted under any of clauses (aa), (bb), and (cc) shall be excluded from the calculation of Consolidated Net Income (or Loss).           8.9     Transactions with Affiliates .  The Borrower will not, and will not cause, permit, or suffer any of its Subsidiaries to, directly or indirectly, enter into any Contract or other transaction with any Affiliate of the Borrower or any of its Subsidiaries that is material to the Borrower and the Consolidated Subsidiaries taken as a whole, unless either: (a) such Contract or transaction relates solely to compensation arrangements with directors, officers, or employees of the Borrower, the General Partner, or the Consolidated Subsidiaries, or (b) such transaction is in the ordinary course of business and is, taking into account the totality of the relationships involved, on fair and reasonable terms no less favorable to the Borrower and the Consolidated Subsidiaries taken as a whole than would be obtained in comparable arm’s length transactions with Persons that are not Affiliates of the Borrower or its Subsidiaries or (c) the Contract or other transaction is in connection with a Reorganization permitted under Section 8.2 hereof.           8.10   Fiscal Year.  The Borrower shall not change its fiscal year unless the parties to the Loan Documents shall first enter into amendments to the Loan Documents such that the rights of the parties to the Loan Documents will not be affected by the change in the fiscal year of the Borrower, and the parties shall enter into such amendments as may be required in connection with a change of the Borrower’s fiscal year.           8.11   Compliance with Environmental Laws.  The Borrower will not, and will not cause, permit, or suffer any of its Subsidiaries to, (a) use any of the Real Estate or any portion thereof for the handling, processing, storage, or disposal of Hazardous Substances, (b) cause, permit, or suffer to be located on any of the Real Estate any underground tank or other underground storage receptacle for Hazardous Substances, (c) generate any Hazardous Substances on any of the Real Estate, (d) conduct any activity at any Real Estate or use any Real Estate in any manner so as to cause a release (i.e., releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing, or dumping) or threatened release of Hazardous Substances on, upon, or into the Real Estate, or (e) otherwise conduct any activity at any Real Estate or use any Real Estate in any manner that would violate any Environmental Law or bring such Real Estate in violation of any Environmental Law, in each case, so as would be likely to have a Material Effect.           8.12   Employee Benefit Plans .  The Borrower will not, and will not cause, permit, or suffer any ERISA Affiliate to:                     (a)      engage in any “prohibited transaction” within the meaning of §406 of ERISA or §4975 of the Code that could result in a material liability for the Borrower and its Consolidated Subsidiaries taken as a whole;                     (b)      permit any Guaranteed Pension Plan to incur an “accumulated funding deficiency”, as such term is defined in §302 of ERISA, whether or not such deficiency is or may be waived;                     (c)      fail to contribute to any Guaranteed Pension Plan to an extent that, or terminate any Guaranteed Pension Plan in a manner that, could result in the imposition of a Lien on the assets of the Borrower or any of its Subsidiaries pursuant to §302(f) or §4068 of ERISA; or                     (d)      permit or take any action that would result in the aggregate benefit liabilities (within the meaning of §4001 of ERISA) of all Guaranteed Pension Plans exceeding the value of the aggregate assets of such Plans by more than $20,000,000, disregarding for this purpose the benefit liabilities and assets of any such Plan with assets in excess of benefit liabilities.           8.13   Amendments to Certain Documents.  The Borrower shall not, without the prior written consent of the Administrative Agent in each instance, permit or suffer any material amendments, modifications, supplements, or restatements of its certificate of limited partnership or the Borrower Partnership Agreement (or, following any conversion of the Borrower to a corporation, its certificate of incorporation or by-laws) that (i) relate to the determination of Available Cash Flow or Operating Cash Flow under the Borrower Partnership Agreement, or (ii) could reasonably be expected to materially adversely affect the ability of the Borrower to perform and observe its obligations under the Loan Documents or the legal rights and remedies of the Banks, the Co-Agents and the Administrative Agent under any of the Loan Documents. 9.       FINANCIAL COVENANTS OF THE BORROWER.           The Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit, or Note is outstanding or any Bank or Co-Agent has any obligation to make any Loans or any Co-Agent has any obligation to issue, extend, or renew any Letters of Credit:           9.1     Ratio of Consolidated Adjusted Funded Debt to Consolidated Adjusted Cash Flow.                     (a)      The Borrower will not at any time permit the ratio of (i) the aggregate principal amount of Consolidated Adjusted Funded Debt at such time to (ii) Consolidated Adjusted Cash Flow for the period of four (4) consecutive fiscal quarters then (or most recently) ended to exceed 3.00 to 1.00.                     (b)      Consolidated Adjusted Funded Debt shall mean at any time the sum of:                     (i)       the aggregate outstanding principal amount of Funded Debt of the Borrower and the Consolidated Subsidiaries (whether owed by more than one of them jointly or by any of them singly) at such time determined on a consolidated basis in accordance with GAAP; and                     (ii)      without duplication, the aggregate outstanding principal amount of Funded Debt owed by the Borrower and the Consolidated Subsidiaries (whether owed by more than one of them jointly or by any of them singly) at such time to any Consolidated Subsidiary that is not a Restricted Subsidiary.                     (c)      Consolidated Adjusted Cash Flow shall mean, with respect to any fiscal period, the difference of:                     (i)       the sum of (A) EBITDA of the Borrower and the Consolidated Subsidiaries for such fiscal period, plus (B) non-cash charges of the Borrower and the Consolidated Subsidiaries (other than charges for depreciation and amortization) for such fiscal period to the extent deducted in determining Consolidated Net Income (or Loss) for such period;           minus                     (ii)      brokerage commissions paid in connection with sales of “B” shares of investment companies and mutual funds managed or advised by the Borrower or one of its Subsidiaries (net of contingent deferred sales charges received in conjunction with redemptions of such “B” shares).           9.2     Minimum Net Worth.  As of the last day of each calendar quarter, the Borrower shall not permit its Consolidated Net Worth to be less than $700,000,000.           9.3     Miscellaneous .                     (a)      All capitalized terms that are used in this Section 9 without definition in this Agreement shall refer to the corresponding items in the financial statements of the Borrower (as such items were determined for purposes of the financial statements referred to in this Section 9.3).                     (b)      For purposes of this Section 9, demand obligations shall be deemed to be due and payable during any fiscal year during which such obligations are outstanding. 10.     CLOSING CONDITIONS.           The obligations of the Banks to enter into this Credit Agreement shall be subject to the satisfaction of the following conditions precedent at or before the Closing Date:           10.1   Financial Statements and Material Changes.  The Banks shall be reasonably satisfied that (a) the financial statements of the Borrower and the Consolidated Subsidiaries referred to in Section 6.4 fairly present in all material respects the business and financial condition and the results of operations of the Borrower and the Consolidated Subsidiaries as of the dates and for the periods to which such financial statements relate, and (b) there shall have been no material adverse change in the Business of the Borrower and the Consolidated Subsidiaries taken as a whole since the dates of such financial statements.           10.2   Loan Documents.  Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto and shall be in full force and effect.  Each Bank, each Co-Agent and the Administrative Agent shall have received a fully executed copy of each such document.           10.3   Certified Copies of Charter Documents.  Each of the Banks, the Co-Agents and the Administrative Agent shall have received from the Borrower and the General Partner (a) a copy of its certificate of incorporation, certificate of limited partnership, or other charter document duly certified as of a recent date by the Secretary of State of Delaware, (b) a copy, certified by a duly authorized officer of such Entity to be true and complete on the Closing Date, of its by-laws, agreement of limited partnership, or equivalent document as in effect on such date, and (c) a certificate of the Secretary of State of Delaware as to the due organization, legal existence, and good standing of such Entity. The certificate of incorporation and by-laws or partnership agreement and certificate of limited partnership, as the case may be, of the Borrower, each of its Subsidiaries, and the General Partner shall be in all respects satisfactory in form and substance to the Banks, the Co-Agents and the Administrative Agent.           10.4   Partnership and Corporate Action.  All partnership action necessary for the valid execution, delivery, and performance by the Borrower of this Credit Agreement and the other Loan Documents to which it is or is to become a party, and all corporate action necessary for the General Partner to cause the Borrower to execute, deliver, and perform this Credit Agreement and the other Loan Documents to which the Borrower is or is to become a party, shall have been duly and effectively taken, evidence thereof reasonably satisfactory to the Banks, the Co-Agents and the Administrative Agent shall have been provided to each of the Banks, and such action shall be in full force and effect at the Closing Date.           10.5   Consents.  Each party hereto shall have duly obtained all consents and approvals of Government Authorities and other third parties, and shall have effected all notices, filings, and registrations with Government Authorities and other third parties, as may be required in connection with the execution, delivery, performance, and observance of the Loan Documents; all of such consents, approvals, notices, filings, and registrations shall be in full force and effect; and the Banks, the Co-Agents and the Administrative Agent shall have each received evidence thereof satisfactory to them.           10.6   Opinions of Counsel.  Each of the Banks, the Co-Agents and the Administrative Agent shall have received a favorable opinion addressed to the Banks, the Co-Agents and the Administrative Agent, dated as of the Closing Date, from Brown & Wood LLP, counsel to the Borrower, in the form of Exhibit I hereto.           10.7   Proceedings .  There shall be no Proceedings pending or threatened the result of which is reasonably likely to impair or prevent the Borrower’s performance and observance of its obligations under this Credit Agreement and the other Loan Documents.           10.8   Incumbency Certificate.  Each of the Banks, the Co-Agents and the Administrative Agent shall have received from the Borrower an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of the Borrower and giving the name and bearing a specimen signature of each individual who shall be authorized: (a) to sign, in the name and on behalf of the Borrower, each of the Loan Documents to which the Borrower is or is to become a party; (b) to make Loan Requests, Conversion Requests and to apply for Letters of Credit; and (c) to give notices and to take other action on behalf of the Borrower under the Loan Documents.           10.9   Fees.  The Borrower shall have paid to the Administrative Agent for the accounts of the Banks all fees then payable.           10.10 Representations and Warranties True; No Defaults.  The Co-Agents, the Administrative Agent and the Banks shall have received a certificate of an officer of the General Partner, in form and substance satisfactory to the Administrative Agent, the Co-Agents, and the Banks, to the effect that (i) each of the representations and warranties set forth herein and each of the other Loan Documents is true and correct in all material respects on and as of the Closing Date, and (ii) no material defaults exist under any material contract or agreement of the Borrower, including, without limitation, this Credit Agreement and the other Loan Documents. 11.     CONDITIONS TO ALL BORROWINGS.           The obligations of the Banks to make any Loan, and the obligations of any Co-Agent to issue, extend or renew any Letter of Credit whether on or after the Closing Date, shall also be subject to the satisfaction of the conditions precedent set forth below.  Each of the submission of a Loan Request or a Letter of Credit Application by the Borrower and the acceptance by the Borrower of any Loan shall constitute a representation and warranty by the Borrower that the conditions set forth below have been satisfied.           11.1   No Default.  No Default or Event of Default shall have occurred and be continuing.           11.2   Representations True.  Each of the representations and warranties of the Borrower and its Subsidiaries contained in this Credit Agreement (other than the Borrower’s representation and warranty set forth in Section 6.5), the other Loan Documents, or in any document or instrument delivered pursuant to or in connection with this Credit Agreement shall be true and correct in all material respects as of the time of the making of such Loan or the issuance, extension or renewal of such Letter of Credit, with the same effect as if made at and as of that time (except (a) to the extent that such representations and warranties expressly relate to a prior date, in which case they shall be true and correct in all material respects as of such earlier date, and (b) to the extent of changes resulting from transactions contemplated or permitted by this Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse to the Borrower and its Consolidated Subsidiaries taken as a whole).           11.3   Loan Request or Letter of Credit Application.  In the case of a Loan (other than a Loan made under Section 2.8), the Administrative Agent shall have received a Loan Request as provided in Section 2.7.  In the case of a Letter of Credit, any of the Co-Agents shall have received a Letter of Credit Application as provided in Section 4.1.           11.4   Payment of Fees .  Without limiting any other condition, the Borrower shall have paid to the Administrative Agent, for the account of the Banks, the Co-Agents and the Administrative Agent as appropriate, all fees and other amounts due and payable under the Loan Documents at or prior to the time of the making of such Loan or the issuance, extension or renewal of such Letter of Credit.           11.5   No Legal Impediment.  No change shall have occurred in any Government Mandate that in the reasonable opinion of any Bank would make it illegal for such Bank to make such Loan (it being understood that this section shall be a condition only for the Bank or Banks affected by such Government Mandate) or that in the reasonable opinion of any of the Co-Agents would make it illegal for such Co-Agent to issue, extend or renew any Letter of Credit. 12.     EVENTS OF DEFAULT; ACCELERATION; ETC.           12.1   Events of Default and Acceleration.  If any of the following events (“Events of Default” or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, “Defaults”) shall occur:                     (a)      the Borrower or any Other Obligor shall fail to pay any principal of the Loans or any Reimbursement Obligation (for which a Loan is not made as provided in Section 2.8) when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment;                     (b)      the Borrower or any Other Obligor shall fail to pay any interest on the Loans when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment, and such failure shall continue for five (5) days after written notice of such failure has been given to the Borrower (or if the Borrower no longer exists, such other Obligor) by the Administrative Agent;                     (c)      the Borrower or any Other Obligor shall fail to perform or observe any of its covenants contained in Sections 7.5.1, 7.6.1, 8.1, 8.2, 8.3, 8.4(x), 8.13, 9, or, if such failure relates to a Lien securing Funded Debt, 8.4;                     (d)      the Borrower, any Other Obligor, or any of their respective Subsidiaries shall fail to perform or observe any term, covenant, or agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this Section 12) for thirty (30) days after written notice of such failure has been given to the Borrower (or if the Borrower no longer exists, such Other Obligor) by the Administrative Agent, provided, that a failure to perform or observe the terms, covenants and agreements set forth in Section 7.4 or Section 7.5.3 that continues for more than ten (10) days (regardless of whether notice of such failure is given to the Borrower) shall constitute an Event of Default hereunder;                     (e)      any representation or warranty of the Borrower, any Other Obligor, or any of their respective Subsidiaries in this Credit Agreement, any of the other Loan Documents, or in any other document or instrument delivered pursuant to or in connection with this Credit Agreement shall prove to have been incorrect in any material respect upon the date when made or deemed to have been made or repeated;                     (f)       failure to make a payment of principal or interest, or a default, event of default, or other event permitting (with or without the passage of time or the giving of notice) acceleration or exercise of remedies shall occur with respect to (i) any Indebtedness for money borrowed, (ii) any Indebtedness in respect of the deferred purchase price of goods or services, or (iii) any Capitalized Lease, of the Borrower, any Other Obligor, or any of their respective Subsidiaries, having a principal amount (or, in the case of a Capitalized Lease, scheduled rental payments with a discounted present value from the last day of the initial term to the date of determination as determined in accordance with generally accepted accounting principles), (A) in any one case, of  $50,000,000 or more, or (B) in the aggregate, of $150,000,000 or more, and such failure to make a payment of principal or interest, or a default, event of default, or other event shall continue for such period of time as would entitle the holder of such Indebtedness or Capitalized Lease (with or without notice) to accelerate such Indebtedness or terminate such Capitalized Lease;                     (g)      any of the Loan Documents shall be cancelled, terminated, revoked, or rescinded otherwise than in accordance with the terms thereof or with the express prior written agreement, consent, or approval of the Banks, or any Proceeding to cancel, revoke, or rescind any of the Loan Documents shall be commenced by or on behalf of the Borrower, any Other Obligor, or any of their respective Subsidiaries party thereto, or any Government Authority of competent jurisdiction shall make a determination that, or issue a Government Mandate to the effect that, any material provision of one or more of the Loan Documents is illegal, invalid, or unenforceable in accordance with the terms thereof;                     (h)      the Borrower, any Other Obligor, Alliance Distributors, the General Partner, or any Material Subsidiary shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator, or receiver of the Borrower, any Other Obligor, Alliance Distributors, the General Partner or any Material Subsidiary or of any substantial part of the assets of the Borrower, any Other Obligor, Alliance Distributors, the General Partner, or any Material Subsidiary, or shall commence any Proceeding relating to the Borrower, any Other Obligor, Alliance Distributors, the General Partner, or any Material Subsidiary under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation, or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such Proceeding shall be commenced against the Borrower, any Other Obligor, Alliance Distributors, the General Partner, or any Material Subsidiary and any of such parties shall indicate its approval thereof, consent thereto, or acquiescence therein;                     (i)       either (i) an involuntary Proceeding relating to the Borrower, any Other Obligor, Alliance Distributors, the General Partner, or any Material Subsidiary under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation, or similar law of any jurisdiction, now or hereafter in effect is commenced and not dismissed or vacated within sixty (60) days following entry thereof, or (ii) a decree or order is entered appointing any trustee, custodian, liquidator, or receiver described in (h) or adjudicating the Borrower, any Other Obligor, Alliance Distributors, the General Partner, or any Material Subsidiary bankrupt or insolvent, or approving a petition in any such Proceeding, or a decree or order for relief is entered in respect of the Borrower, any Other Obligor, Alliance Distributors, the General Partner, or any Material Subsidiary in an involuntary Proceeding under federal bankruptcy laws as now or hereafter constituted;                     (j)       there shall remain in force, undischarged, unsatisfied, and unstayed, for more than forty-five (45) days, any final judgment or order against the Borrower, any Other Obligor, or any of their respective Subsidiaries, that, with any other such outstanding final judgments or orders, undischarged, against the Borrower, any Other Obligors, and their respective Subsidiaries taken together exceeds in the aggregate $20,000,000;                     (k)      with respect to any Guaranteed Pension Plan, an ERISA Reportable Event shall have occurred and the Majority Banks shall have determined in their reasonable discretion that such event reasonably could be expected to result in liability of the Borrower, any Other Obligor, or any of their respective Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $20,000,000 and such event in the circumstances occurring reasonably could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan; or a trustee shall have been appointed by the United States District Court to administer such Guaranteed Pension Plan; or the PBGC shall have instituted proceedings to terminate such Guaranteed Pension Plan;                     (l)       any of the following: (i) the Borrower or (if required to be so registered) any Other Obligor shall fail to be duly registered as an “investment adviser” under the Investment Advisers Act of 1940; or (ii) Alliance Distributors shall cease to be duly registered as a “broker/dealer” under the Securities Exchange Act of 1934 or shall cease to be a member in good standing of the National Association of Securities Dealers, Inc.;                     (m)     the Borrower, any Other Obligor, Alliance Distributors, the General Partner, or any Material Subsidiary shall either (i) be indicted for a federal or state crime and, in connection with such indictment, Government Authorities shall seek to seize or attach, or seek a civil forfeiture of, property of the Borrower, any Other Obligor, Alliance Distributors, the General Partner, or one or more of such Material Subsidiary having a fair market value in excess of $20,000,000, or (ii) be found guilty of, or shall plead guilty, no contest, or nolo contendere to, any federal or state crime, a punishment for which could include a fine, penalty, or forfeiture of any assets of the Borrower, such Other Obligor, Alliance Distributors, the General Partner, or such Material Subsidiary having in any such case a fair market value in excess of $20,000,000; or                     (n)      Alliance Capital Management Corporation shall cease to be the sole general partner of the Borrower, and such circumstance shall continue for thirty (30) days after written notice of such circumstance has been given to the Borrower (or, if the Borrower no longer exists, any Other Obligor), provided,thatthe admission of additional Persons as (a) general partner of the Borrower shall not constitute an Event of Default if, prior to the admission of any such general partner, the Borrower delivers to the Banks (i) the documentation with respect to such general partner that would be required under Section 10.3 if such Person were a General Partner on the Closing Date, (ii) an incumbency certificate for such general partner as required for the Borrower pursuant to Section 10.8, and (c) an opinion from counsel reasonably acceptable to the Banks, in form and substance reasonably satisfactory to the Banks, as to such general partner’s power and authority to act on behalf of the Borrower as a general partner of the Borrower, and provided, further, that a Reorganization of the Borrower pursuant to Section 8.2(c) as permitted under Section 2.05 of the Borrower Partnership Agreement shall not constitute a Default or an Event of Default under this clause(n);           then, and in any such event, so long as the same may be continuing, the Administrative Agent, upon the request of the Majority Banks, shall by notice in writing to the Borrower declare all amounts owing with respect to this Credit Agreement, the Notes, and the other Loan Documents and all Reimbursement Obligations (including with respect to outstanding undrawn Letters of Credit) to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest, or other notice of any kind, all of which are hereby expressly waived by the Borrower; provided that in the event of any Event of Default specified in Section 12.1(h) or Section 12.1(i), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Administrative Agent, any Co-Agent or any Bank; and provided, further, that any such declaration may be rescinded by the Majority Banks after the Events of Default leading to such declaration are cured or waived.           12.2   Termination of Commitments .  If any one or more of the Events of Default specified in Section 12.1(h) or Section 12.1(i) shall occur, any unused portion of the Total Commitment hereunder shall forthwith terminate and each of the Banks shall be relieved of all obligations to make Loans to the Borrower and the Co-Agents shall be relieved of all further obligations to issue, extend or renew Letters of Credit.  If any other Event of Default shall have occurred and be continuing, or if on any Drawdown Date the conditions precedent to the making of the Loans to be made on such Drawdown Date are not satisfied, or if on any date for issuing, extending, or renewing any Letter of Credit the conditions precedent to issuing, extending, or renewing such Letter of Credit on such date are not satisfied, the Administrative Agent may with the consent of the Majority Banks and, upon the request of the Majority Banks, shall, by notice to the Borrower, terminate the unused portion of the Total Commitment hereunder, and upon such notice being given such unused portion of the Total Commitment hereunder shall terminate immediately and each of the Banks shall be relieved of all further obligations to make Loans and the Co-Agents shall be relieved of all further obligations to issue, extend or renew Letters of Credit.  If any such notice is given to the Borrower, the Administrative Agent will forthwith furnish a copy thereof to each of the Banks. No termination of the Total Commitment hereunder shall relieve the Borrower of any of the Obligations or any of its existing obligations to any of the Banks arising under other agreements or instruments.           12.3   Remedies                     (a)      In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Administrative Agent shall have accelerated the maturity of the Loans pursuant to Section 12.1, each Bank, if owed any amount with respect to the Loans or the Reimbursement Obligations, may with the consent of the Majority Banks but not otherwise, proceed to protect and enforce its rights by any appropriate Proceeding, whether for the specific performance of any covenant or agreement contained in this Credit Agreement and the other Loan Documents or any instrument pursuant to which the Obligations to such Bank are evidenced, including as permitted by applicable Government Mandate the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of such Bank.                     (b)      No remedy herein conferred upon any Bank, any Co-Agent or the Administrative Agent or the holder of any Note or purchaser of any Letter of Credit Participation is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by any Government Mandate.           12.4   Application of Monies.  In the event that, during the continuance of any Default or Event of Default, the Administrative Agent, any Co-Agent or any Bank, as the case may be, receives any monies in connection with the enforcement of rights under the Loan Documents, such monies shall be distributed for application as follows:                     (a)      First, to the payment of, or (as the case may be) the reimbursement of the Administrative Agent for or in respect of all costs, expenses, disbursements, and losses that shall have been incurred or sustained by the Administrative Agent in connection with the collection of such monies by the Administrative Agent, for the exercise, protection, or enforcement by the Administrative Agent of all or any of the rights, remedies, powers, and privileges of the Administrative Agent under this Credit Agreement or any of the other Loan Documents, or in support of any provision of adequate indemnity to the Administrative Agent against any taxes or Liens that by Government Mandate shall have, or may have, priority over the rights of the Administrative Agent to such monies;                     (b)      Second, to all other Obligations in such order or preference as the Majority Banks may determine; provided, however, that distributions among Obligations owing to the Banks, the Co-Agents and the Administrative Agent with respect to each type of Obligation such as interest, principal, fees, and expenses, shall be made among the Banks, the Co-Agents and the Administrative Agent pro rata according to the respective amounts thereof; and provided, further, that the Administrative Agent may in its discretion make proper allowance to take into account any Obligations not then due and payable; and                     (c)      Third, the excess, if any, shall be returned to the Borrower or to such other Persons as are entitled thereto. 13.     SETOFF.           Regardless of the adequacy of any collateral, during the continuance of any Event of Default, any deposits or other sums credited by or due from any of the Banks to the Borrower and any securities or other property of the Borrower in the possession of such Bank may be applied to or set off by such Bank against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrower to such Bank.  Each of the Banks agrees with each other Bank that (a) if an amount to be set off is to be applied to Indebtedness of the Borrower to such Bank, other than Indebtedness evidenced by the Notes held by such Bank or constituting Reimbursement Obligations owed to such Bank, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness evidenced by all such Notes held by such Bank or constituting Reimbursement Obligations owed to such Bank, and (b) if such Bank shall receive from the Borrower, whether by voluntary payment, exercise of the right of setoff, counterclaim, cross action, enforcement of the claim evidenced by the Notes held by, or constituting Reimbursement Obligations owed to, such Bank by Proceedings against the Borrower, by proof thereof in bankruptcy, reorganization, liquidation, receivership, or similar Proceedings, or otherwise, and shall retain and apply to the payment of the Notes held by, or Reimbursement Obligations owed to, such Bank, any amount in excess of its ratable portion of the payments received by all of the Banks with respect to the Notes held by, and Reimbursement Obligations owed to, all of the Banks (exclusive of payments to be made for the account of less than all of the Banks as provided in Sections 3.2.2, 5.8, and 5.9), such Bank will make such disposition and arrangements with the other Banks with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Bank receiving in respect of the Notes held by it, or Reimbursement Obligations owed to it, its proportionate payment as contemplated by this Credit Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Bank, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. 14.     THE ADMINISTRATIVE AGENT.           14.1   Authorization.  The Administrative Agent is authorized to take such action on behalf of each of the Banks and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Administrative Agent, together with such powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Administrative Agent.  The relationship between the Administrative Agent and the Banks is and shall be that of agent and principal only, and nothing contained in this Credit Agreement, the Letters of Credit or any of the other Loan Documents shall be construed to constitute the Administrative Agent as a trustee for any Bank.           14.2   Employees and Agents.  The Administrative Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of legal counsel concerning all matters pertaining to its rights and duties under this Credit Agreement and the other Loan Documents. The Administrative Agent may utilize the services of such Persons as the Administrative Agent in its sole discretion may reasonably determine.           14.3   No Liability.  Neither the Administrative Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Administrative Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence.           14.4   No Representations.  The Administrative Agent shall not be responsible for the execution or validity or enforceability of this Credit Agreement, the Notes, the Letters of Credit, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability, or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties, or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrower, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants, or agreements herein or in any instrument at any time constituting, or intended to constitute, collateral security for the Notes or to inspect any of the properties, books, or records of the Borrower or any of its Subsidiaries.  The Administrative Agent shall not be bound to ascertain whether any notice, consent, waiver, or request delivered to it by the Borrower or any holder of any of the Notes shall have been duly authorized or is true, accurate, and complete.  The Administrative Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Banks, with respect to the credit worthiness or financial conditions of the Borrower or any of its Subsidiaries.  Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Credit Agreement.           14.5   Payments.                     14.5.1           Payments to Administrative Agent.  A payment by the Borrower to the Administrative Agent hereunder or under any of the other Loan Documents for the account of any Bank or Co-Agent shall constitute a payment to such Bank or Co-Agent.  The Administrative Agent shall promptly distribute to each Bank and Co-Agent such Bank’s or, as the case may be, Co-Agent, pro rata share of payments received by the Administrative Agent for the account of the Banks and the Co-Agents except as otherwise expressly provided herein or in any of the other Loan Documents.                     14.5.2           Distribution by Administrative Agent.  If in the reasonable opinion of the Administrative Agent the distribution of any amount received by it in such capacity hereunder, under the Notes, or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make the same shall have been adjudicated by a court of competent jurisdiction.  If any Government Authority shall adjudge that any amount received and distributed by the Administrative Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Administrative Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such Government Authority.                     14.5.3           Delinquent Banks.  Notwithstanding anything to the contrary contained in this Credit Agreement or any of the other Loan Documents, any Bank that fails (a) to make available to the Administrative Agent its pro rata share of any Loan, (b) to purchase any Letter of Credit Participation as, when, and to the full extent required by the provisions of this Credit Agreement, or (c) to comply with the provisions of Section 13 with respect to making dispositions and arrangements with the other Banks, where such Bank’s share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Banks, in each case as, when, and to the full extent required by the provisions of this Credit Agreement, shall be deemed delinquent (a “Delinquent Bank”) and shall be deemed a Delinquent Bank until such time as such delinquency is satisfied.  A Delinquent Bank shall be deemed to have assigned any and all payments due to it from the Borrower, whether on account of outstanding Loans, Unpaid Reimbursement Obligations, interest, fees, or otherwise, to the remaining nondelinquent Banks for application to, and reduction of, their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations.  The Delinquent Bank hereby authorizes the Administrative Agent to distribute such payments to the nondelinquent Banks in proportion to their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations.  A Delinquent Bank shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans and Unpaid Reimbursement Obligations of the non-delinquent Banks, the Banks’ respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency.           14.6   Holders of Notes.  Subject to Section 18, the Administrative Agent may deem and treat the payee of any Note or purchaser of any Letter of Credit Participation as the absolute owner thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee, or transferee.           14.7   Indemnity.  The Banks ratably shall indemnify and hold harmless the Administrative Agent from and against any and all Proceedings (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Administrative Agent has not been reimbursed by the Borrower as required by Section 15), and liabilities of every nature and character arising out of or related to this Credit Agreement, the Notes, any of the other Loan Documents, or the transactions contemplated or evidenced hereby or thereby, or the Administrative Agent’s actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Administrative Agent’s willful misconduct or gross negligence.           14.8   Administrative Agent and Co-Agents as Banks.  In its individual capacity, Bank of America, N.A., The Chase Manhattan Bank and Deutsche Bank AG, New York and/or Cayman Islands Branches shall have the same obligations and the same rights, powers, and privileges in respect to its Commitment and the Loans made by it, and as the holder of any of the Notes and as the purchase of any Letter of Credit Participations, as it would have were it not also the Administrative Agent and/or a Co-Agent.           14.9   Resignation.  The Administrative Agent and/or any Co-Agent may resign at any time by giving sixty (60) days’ prior written notice thereof to the Banks and the Borrower.  Upon any such resignation, the Majority Banks shall have the right to appoint a successor Administrative Agent and/or Co-Agent, as the case may be.  Unless an Event of Default shall have occurred and be continuing, such successor Administrative Agent and/or Co-Agent shall be reasonably acceptable to the Borrower.  If no successor Administrative Agent and/or Co-Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent’s and/or Co-Agent’s giving of notice of resignation, then the retiring Administrative Agent and/or Co-Agent may, on behalf of the Banks, appoint a successor, which shall be a financial institution having a rating of not less than A or its equivalent by Standard & Poor’s Ratings Services.  Upon the acceptance of any appointment as Administrative Agent and/or Co-Agent hereunder by a successor, such successor shall thereupon succeed to and become vested with all the rights, powers, privileges, and duties of the retiring Administrative Agent and/or Co-Agent, and the retiring Administrative Agent and/or Co-Agent shall be discharged from its duties and obligations hereunder.  After any retiring Administrative Agent’s and/or Co-Agent’s resignation, the provisions of this Credit Agreement and the other Loan Documents 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 Administrative Agent.           14.10 Notification of Defaults and Events of Default. Upon learning of the existence of a Default or an Event of Default, a Bank or Co-Agent shall promptly notify the Administrative Agent thereof.  Upon receipt of any notice under this Section 14.10, the Administrative Agent shall promptly notify the other Banks of the existence of such Default or Event of Default.           14.11 Duties in the Case of Enforcement.  In case one or more Events of Default shall have occurred and be continuing, and whether or not acceleration of the Obligations shall have occurred, the Administrative Agent shall, if (a) so requested by the Majority Banks and (b) the Banks have provided to the Administrative Agent such additional indemnities and assurances against expenses and liabilities as the Administrative Agent may reasonably request, proceed to enforce the provisions of the Loan Documents and exercise all or any such other legal, equitable, and other rights or remedies as it may have under the Loan Documents.  The Majority Banks may direct the Administrative Agent in writing as to the method and the extent of any such action, the Banks hereby agreeing to indemnify and hold the Administrative Agent harmless from all liabilities incurred in respect of all actions taken or omitted in accordance with such directions, provided that the Administrative Agent need not comply with any such direction to the extent that the Administrative Agent reasonably believes the Administrative Agent’s compliance with such direction to be unlawful or commercially unreasonable in any applicable jurisdiction. 15.     EXPENSES.           The Borrower shall upon demand either, as the Banks, the Co-Agents or the Administrative Agent may require and regardless of whether any Loans are made hereunder, pay in the first instance or reimburse the Banks, the Co-Agents and the Administrative Agent (to the extent that payments for the following items are not made under the other provisions hereof) for (a) the reasonable out-of-pocket costs of producing and reproducing this Credit Agreement, the other Loan Documents, and the other agreements and instruments mentioned herein, (b) reasonable out-of-pocket expenses incurred in connection with the syndication of this facility, (c) any taxes (including any interest and penalties in respect thereto) payable by the Administrative Agent, any of the Co-Agents or any of the Banks (other than taxes based upon the Administrative Agent’s, any Co-Agent’s or any Bank’s income or profits) on or with respect to the transactions contemplated by this Credit Agreement, (d) the reasonable fees, expenses, and disbursements of the Co-Agent’s special counsel incurred in connection with the preparation, the administration, or interpretation of the Loan Documents, the other instruments mentioned herein, and the term sheet for the transactions contemplated by this Credit Agreement, each closing hereunder, and amendments, modifications, approvals, consents or waivers hereto or hereunder, (e) the reasonable fees, expenses, and disbursements of the Administrative Agent incurred by the Administrative Agent in connection with the preparation, administration, or interpretation of the Loan Documents and other instruments mentioned herein, (f) all reasonable out-of-pocket expenses (including reasonable attorneys’ fees and costs, which attorneys may be employees of any Bank, any Co-Agent or the Administrative Agent, and reasonable consulting, accounting, appraisal, investment banking, and similar professional fees and charges) incurred by any Bank, any Co-Agent or the Administrative Agent in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Borrower or any of its Subsidiaries or the administration thereof after the occurrence of a Default or Event of Default and (ii) any Proceeding or dispute whether arising hereunder or otherwise, in any way related to any Bank’s, any Co-Agent’s or the Administrative Agent’s relationship with the Borrower or any of its Subsidiaries.  The Borrower shall not be responsible under clause (f) above for the fees and costs of more than one law firm in any one jurisdiction with respect to any one Proceeding or set of related Proceedings for the Administrative Agent, the Co-Agents and the Banks, unless any of the Administrative Agent, the Co-Agents and the Banks shall have reasonably concluded that there are legal defenses available to it that are different from or additional to those available to the Borrower or there are other circumstances that in the reasonable judgment of the Administrative Agent, the Co-Agents and the Banks make separate counsel advisable.  The covenants of this Section 15 shall survive payment or satisfaction of all other Obligations. 16.     INDEMNIFICATION.           The Borrower shall, regardless of whether any Loans are made hereunder, indemnify and hold harmless the Administrative Agent, the Co-Agents and the Banks, together with their respective shareholders, directors, agents, officers, Subsidiaries, and Affiliates, from and against any and all damages, losses, settlement payments, obligations, liabilities, claims, causes of action, and Proceedings, and reasonable costs and expenses in connection therewith, incurred, suffered, sustained, or required to be paid by an indemnified party by reason of or resulting, directly or indirectly, from the transactions contemplated by the Loan Documents, including (a) any actual or proposed use by the Borrower or any of its Subsidiaries of the proceeds of any of the Loans or Letters of Credit, (b) the Borrower or any of its Subsidiaries entering into or performing this Credit Agreement or any of the other Loan Documents, or (c) with respect to the Borrower and its Subsidiaries and their respective properties and assets, the violation of any Environmental Law, the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release, or threatened release of any Hazardous Substances or any Proceeding brought or threatened with respect to any Hazardous Substances (including claims with respect to wrongful death, personal injury, or damage to property), in each case including the reasonable fees and disbursements of legal counsel and reasonable allocated costs of internal legal counsel incurred in connection with any such Proceeding, provided, however, the Borrower shall not be obligated to indemnify any party for any damages, losses, settlement payments, obligations, liabilities, claims, causes of action, Proceedings, costs, and expenses that were caused directly by (i) the gross negligence or willful misconduct of the indemnified party or (ii) any breach by any Bank of its obligation to fund a Loan pursuant to this Credit Agreement, provided that the Borrower is not then in Default.  In Proceedings, or the preparation therefor, the indemnified parties shall be entitled to select their legal counsel and, in addition to the foregoing indemnity, the Borrower shall, promptly upon demand, pay in the first instance, or reimburse the indemnified parties for, the reasonable fees and expenses of such legal counsel.  The Borrower shall not be responsible under this section for the fees and costs of more than one law firm in any one jurisdiction for the Borrower and the indemnified parties with respect to any one Proceeding or set of related Proceedings, unless any indemnified party shall have reasonably concluded that there are legal defenses available to it that are different from or additional to those available to the Borrower or there are other circumstances that in the reasonable judgment of the indemnified parties make separate counsel advisable.  If, and to the extent that the obligations of the Borrower under this Section 16 are unenforceable for any reason, the Borrower shall make the maximum contribution to the payment in satisfaction of such obligations that is permissible under applicable law.  The covenants contained in this Section 16 shall survive payment or satisfaction in full of all other Obligations. 17.     SURVIVAL OF COVENANTS, ETC.           All covenants, agreements, representations, and warranties made herein, in the Notes, in any of the other Loan Documents, or in any documents or other papers delivered by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto shall be deemed to have been relied upon by the Banks, the Co-Agent and the Administrative Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Banks of the Loans and the issuance, extension or renewal of any Letters of Credit, as herein contemplated, and shall continue in full force and effect so long as any Letter of Credit or amount due under this Credit Agreement or the Notes or any of the other Loan Documents remains outstanding or any Bank has any obligation to make any Loans or any of the Co-Agents has any obligation to issue, extend, or renew any Letter of Credit, and for such further time as may be otherwise expressly specified in this Credit Agreement.  All statements contained in any certificate or other paper delivered to any Bank, any Co-Agent or the Administrative Agent at any time by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Borrower or such Subsidiary hereunder. 18.     ASSIGNMENT AND PARTICIPATION.           18.1   Conditions to Assignment by Banks.  Except as provided herein, each Bank may assign to one or more Eligible Assignees all or a portion of its interests, rights, and obligations under this Credit Agreement (including all or a portion of its Commitment Percentage and Commitment and the same portion of the Loans at the time owing to it and its participating interest in the risk relating to any Letters of Credit) and the Notes held by it; provided that (a) the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower shall have given its prior written consent to such assignment, which consent, in the case of the Borrower, will not be unreasonably withheld, provided that, if no Event of Default has occurred and is continuing, no Bank may assign its rights and obligations hereunder if such assignment would result in a reduction of or a withdrawal of the then current rating of the commercial paper notes of the Borrower (b) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Bank’s rights and obligations under this Credit Agreement, (c) each assignment of less than all of the assigning Bank’s rights and obligations under this Credit Agreement, shall be in an amount equal to $10,000,000 or in integral multiples of $1,000,000 in excess thereof, and (d) the parties to such assignment shall execute and deliver to the Administrative Agent, for recording in the Register (as hereinafter defined), an Assignment and Acceptance, substantially in the form of Exhibit J hereto (an “Assignment and Acceptance”), together with any Notes subject to such assignment.  Upon such execution, delivery, acceptance, and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, (i) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Bank hereunder, and (ii) the assigning Bank shall, to the extent provided in such assignment and upon payment to the Administrative Agent of the registration fee referred to in Section 18.3, be released from its obligations under this Credit Agreement.           18.2   Certain Representations and Warranties; Limitations; Covenants.  By executing and delivering an Assignment and Acceptance, the parties to the assignment thereunder confirm to and agree with each other and the other parties hereto as follows: (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Bank makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties, or representations made in or in connection with this Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency, or value of this Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto; (b) the assigning Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower and its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by the Borrower and its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations or any of their obligations under this Credit Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (c) such assignee confirms that it has received a copy of this Credit Agreement, together with copies of the most recent financial statements referred to in Section 6.4 and Section 7.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (d) such assignee will, independently and without reliance upon the assigning Bank, the Administrative Agent, or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement; (e) such assignee represents and warrants that it is an Eligible Assignee; (f) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Credit Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; (g) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Credit Agreement are required to be performed by it as a Bank; (h) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; and (i) such assignee acknowledges that it has made arrangements with the assigning Bank satisfactory to such assignee with respect to its pro rata share of Letter of Credit Fees in respect of outstanding Letters of Credit.           18.3   Register.  The Administrative Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register or similar list (the “Register”) for the recordation of the names and addresses of the Banks and the Commitment Percentage of, and principal amount of the Loans owing to, and Letter of Credit Participations purchased by the Banks from time to time.  The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent, and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Credit Agreement.  The Register shall be available for inspection by the Borrower and the Banks at any reasonable time and from time to time upon reasonable prior notice.  Upon each such recordation, the assigning Bank agrees to pay to the Administrative Agent a registration fee in the sum of $3,500.           18.4   New Notes.  Upon its receipt of an Assignment and Acceptance executed by the parties to such assignment, together with each Note subject to such assignment, the Administrative Agent shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrower and the Banks (other than the assigning Bank).  Within five (5) Business Days after receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent, in exchange for each surrendered Note, a new Note to the order of such Eligible Assignee in an amount equal to the amount assumed by such Eligible Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank has retained some portion of its obligations hereunder, a new Note to the order of the assigning Bank in an amount equal to the amount retained by it hereunder. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Notes.  The surrendered Notes shall be cancelled and returned to the Borrower.           18.5   Participations.  Each Bank may sell participations to one or more banks or other entities in all or a portion of such Bank’s rights and obligations under this Credit Agreement and the other Loan Documents; provided that (a) any such sale or participation shall not affect the rights and duties of the selling Bank hereunder to the Borrower, (b) the only rights granted to the participant pursuant to such participation arrangements with respect to waivers, amendments, or modifications of the Loan Documents shall be the rights to approve waivers, amendments or modifications that require the unanimous consent of the Banks pursuant to Section 25 and (c) such participation shall be in a minimum amount of $1,000,000 or in integral multiples of $1,000,000 in excess thereof.  Each Bank shall, promptly upon request of the Borrower in each instance, disclose to the Borrower the parties to which such Bank has granted participations under this section unless such Bank is subject to a contractual restriction not to do so.           18.6   Disclosure.  Any Bank may disclose information obtained by such Bank pursuant to this Credit Agreement to assignees or participants and potential assignees or participants hereunder subject to Section 7.4(e).           18.7   Assignee or Participant Affiliated with the Borrower.  If any assignee Bank is an Affiliate of the Borrower, then any such assignee Bank shall have no right to vote as a Bank hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or other modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to Section 12, and the determination of the Majority Banks shall for all purposes of this Agreement and the other Loan Documents be made without regard to such assignee Bank’s interest in any of the Loans.  If any Bank sells a participating interest in any of the Loans or Reimbursement Obligations to a participant, and such participant is the Borrower or an Affiliate of the Borrower, then such transferor Bank shall promptly notify the Administrative Agent of the sale of such participation.  A transferor Bank shall have no right to vote as a Bank hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to Section 12 to the extent that such participation is beneficially owned by the Borrower or any Affiliate of the Borrower, and the determination of the Majority Banks shall for all purposes of this Agreement and the other Loan Documents be made without regard to the interest of such transferor Bank in the Loans to the extent of such participation.           18.8   Miscellaneous Assignment Provisions.  Any assigning Bank shall retain its rights to be indemnified pursuant to Sections 5.8, 5.9, 15, and 16 with respect to any claims or actions arising prior to the date of the assignment.  If any assignee Bank is not incorporated under the laws of the United States of America or any state thereof, it shall, prior to the date on which any interest or fees are payable hereunder or under any of the other Loan Documents for its account, deliver to the Borrower and the Administrative Agent certification as to its exemption from deduction or withholding of any United States federal income taxes.  Anything contained in this Section 18 to the contrary notwithstanding, any Bank may at any time pledge all or any portion of its interest and rights under this Credit Agreement (including all or any portion of its Notes) to any of the twelve Federal Reserve Banks organized under §4 of the Federal Reserve Act, 12 U.S.C. §341.  No such pledge or the enforcement thereof shall release the pledgor Bank from its obligations hereunder or under any of the other Loan Documents.           18.9   Assignment by Borrower.  The Borrower shall not assign or transfer any of its rights or obligations under any of the Loan Documents without the prior written consent of each of the Banks. 19.     NOTICES, ETC.           Except as otherwise expressly provided in this Credit Agreement, all notices and other communications made or required to be given pursuant to this Credit Agreement or the Notes or any Letter of Credit Applications shall be in writing and shall be delivered in hand, mailed by United States registered or certified first class mail, postage prepaid, sent by overnight courier, or sent by telegraph, telecopy, telefax or telex and confirmed by delivery via courier or postal service, addressed as follows:                     (a)      if to the Borrower, at 1345 Avenue of the Americas, New York, New York 10105 (Telecopy Number (212) 969-6260), Attention:  Treasurer, with a copy sent via the same means to General Counsel of the Borrower at 1345 Avenue of the Americas, New York, New York 10105 (Telecopy Number (212) 969-1334), or at such other address for notice as any of such Persons shall last have furnished in writing to the Person giving the notice;                     (b)      if to Bank of America, whether individually or as Administrative Agent or Co-Agent,                     (i)       at 101 North Tryon Street, Charlotte, North Carolina 28255, Agency Services – Independence Center NC1-001-1504 (Telecopy Number (704) 409–0002), Attention: Herbert Boyd, Ref: Alliance Capital Management L.P.,                     (ii)      all financial information at Credit Compliance, 231 South LaSalle Street, Chicago, Illinois 60697 (Telecopy Number (312) 987-0889), Attention: Lizet Flores, Mehul Mehta and Allison Ryan,                     (iii)     with a copy sent via the same means to Paul, Hastings, Janofsky & Walker LLP, 600 Peachtree Street, N.E., Suite 2400, Atlanta, Georgia 30308-2222 (Telecopy Number:  (404) 815-2424), Attention: Chris D. Molen, Esq.,                     or such other address for notice as such Person shall last have furnished in writing to the Person giving the notice;                     (c)      if to any Bank, at such Bank’s address set forth on Schedule 1 hereto, or such other address for notice as such Bank shall have last furnished in writing to the Person giving the notice. Any such notice or demand shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or telecopy to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such telecopy, or when delivery (if other than by telecopy) is duly attempted and refused, and (ii) if sent by registered or certified first-class mail, postage prepaid, on the third Business Day following the mailing thereof. 20.     GOVERNING LAW.           THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.  EACH OF THE ADMINISTRATIVE AGENT, THE CO-AGENTS, THE BANKS, AND THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 19.  EACH OF THE ADMINISTRATIVE AGENT, THE CO-AGENTS, THE BANKS, AND THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. 21.     HEADINGS.           The captions in this Credit Agreement are for convenience of reference only and shall not define or limit the provisions hereof. 22.     COUNTERPARTS.           This Credit Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument.  In proving this Credit Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.  Any signatures delivered after the Closing Date by a party by facsimile transmission shall be deemed an original signature hereto. 23.     ENTIRE AGREEMENT, ETC.           The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby.  Neither this Credit Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in Section 25. 24.     WAIVER OF JURY TRIAL.           EACH OF THE ADMINISTRATIVE AGENT, THE CO-AGENTS, THE BANKS, AND THE BORROWER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS CREDIT AGREEMENT, THE NOTES, OR ANY OF THE OTHER LOAN DOCUMENTS, AND RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.  EXCEPT AS PROHIBITED BY LAW, EACH OF THE ADMINISTRATIVE AGENT, THE BANKS, THE CO-AGENTS AND THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY PROCEEDING REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.  THE BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY BANK, ANY CO-AGENT OR THE ADMINISTRATIVE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH BANK, SUCH CO-AGENT OR THE ADMINISTRATIVE AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT EACH OF THE ADMINISTRATIVE AGENT, THE CO-AGENTS AND THE BANKS HAS BEEN INDUCED TO ENTER INTO THIS CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN. 25.     CONSENTS, AMENDMENTS, WAIVERS, ETC.           Except as otherwise expressly provided in this Credit Agreement, any term of this Credit Agreement, the other Loan Documents, or any other instrument related hereto or mentioned herein may be amended with, but only with, the written consent of the Borrower and the Majority Banks.  Any consent or approval required or permitted by this Credit Agreement to be given by the Banks may be given, any acceleration of amounts owing under the Loan Documents may be rescinded, and the performance or observance by the Borrower of any terms of this Credit Agreement, the other Loan Documents, or any other instrument related hereto or mentioned herein or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Majority Banks. Notwithstanding the foregoing, the rate of interest on the Notes (other than interest accruing pursuant to Section 5.10 following the effective date of any waiver by the Majority Banks of the Default or Event of Default relating thereto), the term of the Notes, the definition of Maturity Date, the amount of the Commitments of the Banks, and the amount of facility fees hereunder or Letter of Credit Fees may not be changed without the written consent of the Borrower and the written consent of Banks holding one hundred percent (100%) of the outstanding principal amount of the Notes (or, if no Notes are outstanding, Commitments representing one hundred percent (100%) of the Total Commitment); neither this Section 25 nor the definition of Majority Banks may be amended without the written consent of all of the Banks; and the amount of the Administrative Agent’s fee or Letter of Credit Fees and Section 14 may not be amended without the written consent of the Administrative Agent.  No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon.  No course of dealing or delay or omission on the part of any Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto.  No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances.  Neither the Administrative Agent nor any Bank has any fiduciary relationship with or fiduciary duty to the Borrower arising out of or in connection with this Credit Agreement or any of the other Loan Documents, and the relationship between the Administrative Agent and the Banks, on the one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor. 26.     SEVERABILITY.           The provisions of this Credit Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Credit Agreement in any jurisdiction.     THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK             IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement as a sealed instrument as of the date first set forth above. BORROWER: ALLIANCE CAPITAL MANAGEMENT L.P.   By: Alliance Capital Management     Corporation, its General Partner   By: /s/ Robert H. Joseph, Jr. --------------------------------------------------------------------------------   Name: Robert H. Joseph, Jr.   Title: Senior Vice President and Chief Financial Officer ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A.   By: /s/ Mehul Mehta --------------------------------------------------------------------------------   Name: Mehul Mehta   Title: Vice President SYNDICATION AGENT: THE CHASE MANHATTAN BANK   By: /s/ Peter Platten --------------------------------------------------------------------------------   Name: Peter Platten   Title: Vice President DOCUMENTATION AGENT: DEUTCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES   By: /s/ Alan Krouck --------------------------------------------------------------------------------   Name: Alan Krouck   Title: Vice President   By: /s/ Suzanne Kissling --------------------------------------------------------------------------------   Name: Suzanne Kissling   Title: Managing Director BANKS: BANK OF AMERICA, N.A.   By: /s/ Mehul Mehta --------------------------------------------------------------------------------   Name: Mehul Mehta   Title: Vice President   THE CHASE MANHATTAN BANK   By: /s/ Peter Platten --------------------------------------------------------------------------------   Name: Peter Platten   Title: Vice President   DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES         By: /s/ Alan Krouck --------------------------------------------------------------------------------     Name:  Alan Krouck   Title: Vice President   By: /s/ Suzanne Kissling --------------------------------------------------------------------------------     Name:  Suzanne Kissling   Title: Managing Director        

NATIONAL FUEL GAS COMPANY 1993 AWARD AND OPTION PLAN As Amended October 27, 1995, December 11, 1996, December 18, 1996 and June 14, 2001      1. Purpose         The purposes of the Plan are to advance the interests of the Company and its stockholders, by providing a long-term incentive compensation program that will be an incentive to the Key Employees of the Company and its Subsidiaries whose contributions are important to the continued success of the Company and its Subsidiaries, and by enhancing their ability to attract and retain in their employ highly qualified persons for the successful conduct of their businesses.      2. Definitions         2.1 “Acceleration Date” means (i) in the event of a Change in Ownership, the date on which such change occurs, or (ii) with respect to a Participant who is eligible for treatment under paragraph 25 hereof on account of the termination of his employment following a Change in Control, the date on which such termination occurs.         2.2 “Award” means any form of stock option, stock appreciation right, Restricted Stock, performance unit, performance share or other incentive award granted by the Committee to a Participant under the Plan pursuant to such terms and conditions as the Committee may establish. An Award may be granted singly, in combination or in the alternative.         2.3 “Award Notice“ means a written notice from the Company to a Participant that sets forth the terms and conditions of an Award in addition to those established by this Plan and by the Committee’s exercise of its administrative powers.         2.4 “Board“ means the Board of Directors of the Company.         2.5 “Cause” means (i) the willful and continued failure by a Key Employee to substantially perform his duties with his employer after written warnings specifically identifying the lack of substantial performance are delivered to him by his employer, or (ii) the willful engaging by a Key Employee in illegal conduct which is materially and demonstrably injurious to the Company or a Subsidiary.         2.6 “Change in Control” shall be deemed to have occurred at such time as (i) any “person” within the meaning of Section 14(d) of the Exchange Act, other than the Company, a Subsidiary, or any employee benefit plan or plans sponsored by the Company or any Subsidiary, is or has become the “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of twenty percent (20%) or more of the combined voting power of the outstanding securities of the Company ordinarily having the right to vote at the election of directors, or (ii) approval by the stockholders of the Company 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 stock of the Company would be converted into cash, securities or other property, other than a consolidation or merger of the Company in which the common stockholders of the Company immediately prior to the consolidation or merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the consolidation or merger as immediately before, or (b) any consolidation or merger in which the Company is the continuing or surviving corporation but in which the common stockholders of the Company immediately prior to the consolidation or merger do not hold at least a majority of the outstanding common stock of the continuing or surviving corporation (except where such holders of Common Stock hold at least a majority of the common stock of the corporation which owns all of the common stock of the Company), or (c) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, or (iii) individuals who constitute the Board on February 17, 1993 (the “Incumbent Board”) have ceased for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to February 17, 1993 whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least three-quarters ( 3/4) of the directors comprising the Incumbent Board (either by specific vote or by approval of the proxy statement of the Company in which such person is named as nominee for director without objection to such nomination) shall be, for purposes of this Plan, considered as though such person were a member of the Incumbent Board.         2.7 “Change in Control Price” means, in respect of a Change in Control, the highest closing price per share paid for the purchase of Common Stock on the New York Stock Exchange, another national stock exchange or the National Association of Securities Dealers Automated Quotation System during the ninety (90) day period ending on the date the Change in Control occurs, and in respect of a Change in Ownership, the highest closing price per share paid for the purchase of Common Stock on the New York Stock Exchange, another national stock exchange or the National Association of Securities Dealers Automated Quotation System during the ninety (90) day period ending on the date the Change in Ownership occurs.         2.8 “Change in Ownership” means a change which results directly or indirectly in the Company’s Common Stock ceasing to be actively traded on a national securities exchange or the National Association of Securities Dealers Automated Quotation System.         2.9 “Code” means the Internal Revenue Code of 1986, as amended from time to time.         2.10 “Committee” means the Compensation Committee of the Board, or such other committee designated by the Board as authorized to administer the Plan. The Committee shall consist of not less than two (2) members of the Board, each of whom shall be a Disinterested Board Member. A Disinterested Board Member means a member who (a) is not a current employee of the Company or a Subsidiary, (b) is not a former employee of the Company or a Subsidiary who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year, (c) has not been an officer of the Company, (d) does not receive remuneration from the Company or a Subsidiary, either directly or indirectly, in any capacity other than as a director and (e) does not possess an interest in any other transaction, and is not engaged in a business relationship, for which disclosure would be required pursuant to Item 404(a) or (b) of Regulation S-K under the Securities Act of 1933, as amended. The term Disinterested Board Member shall be interpreted in such manner as shall be necessary to conform to the requirements of Section 162(m) of the Code and Rule 16b-3 promulgated under the Exchange Act.         2.11 “Common Stock” means the common stock of the Company.         2.12 “Company” means National Fuel Gas Company.         2.13 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.         2.14 “Fair Market Value” of a share of Common Stock on any date means the average of the high and low sales prices of a share of Common Stock as reflected in the report of consolidated trading of New York Stock Exchange-listed securities for that date (or, if no such shares were publicly traded on that date, the next preceding date that such shares were so traded) published in The Wall Street Journal or in any other publication selected by the Committee; provided, however, that if shares of Common Stock shall not have been publicly traded for more than ten (10) days immediately preceding such date, then the Fair Market Value of a share of Common Stock shall be determined by the Committee in such manner as it may deem appropriate.         2.15 “Good Reason” means a good faith determination made by a Participant that there has been any (i) material change by the Company of the Participant’s functions, duties or responsibilities which change could cause the Participant’s position with the Company to become of less dignity, responsibility, importance, prestige or scope, including, without limitation, the assignment to the Participant of duties and responsibilities inconsistent with his positions, (ii) assignment or reassignment by the Company of the Participant without the Participant’s consent, to another place of employment more than 30 miles from the Participant’s current place of employment, or (iii) reduction in the Participant’s total compensation or benefits or any component thereof, provided in each case that the Participant shall specify the event relied upon for such determination by written notice to the Board at any time within six months after the occurrence of such event.         2.16 “Key Employee” means an officer or other key employee of the Company or a Subsidiary as determined by the Committee.         2.17 “Participant” means any individual to whom an Award has been granted by the Committee under this Plan.         2.18 “Plan” means the National Fuel Gas Company 1993 Award and Option Plan.         2.19 “Pre-Split” and “Post-Split” means before and after giving effect to the two-for-one stock split of all shares outstanding at close of business August 24, 2001, to be effective on September 7, 2001.         2.20 “Restricted Stock” means an Award granted pursuant to paragraph 10 hereof.         2.21 “Subsidiary” means a corporation or other business entity in which the Company directly or indirectly has an ownership interest of eighty percent (80%) or more.         2.22 “Unit” means a bookkeeping entry used by the Company to record and account for the grant of the following Awards until such time as the Award is paid, cancelled, forfeited or terminated, as the case may be: Units of Common Stock, performance units, and performance shares which are expressed in terms of Units of Common Stock.      3. Administration         The Plan shall be administered by the Committee. The Committee shall have the authority to: (a) interpret the Plan; (b) establish such rules and regulations as it deems necessary for the proper administration of the Plan; (c) select Key Employees to receive Awards under the Plan; (d) determine the form of an Award, whether a stock option, stock appreciation right, Restricted Stock, performance unit, performance share, or other incentive award established by the Committee in accordance with (h) below, the number of shares or Units subject to the Award, all the terms and conditions of an Award, including the time and conditions of exercise or vesting; (e) determine whether Awards would be granted singly, in combination or in the alternative; (f) grant waivers of Plan terms and conditions, provided that any such waiver granted to an executive officer of the Company shall not be inconsistent with Section 16 of the Exchange Act and the rules promulgated thereunder; (g) accelerate the vesting, exercise or payment of any Award or the performance period of an Award when any such action would be in the best interest of the Company; (h) establish such other types of Awards, besides those specifically enumerated in paragraph 2.2 hereof, which the Committee determines are consistent with the Plan’s purposes; and (i) take any and all other action it deems advisable for the proper administration of the Plan. The Committee shall also have the authority to grant Awards in replacement of Awards previously granted under this Plan or any other executive compensation or stock option plan of the Company or a Subsidiary. All determinations of the Committee shall be made by a majority of its members, and its determinations shall be final, binding and conclusive. The Committee, in its discretion, may delegate its authority and duties under the Plan to the Chief Executive Officer or to other senior officers of the Company to the extent permitted by Section 16 of the Exchange Act and notwithstanding any other provision of this Plan or an Award Notice, under such conditions as the Committee may establish; provided, however, that only the Committee may select and grant Awards and render other decisions as to the timing, pricing and amount of Awards to Participants who are subject to Section 16 of the Exchange Act.      4. Eligibility         Any Key Employee is eligible to become a Participant of the Plan.      5. Shares Available         The maximum number of post-split shares of Common Stock, $1.00 par value, of the Company which shall be available for grant of Awards under the Plan (including incentive stock options) during its term shall not exceed 4,290,900; subject to adjustment as provided in paragraph 18. Awards covering no more than 650,000 post-split shares of Common Stock (subject to adjustment as provided in paragraph 18) may be granted to any Participant in any fiscal year of the Company. The 1,090,900 post-split shares made available by the Plan Amendment approved at the 2001 Special Meeting of Shareholders will be available only for Awards of stock options. Any shares of Common Stock related to Awards which terminate by expiration, forfeiture, cancellation or otherwise without the issuance of such shares, are settled in cash in lieu of Common Stock, or are exchanged with the Committee's permission for Awards not involving Common Stock, shall be available again for grant under the Plan, provided, however, that if dividends or dividend equivalents pursuant to paragraph 14, or other benefits of share ownership (not including the right to vote the shares) have been received by the Participant in respect of an Award prior to such termination, settlement or exchange, the shares which were the subject of the Award shall not again be available for grant under the Plan. Further, any shares of Common Stock which are used by a Participant for the full or partial payment to the Company of the purchase price of shares of Common Stock upon exercise of a stock option, or for any withholding taxes due as a result of such exercise, shall again be available for Awards under the Plan. Similarly, shares of Common Stock with respect to which an Alternative SAR has been exercised and paid in cash shall again be available for grant under the Plan. Shares to which independent or combination SARs relate shall not count against the 4,290,900 post-split limit set forth in this paragraph 5. The shares of Common Stock available for issuance under the Plan may be authorized and unissued shares or treasury shares. The number of shares of Common Stock issued under this Plan on or before August 24, 2001 was doubled pursuant to the two-for-one stock split effective September 7, 2001. The additional shares issued under this Plan as a result of that stock split count against the 4,290,900 shares of post-split stock available as set forth in this paragraph 5 for grant of Awards under this Plan.      6. Term         The Plan shall become effective as of February 18, 1993, subject to its approval by the Company’s stockholders at the 1993 Annual Meeting of Stockholders and subject to the approval of the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935, as amended. No Awards shall be exercisable or payable before these approvals of the Plan have been obtained. Awards shall not be granted pursuant to the Plan after February 17, 2003; provided, however, that incentive stock options shall not be granted pursuant to the Plan after December 9, 2002.      7. Participation         The Committee shall select Participants, determine the type of Awards to be made, and establish in the related Award Notices the applicable terms and conditions of the Awards in addition to those set forth in this Plan and the administrative rules issued by the Committee.      8. Stock Options         (a) Grants. Awards may be granted in the form of stock options. These stock options may be incentive stock options within the meaning of Section 422 of the Code or non-qualified stock options (i.e., stock options which are not incentive stock options), or a combination of both.         (b) Terms and Conditions of Options. Unless the Award Notice provides otherwise, an option shall be exercisable in whole or in part. The price at which Common Stock may be purchased upon exercise of a stock option shall be established by the Committee, but such price shall not be less than the Fair Market Value of the Common Stock on the date of the stock option’s grant. An Award Notice evidencing a stock option may, in the discretion of the Committee, provide that a Participant who pays the option price of a stock option by an exchange of shares of Common Stock previously owned by the Participant shall automatically be issued a new stock option to purchase additional shares of Common Stock equal to the number of shares of Common Stock so exchanged. Such new stock option shall have an option price equal to the Fair Market Value of the Common Stock on the date such new stock option is issued and shall be subject to such other terms and conditions as the Committee deems appropriate. Unless the Award Notice provides otherwise, each incentive stock option shall first become exercisable on the first anniversary of its date of grant, and each non-qualified stock option shall first become exercisable on the first anniversary of its date of grant, or, if earlier (i) on the date of the Participant’s death occurring after the date of grant, (ii) six months after the date of grant, if the Participant has voluntarily resigned on or after his 60th birthday, after the date of grant, and before such six months, or (iii) on the date of the Participant’s voluntary resignation on or after his 60th birthday and at least six months after the date of grant. Unless the Award Notice provides otherwise, each non-qualified stock option shall expire on the day after the tenth anniversary of its date of grant, and incentive stock options and non-qualified stock options granted in combination may be exercised separately.         (c) Restrictions Relating to Incentive Stock Options. Stock options issued in the form of incentive stock options shall, in addition to being subject to all applicable terms and conditions established by the Committee, comply with Section 422 of the Code. Accordingly, the aggregate Fair Market Value (determined at the time the option was granted) of the Common Stock with respect to which incentive stock options are exercisable for the first time by a Participant during any calendar year (under this Plan or any other plan of the Company or any of its Subsidiaries) shall not exceed $100,000 (or such other limit as may be required by the Code). Unless the Award Notice provides a shorter period, each incentive stock option shall expire on the tenth anniversary of its date of grant. The number of post-split shares of Common Stock that shall be available for incentive stock options granted under the Plan is 4,290,900.         (d) Exercise of Option. Upon exercise, the option price of a stock option may be paid in cash, shares of Common Stock, shares of Restricted Stock, a combination of the foregoing, or such other consideration as the Committee may deem appropriate. The Committee shall establish appropriate methods for accepting Common Stock, whether restricted or unrestricted, and may impose such conditions as it deems appropriate on the use of such Common Stock to exercise a stock option. The Committee, in its sole discretion, may establish procedures whereby a Participant to the extent permitted by and subject to the requirements of Rule 16b-3 under the Exchange Act, Regulation T issued by the Board of Governors of the Federal Reserve System pursuant to the Exchange Act, federal income tax laws, and other federal, state and local tax and securities laws, can exercise an option or a portion thereof without making a direct payment of the option price to the Company. If the Committee so elects to establish a cashless exercise program, the Committee shall determine, in its sole discretion and from time to time, such administrative procedures and policies as it deems appropriate. Such procedures and policies shall be binding on any Participant wishing to utilize the cashless exercise program.      9. Stock Appreciation Rights         (a) Grants and Valuation. Awards may be granted in the form of stock appreciation rights (“SARs”) until June 15, 2001. SARs may be granted singly (“Independent SARs”), in combination with all or a portion of a related stock option under the Plan (“Combination SARs”), or in the alternative (“Alternative SARs”). Combination or Alternative SARs may be granted either at the time of the grant of related stock options or at any time thereafter during the term of the stock options. Combination SARs shall be subject to paragraph 9(b) hereof. Alternative SARs shall be subject to paragraph 9(c) hereof. Independent SARs shall be subject to paragraph 9(d) hereof. Unless this Plan or the Award Notice provides otherwise, SARs shall entitle the recipient to receive a payment equal to the appreciation in the Fair Market Value of a stated number of shares of Common Stock from the award date to the date of exercise. In the case of SARs granted in combination with, or in the alternative to, stock options granted prior to the grant of such SARs, the appreciation in value is from the option price of such related stock option to the Fair Market Value on the date of exercise. Unless this Plan or the Award Notice provides otherwise, SARs granted in conjunction with stock options shall be Combination SARs, and all SARs shall be exercisable between one year and ten years and one day after the date of their award.         (b) Terms and Conditions of Combination SARs. Both the stock options granted in conjunction with Combination SARs and the Combination SARs may be exercised. Combination SARs shall be exercisable only to the extent the related stock option is exercisable, and the base from which the value of the Combination SARs is measured at its exercise shall be the option price of the related stock option. Combination SARs may be exercised either together with the related stock option or separately. If a Participant exercises a Combination SAR or related stock option, but not both, the other shall remain outstanding and shall remain exercisable during the entire exercise period.         (c) Terms and Conditions of Alternative SARs. Either the stock options granted in the alternative to Alternative SARs or the Alternative SARs may be exercised, but not both. Alternative SARs shall be exercisable only to the extent that the related stock option is exercisable, and the base from which the value of the Alternative SARs is measured at its exercise shall be the option price of the related stock option. If related stock options are exercised as to some or all of the shares covered by the Award, the related Alternative SARs shall be cancelled automatically to the extent of the number of shares covered by the stock option exercise. Upon exercise of Alternative SARs as to some or all of the shares covered by the Award, the related stock option shall be cancelled automatically to the extent of the number of shares covered by such exercise, and such shares shall again be eligible for grant in accordance with paragraph 5 hereof.         (d) Terms and Conditions of Independent SARs. Independent SARs shall be exercisable in whole or in such installments and at such time as may be determined by the Committee. The base price from which the value of an Independent SAR is measured shall also be determined by the Committee; provided, however, that such price shall not be less than the Fair Market Value of the Common Stock on the date of the grant of the Independent SAR.         (e) Deemed Exercise. The Committee may provide that an SAR shall be deemed to be exercised at the close of business on the scheduled expiration date of such SAR, if at such time the SAR by its terms remains exercisable and, if so exercised, would result in a payment to the holder of such SAR.         (f) Conversion of SARs to Non-Qualified Stock Options. Each unexercised SAR shall be convertible to a non-qualified option to purchase one share of Common Stock, at the option of the Committee and with the consent of the Participant to whom that SAR was awarded (or his successor or assignee). Notwithstanding paragraph 8(b), such an option will have the same exercise price and expiration date as did the converted SAR, and will have the same other terms and conditions as the other non-qualified stock options issued to the same Participant and on the same day as the converted SAR. A share issued upon exercise of such an option will count against the 4,290,900 post-split shares available under paragraph 5. For purposes of the limit set forth in paragraph 5 that Awards covering no more than 650,000 post-split shares of Common Stock may be granted to a Participant in a fiscal year, the conversion of a SAR into an option in accordance with this paragraph 9(f) will not count as an Award granted in the fiscal year in which the conversion takes place.      10. Restricted Stock         (a) Grants. Awards may be granted in the form of Restricted Stock. Shares of Restricted Stock shall be awarded in such amounts and at such times during the term of the Plan as the Committee shall determine.         (b) Award Restrictions. Restricted Stock shall be subject to such terms and conditions as the Committee deems appropriate, including restrictions on transferability and continued employment. No more than 50,000 restricted pre-split shares may be issued in a single fiscal year. The Committee may modify or accelerate the delivery of shares of Restricted Stock under such circumstances as it deems appropriate.         (c) Rights as Stockholders. During the period in which any shares of Restricted Stock are subject to the restrictions imposed under paragraph 10(b), the Committee may, in its discretion, grant to the Participant to whom shares of Restricted Stock have been awarded all or any of the rights of a stockholder with respect to such shares, including, but not by way of limitation, the right to vote such shares and to receive dividends.         (d) Evidence of Award. Any shares of Restricted Stock granted under the Plan may be evidenced in such manner as the Committee deems appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates.      11. Performance Units         (a) Grants. Awards may be granted in the form of performance units. Performance units shall refer to the Units valued by reference to designated criteria established by the Committee, other than Units which are expressed in terms of Common Stock.         (b) Performance or Service Criteria. Performance units shall be contingent on the attainment during a performance period of certain performance and/or service objectives. The length of the performance period, the performance or service objectives to be achieved, and the extent to which such objectives have been attained shall be conclusively determined by the Committee in the exercise of its absolute discretion. Performance and service objectives may be revised by the Committee during the performance period, in order to take into consideration any unforeseen events or changes in circumstances.      12. Performance Shares         (a) Grants. Awards may be granted in the form of performance shares. Performance shares shall refer to shares of Common Stock or Units which are expressed in terms of Common Stock, including shares of phantom stock.         (b) Performance or Service Criteria. Performance shares shall be contingent upon the attainment during a performance period of certain performance or service objectives. The length of the performance period, the performance or service objectives to be achieved, and the extent to which such objectives have been attained shall be conclusively determined by the Committee in the exercise of its absolute discretion. Performance and service objectives may be revised by the Committee during the performance period, in order to take into consideration any unforeseen events or changes in circumstances.      13. Payment of Awards         At the discretion of the Committee, payment of Awards may be made in cash, Common Stock, a combination of cash and Common Stock, or any other form of property as the Committee shall determine.      14. Dividends and Dividend Equivalents         If an Award is granted in the form of Restricted Stock, stock options, or performance shares, or in the form of any other stock-based grant, the Committee may, at any time up to the time of payment, include as part of an Award an entitlement to receive dividends or dividend equivalents, subject to such terms and conditions as the Committee may establish. Dividends and dividend equivalents shall be paid in such form and manner (i.e., lump sum or installments), and at such time as the Committee shall determine. All dividends or dividend equivalents which are not paid currently may, at the Committee’s discretion, accrue interest, be reinvested into additional shares of Common Stock or, in the case of dividends or dividend equivalents credited in connection with performance shares, be credited as additional performance shares and paid to the Participant if and when, and to the extent that, payment is made pursuant to such Award.      15. Deferral of Awards         At the discretion of the Committee, the receipt of the payment of shares of Restricted Stock, performance shares, performance units, dividends, dividend equivalents, or any portion thereof, may be deferred by a Participant until such time as the Committee may establish. All such deferrals shall be accomplished by the delivery of a written, irrevocable election by the Participant prior to such time payment would otherwise be made, on a form provided by the Company. Further, all deferrals shall be made in accordance with administrative guidelines established by the Committee to ensure that such deferrals comply with all applicable requirements of the Code and its regulations. Deferred payments shall be paid in a lump sum or installments, as determined by the Committee. The Committee may also credit interest, at such rates to be determined by the Committee, on cash payments that are deferred and credit dividends or dividend equivalents on deferred payments denominated in the form of Common Stock.      16. Termination of Employment         (a) General Rule. Subject to paragraph 20, if a Participant’s employment with the Company or a Subsidiary terminates for a reason other than death, disability, retirement, or any approved reason, all unexercised, unearned or unpaid. Awards shall be cancelled or forfeited as the case may be, unless otherwise provided in this paragraph or in the Participant’s Award Notice. The Committee shall have the authority to promulgate rules and regulations to (i) determine what events constitute disability, retirement, or termination for an approved reason for purposes of the Plan, and (ii) determine the treatment of a Participant under the Plan in the event of his death, disability, retirement, or termination for an approved reason.         (b) Incentive Stock Options. Unless the Award Notice provides otherwise, any incentive stock option which has not theretofore expired, shall terminate upon termination of the Participant’s employment with the Company whether by death or otherwise, and no shares of Common Stock may thereafter be purchased pursuant to such incentive stock option, except that:                 (i) Upon termination of employment (other than by death), a Participant may, within three months after the date of termination of employment, purchase all or part of any shares of Common Stock which the Participant was entitled to purchase under such incentive stock option on the date of termination of employment.                 (ii) Upon the death of any Participant while employed with the Company or within the three-month period referred to in paragraph 16(b)(i) above, the Participant’s estate or the person to whom the Participant’s rights under the incentive stock option are transferred by will or the laws of descent and distribution may, within one year after the date of the Participant’s death, purchase all or part of any shares of Common Stock which the Participant was entitled to purchase under such incentive stock option on the date of death.                 Notwithstanding anything in this paragraph 16(b) to the contrary, the Committee may at any time within the three-month period after the date of termination of a Participant’s employment, with the consent of the Participant, the Participant’s estate or the person to whom the Participant’s rights under the incentive stock options are transferred by will or the laws of descent and distribution, extend the period for exercise of the Participant’s incentive stock options to any date not later than the date on which such incentive stock options would have otherwise expired absent such termination of employment. Nothing in this paragraph 16(b) shall authorize the exercise of an incentive stock option after the expiration of the exercise period therein provided, nor later than ten years after the date of grant.         (c) Non-Qualified Stock Options. Unless the Award Notice provides otherwise, any non-qualified stock option which has not theretofore expired shall terminate upon termination of the Participant’s employment with the Company, and no shares of Common Stock may thereafter be purchased pursuant to such non-qualified stock option, except that:                 (i) Upon termination of employment for any reason other than death, discharge by the Company for cause, or voluntary resignation of the Participant prior to age 60, a Participant may, within five years after the date of termination of employment, exercise all or part of the non-qualified stock option which the Participant was entitled to exercise on the date of termination of employment or subsequently becomes eligible to exercise pursuant to paragraph 8(b) above.                 (ii) Upon the death of a Participant while employed with the Company or within the period referred to in paragraph 16(c)(i) above, the Participant’s estate or the person to whom the Participant’s rights under the non-qualified stock option are transferred by will or the laws of descent and distribution may, within five years after the date of the Participant’s death while employed, or within the period referred to in paragraph 16(c)(i) above, exercise all or part of the non-qualified stock option which the Participant was entitled to exercise on the date of death.                 Nothing in this paragraph 16(c) shall authorize the exercise of a non-qualified stock option later than the exercise period set forth in the Award Notice.      17. Nonassignability         No Award under the Plan shall be subject in any manner to alienation, anticipation, sale, transfer (except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order), assignment, pledge or encumbrance, except that all awards of nonqualified stock options or SAR’s shall be transferable without consideration, subject to all the terms and conditions to which such nonqualified stock options or SARs are otherwise subject, to (i) members of a Participant’s immediate family as defined in Rule 16a-1 promulgated under the Exchange Act, or any successor rule or regulation, (ii) trusts for the exclusive benefit of the Participant or such immediate family members or (iii) entities which are wholly-owned by the Participant or such immediate family members, provided that (x) there may be no consideration for any such transfer, and (y) subsequent transfers of transferred options shall be prohibited except those by will or the laws of descent and distribution. Following transfer, any such options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, and except as provided in the next sentence, the term “Participant” shall be deemed to refer to the transferee. The events of termination of employment under Section 16(c) hereof shall continue to be applied with reference to the original Participant and following the termination of employment of the original Participant, the options shall be exercisable by the transferee only to the extent, and for the periods specified in Section 16(c), that the original Participant could have exercised such option. Except as expressly permitted by this paragraph, an Award shall be exercisable during the Participant’s lifetime only by him.      18. Adjustment of Shares Available         (a) Changes in Stock. In the event of changes in the Common Stock by reason of a Common Stock dividend or stock split-up or combination, appropriate adjustment shall be made by the Committee in the aggregate number of shares available under the Plan and the number of shares, SARs, performance shares, Common Stock units and other stock-based interests subject to outstanding Awards, without, in the case of stock options, change in the aggregate purchase price to be paid therefor. Such proper adjustment as may be deemed equitable may be made by the Committee in its discretion to give effect to any other change affecting the Common Stock.         (b) Changes in Capitalization. In case of a merger or consolidation of the Company with another corporation, a reorganization of the Company, a reclassification of the Common Stock of the Company, a spin-off of a significant asset, or other changes in the capitalization of the Company, appropriate provision shall be made for the protection and continuation of any outstanding Awards by either (i) the substitution, on an equitable basis, of appropriate stock or other securities or other consideration to which holders of Common Stock of the Company will be entitled pursuant to such transaction or succession of transactions, or (ii) by appropriate adjustment in the number of shares issuable pursuant to the Plan, the number of shares covered by outstanding Awards, the option price of outstanding stock options, the exercise price of outstanding SARs, the performance or service criteria or performance period of outstanding performance units, and the performance or service criteria or performance period of outstanding performance shares, as deemed appropriate by the Committee.      19. Withholding Taxes         The Company shall be entitled to deduct from any payment under the Plan, regardless of the form of such payment, the amount of all applicable income and employment taxes required by law to be withheld with respect to such payment or may require the participant to pay to it such tax prior to and as a condition of the making of such payment. A Participant may pay the amount of taxes required by law to be withheld from an Award by requesting that the Company withhold from any payment of Common Stock due as a result of such Award, or by delivering to the Company, shares of Common Stock having a Fair Market Value less than or equal to the amount of such required withholding taxes.      20. Noncompetition Provision         Notwithstanding anything contained in this Plan to the contrary, unless the Award Notice specifies otherwise, a Participant shall forfeit all unexercised, unearned, and/or unpaid Awards, including Awards earned but not yet paid, all unpaid dividends and dividend equivalents, and all interest, if any, accrued on the foregoing if, (i) in the opinion of the Committee, the Participant, without the written consent of the Company, engages directly or indirectly in any manner or capacity as principal, agent, partner, officer, director, employee, or otherwise, in any business or activity competitive with the business conducted by the Company or any Subsidiary; or (ii) the Participant performs any act or engages in any activity which in the opinion of the Committee is inimical to the best interests of the Company. In addition, the Committee may, in its discretion, condition the deferral of any Award, dividend, or dividend equivalent under paragraph 15 hereof on a Participant’s compliance with the terms of this paragraph 20, and cause such a Participant to forfeit any payment which is so deferred if the Participant fails to comply with the terms hereof.      21. Amendments to Awards         The Committee may at any time unilaterally amend any unexercised, unearned, or unpaid Award, including Awards earned but not yet paid, to the extent it deems appropriate; provided, however, that any such amendment which is adverse to the Participant shall require the Participant’s consent.      22. Regulatory Approvals and Listings         Notwithstanding anything contained in this Plan to the contrary, the Company shall have no obligation to issue or deliver certificates of Common Stock evidencing Awards resulting in the payment of Common Stock prior to (a) the obtaining of any approval from any governmental agency which the Company shall, in its sole discretion, determine to be necessary or advisable, (b) the admission of such shares to listing on the stock exchange on which the Common Stock may be listed, and (c) the completion of any registration or other qualification of said shares under any state or federal law or ruling of any governmental body which the Company shall, in its sole discretion, determine to be necessary or advisable.      23. No Right to Continued Employment or Grants         Participation in the Plan shall not give any Key Employee any right to remain in the employ of the Company or any Subsidiary. The Company or, in the case of employment with a Subsidiary, the Subsidiary, reserves the right to terminate any Key Employee at any time. Further, the adoption of this Plan shall not be deemed to give any person any right to be selected as a Participant or to be granted an Award.      24. Amendment         The Board may suspend or terminate the Plan at any time. In addition, the Board may, from time to time, amend the Plan in any manner, provided, however, that any such amendment may be subject to stockholder approval (i) at the discretion of the Board and (ii) to the extent that shareholder approval may be required by law, including, but not limited to, the requirements of Rule 16b-3 under the Exchange Act, or any successor rule or regulation.      25. Change in Control and Change in Ownership         (a) Background. All Participants shall be eligible for the treatment afforded by this paragraph 25 if there is a Change in Ownership or if their employment terminates within two years following a Change in Control, unless the termination is due to (i) death; (ii) disability entitling the Participant to benefits under his employer’s long-term disability plan; (iii) Cause; (iv) resignation by the Participant other than for Good Reason; or (v) retirement entitling the Participant to benefits under his employer’s retirement plan.         (b) Vesting and Lapse of Restrictions. If a Participant is eligible for treatment under this paragraph 25, (i) all of the terms and conditions in effect on any unexercised, unearned, unpaid or deferred Awards shall immediately lapse as of the Acceleration Date; (ii) no other terms or conditions shall be imposed upon any Awards on or after such date, and in no event shall any Award be forfeited on or after such date; and (iii) all of his unexercised, unvested, unearned and/or unpaid Awards or any other outstanding Awards shall automatically become one hundred percent (100%) vested immediately upon such date.         (c) Dividends and Dividend Equivalents. If a Participant is eligible for treatment under this paragraph 25, all unpaid dividends and dividend equivalents and all interest accrued thereon, if any, shall be treated and paid under this paragraph 25 in the identical manner and time as the Award under which such dividends or dividend equivalents have been credited. For example, if upon a Change in Ownership, an Award under this paragraph 25 is to be paid in a prorated fashion, all unpaid dividends and dividend equivalents with respect to such Award shall be paid according to the same formula used to determine the amount of such prorated Award.         (d) Treatment of Performance Units and Performance Shares. If a Participant holding either performance units or performance shares is eligible for treatment under this paragraph 25, the provisions of this paragraph (d) shall determine the manner in which such performance units and/or performance shares shall be paid to him. For purposes of making such payment, each “current performance period” (defined to mean a performance period or term of a performance unit or performance share which period or term has commenced but not yet ended), shall be treated as terminating upon the Acceleration Date, and for each such “current performance period” and each “completed performance period” (defined to mean a performance period or term of a performance unit or performance share which has ended but for which the Committee has not, on the Acceleration Date, made a determination as to whether and to what degree the performance or service objectives for such period have been attained), it shall be assumed that the performance or service objectives have been attained at a level of one hundred percent (100%) or the equivalent thereof. If the Participant is participating in one or more “current performance periods,” he shall be considered to have earned and, therefore, to be entitled to receive, a prorated portion of the Awards previously granted to him for each such performance period. Such prorated portion shall be determined by multiplying the number of performance shares or performance units, as the case may be, granted to the Participant by a fraction, the numerator of which is the total number of whole and partial years (with each partial year being treated as a whole year) that have elapsed since the beginning of the performance period, and the denominator of which is the total number of years in such performance period. A Participant in one or more “completed performance periods” shall be considered to have earned and, therefore, be entitled to receive all the performance shares and performance units previously granted to him during each performance period.         (e) Valuation of Awards. If a Participant is eligible for treatment under this paragraph 25, his Awards (including those earned as a result of the application of paragraph 25(d) above) shall be valued and cashed out on the basis of the Change in Control Price.         (f) Payment of Awards. If a Participant is eligible for treatment under this paragraph 25, whether or not he is still employed by the Company or a Subsidiary, he shall be paid, in a single lump sum cash payment, as soon as practicable but in no event later than 90 days after the Acceleration Date, for all outstanding Units of Common Stock, Independent and Combination SARs, stock options (including incentive stock options), performance units (including those earned as a result of the application of paragraph 25(d) above), and performance shares (including those earned as a result of paragraph 25(d) above), and all other outstanding Awards, including those granted by the Committee pursuant to its authority under paragraph 3(h) hereof.         (g) Deferred Awards. If a Participant is eligible for treatment under this paragraph 25, all deferred Awards for which payment has not been received as of the Acceleration Date shall be paid in a single lump sum cash payment as soon as practicable, but in no event later than 90 days after such date. For purposes of making such payment, the value of all Awards which are stock-based shall be determined by the Change in Control Price.         (h) Miscellaneous. Upon a Change in Control or a Change in Ownership, (i) the provisions of paragraphs 16, 20 and 21 hereof shall become null and void and of no force and effect insofar as they apply to a Participant who has been terminated under the conditions described in (a) above; and (ii) no action shall be taken which would affect the rights of any Participant or the operation of the Plan with respect to any Award to which the Participant may have become entitled hereunder on or prior to the date of the Change in Control or Change in Ownership or to which he may become entitled as a result of such Change in Control or Change in Ownership.         (i) Legal Fees. The Company shall pay all legal fees and related expenses incurred by a Participant in seeking to obtain or enforce any payment, benefit or right he may be entitled to under the Plan after a Change in Control or Change in Ownership; provided, however, the Participant shall be required to repay any such amounts to the Company to the extent a court of competent jurisdiction issues a final and non-appealable order setting forth the determination that the position taken by the Participant was frivolous or advanced in bad faith.      26. No Right, Title or Interest in Company Assets         No Participant shall have any rights as a stockholder as a result of participation in the Plan until the date of issuance of a stock certificate in his name, and, in the case of Restricted Stock, stock options, performance shares or any other stock-based grant, such rights are granted to the Participant under paragraph 10(c) hereof. To the extent any person acquires a right to receive payments from the Company under this Plan, such rights shall be no greater than the rights of an unsecured creditor of the Company.

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.13.1 CONFIDENTIAL TREATMENT REQUESTED [*] Redacted Information Amendment No. 2 to OEM Purchase and License Agreement between McDATA and EMC     This Amendment No. 2 (the "Amendment") to the OEM Purchase and License Agreement (the "OEM Agreement") dated May 19, 2000 by and between McDATA Corporation ("McDATA"), 310 Interlocken Parkway, Broomfield, Colorado 80021-3464, and EMC Corporation, 171 South Street, Hopkinton, Massachusetts 01748 ("EMC"), is made this 21th day of June 2001 by and between McDATA and EMC and commences on the date accepted and executed by McDATA ("Effective Date").     WHEREAS, the parties wish to amend the OEM Agreement so as to 1) define the process for Forecasts, Purchase Orders and Delivery and 2) add new Products and pricing. Agreement     NOW THEREFORE, in consideration of the above and the other respective promises of the parties set forth herein, the parties hereto agree as follows:     1. The following definitions are hereby added to Section 1, Definitions, of the Agreement.     1.15 "Days" means calendar days unless otherwise noted.     1.16 "EMC Unique Parts" shall mean parts procured solely for incorporation into EMC Products and not used on other McDATA products and are non-cancelable/non-returnable with the original part manufacturer.     1.17 "EMC Approved Long Lead-Time Materials" means material listed in Exhibit A-4 which McDATA procures to support EMC's forecast and upside requirements according to Sections 7.1A, 7.3.1A and 7.3.2A.     1.18 "Original Purchase Order" or "Original PO" means the unamended purchase order issued by EMC Franklin by the [*] and the first unamended purchase orders issued by EMC's manufacturing operations in Cork and Apex in each Calendar quarter.     2. Section 7 of the OEM Agreement remains in full force and effect for the ED-5000 (also known as the ED-1032) Products listed on Exhibit A, Figure A-1. The following Section 7.0A, Forecasts, Purchase Orders Terms and Conditions and Delivery for Products listed in Exhibit A, Figures A-2 and A-3 is hereby added to the Agreement.     7.0A FORECASTS, PURCHASE ORDERS, TERMS AND CONDITIONS AND DELIVERY     7.1A Forecasts. EMC agrees to use [*] to provide McDATA with good faith monthly rolling forecasts for [*] of EMC's estimated Product(s) and Spare(s) purchase requirements. EMC's forecasts are for planning purposes only. EMC is under no obligation to purchase forecasted quantities and if EMC fails to purchase any forecasted quantities, EMC shall have no liability of any kind (except as detailed in this Amendment ) nor incur any penalties or retroactive price increases unless otherwise agreed to by EMC in writing. Accordingly, any commitments to buy are only valid upon EMC's issuance of purchase orders as defined in Section 7.2A below and as detailed in this Agreement. McDATA shall use [*] to establish a supply line that results in sufficient material being available at the beginning of each month to support EMC's monthly forecast and McDATA shall use the efforts set forth in Section 7.3.2A to support the upside supply requirements detailed in Section 7.3.2A of this 26 -------------------------------------------------------------------------------- Agreement. McDATA shall respond in writing within [*] of receipt of EMC's forecast if it cannot support the requested quantities.     7.2A Purchase Orders. EMC shall submit a binding, written purchase order for all Product(s) and Spare(s) ordered from McDATA. EMC may transmit purchase orders by facsimile. Purchase orders shall specify EMC's part numbers, Product(s) and/or Spare(s) model numbers, quantity ordered, shipping destination, carrier, and delivery dates, which dates shall be no more than [*] from the date of the purchase order. McDATA shall acknowledge in writing to EMC its receipt of such purchase order within [*] and acceptance or rejection of such purchase order within [*] of McDATA's receipt of each purchase order. For EMC purchase orders for quantities of Product(s) within EMC's forecasts, McDATA shall accept such purchase orders at lead-time, provided such purchase orders comply with the terms of this Agreement. If within [*] from McDATA's receipt of a purchase order EMC does not receive written notice from McDATA rejecting the purchase order and specifying the reasons for such rejection, the purchase order shall be deemed accepted by McDATA. In the event of a conflict between the provisions of this Agreement and the terms and conditions of EMC's purchase order or McDATA's order acknowledgment, the provisions of this Agreement shall prevail. Any additional terms contained in EMC's purchase orders or McDATA's order acknowledgements shall not be binding unless accepted by the other party in writing.     7.2.1A Make Available Process (EMC Drop Shop Purchase Orders). EMC shall issue blanket purchase orders with scheduled [*] deliveries through lead-time. McDATA will manufacture Products to a semi-finished goods state if actual Final Configuration Releases are less than the purchase order quantity for the [*]. "Final Configuration Release" means the EMC document that specifies the final configuration of Products that McDATA shall ship in fulfillment of purchase orders. The cancellation and reschedule terms detailed in 7.3.3A and 7.3.4A shall apply to purchase order delivery dates. If Final Configuration Releases are less than the purchase order quantities, then McDATA will hold such semi-finished goods inventory until [*]. Prior to the end of each EMC fiscal quarter, EMC shall provide Final Configuration Releases for all Products in McDATA's inventory that were produced per EMC's purchase orders if EMC has not already issued Final Configuration Releases and EMC has not cancelled or rescheduled Products under the terms detailed below.     The lead-time for Final Configuration Releases on all purchase orders covered under this paragraph 7.2.1A will be [*] from the date EMC's Final Configuration Release is issued. In some cases, EMC may request delivery sooner than the [*] stated herein. In such cases, McDATA will make [*] to support these inside lead-time requests.     7.2.2A Change Orders to Ship Address. Except as provided above in Section 7.2.1A, EMC reserves the right to submit purchase change orders specifying changes to the ship to address stated on such purchase order. McDATA agrees to receive EMC's purchase change orders specifying changes in ship to address for any Product at any time prior to [*] from scheduled date of shipment, and provided all export documentation which is required to be supplied by EMC is available on a timely basis, McDATA agrees to accommodate such change order. In the event McDATA cannot satisfy any such change order to the ship to address without impacting scheduled delivery, it will apprise EMC of the possibility of delay and of the revised ship date within [*] of its receipt of such purchase change order such that EMC can manage the situation with its customer.     7.2.3A Late Shipment. In the event EMC has submitted a purchase order for Products or Spares in accordance with the terms hereof, and McDATA fails to ship or ships late such Products or Spares, or partial shipments thereof, EMC may cancel or reschedule such purchase order, or portion thereof, [*].     7.3A Lead-time, Upside Support Supply, Rescheduling and Cancellation.     7.3.1A Lead-time. Lead-time for all Purchase Orders covered under this Agreement will be [*]. In some cases, EMC may request delivery sooner than the [*] lead-time stated herein. In such cases, 27 -------------------------------------------------------------------------------- McDATA will make [*] effort to support these inside lead-time requests and will notify EMC in writing of any pass through expediting costs relating thereto. McDATA shall not proceed with such inside lead time request until the parties mutually agree in writing that EMC will pay for such pass through expediting costs.     7.3.2A Upside Support Supply. McDATA agrees to manage its supply chain to meet the upside quantity commitment(s) stated below. McDATA will confirm commitment to support upside requirements for EMC within [*] of receipt of EMC's written request for such upside quantities as provided to McDATA by a supporting purchase order or purchase change order stating supplemental upside quantities, delivery dates and reference to the Original Purchase Order. Number of days prior to Original PO delivery date --------------------------------------------------------------------------------   McDATA upside quantity commitment -------------------------------------------------------------------------------- [*] days   [*] [*] days   [*] [*] days   [*] Beyond PO Delivery Date   McDATA agrees to use [*] to support an [*] upside quantity over current forecasted quantities; EMC and McDATA will mutually agree in writing to upside supply commitments at the time of EMC's request     7.3.3A Rescheduling. EMC shall have the right and ability to reschedule a purchase order an [*] within a quarter as long as the total quantity of each Product stated on the purchase order does not change within the quarter. Reschedules that reduce the quantity of each Product on the purchase order within the current quarter are restricted to the terms documented below. Request made X days before PO delivery date --------------------------------------------------------------------------------   Reschedule quantity allowed* -------------------------------------------------------------------------------- [*] days   [*] [*] days   [*] -------------------------------------------------------------------------------- *If any reschedule results in reductions to the PO quantities for the current quarter, then [*] no later than [*] after the end of the current quarter. Quantities which are rescheduled may not be subsequently cancelled.     7.3.4A Cancellation. EMC shall have the right to cancel delivery of any purchase order, that has not been rescheduled out of the previous quarter, by payment of the cancellation liability set forth below, without McDATA's consent, provided McDATA receives EMC's written notice prior to shipment. If no such notice is given and received, EMC is liable for the purchase orders. X days prior to PO delivery date --------------------------------------------------------------------------------   EMC's liability --------------------------------------------------------------------------------  [*] days   [*]   [*] days   [*]   [*] days   [*]   [*] days   [*]* *[*]         -------------------------------------------------------------------------------- Footnote: All material referenced in the cancellation section beyond [*] days is at McDATA's [*] as stated on McDATA's books as of the date of cancellation.     7.4A Quarterly Material Status Report. Prior to the end of the [*], McDATA shall provide EMC with an update to Exhibit A-4, Material Status Report. 28 --------------------------------------------------------------------------------     7.5A Purchase Order Numbers. Purchase order numbers shall be referenced on all correspondence, invoicing, and packing slips relating to each order.     7.6A Spares.     7.6.1A Spare Parts Orders. EMC has full responsibility for stocking Spares at levels sufficient to satisfy its Reseller and End User Customer requirements. Prices for Spares shall be those set forth on Figure A-5 of Exhibit A. As outlined in McDATA's Spares, Repair and Upgrade Catalog attached hereto as Figure A-5 of Exhibit A, Spares to support Products currently in production may be ordered from 8:00 to 5:00 MT in two ways: "Normal Spares" and "Emergency Spares". Subject to EMC providing McDATA a forecast for Spares, orders for Normal Spares shall be placed by EMC [*]. In the event EMC submits purchase orders for Normal Spares which are outside the then-current forecast, McDATA agrees to accommodate such changes and ship such Spares [*]. In the event EMC requires a shorter lead-time than [*], McDATA will use [*] to first satisfy such requirement [*]. If McDATA is unable to satisfy the shorter lead-time requirement for such Spares order from [*], McDATA shall satisfy such Spares order with Emergency Spares at prices stated in Figure A-5 of Exhibit A. McDATA shall use [*] to ship order for Emergency Spares within [*] after receipt of order. Spares to support discontinued Products shall be handled in accordance with the provisions of the applicable Product discontinuance notice.     7.6.2A Other Vendors. Nothing contained herein shall prohibit EMC from purchasing Spares or replacement parts from any other vendor, provided, however, that McDATA shall have no warranty responsibility with respect to such Spares purchased from other vendor. This Agreement does not grant EMC a license to purchase Spares that infringe any of McDATA's patent or other intellectual property rights. Except as to Product failures caused by defective Spares acquired from sources other than McDATA, the purchase and use by EMC of such Spares or expendables (fuses and diskettes) acquired from sources other than McDATA shall not affect McDATA's warranty responsibility for the affected Products.     7.7A Shipment/Delivery and Export/Import.     7.7.1A After appropriate export and import licenses are secured by McDATA, each item of Product sold hereunder will be shipped [*]. EMC may specify the type of conveyance and/or carrier for shipment. EMC shall also specify in writing, the location to which the Products are to be shipped.     7.7.2A As used in this Agreement, shipment and delivery are synonymous. For purposes of this Agreement, shipment and delivery occur upon delivery of Products by McDATA at McDATA's factory to the common carrier specified by EMC.     7.7.3A McDATA will provide the following information about its Product in writing within [*] of receiving a written request from EMC: i) country of origin; ii) NAFTA preference criteria (if applicable); iii) harmonized scheduled tariff classification number, and iv) export commerce control number ("ECCN"). Upon EMC's request, McDATA, at its expense, will prepare all international shipping documentation, including commercial invoice, NAFTA certificate, Shipper's Letter of Instruction, Shipper's Export Declaration and any other necessary documentation, for any international shipments of Product to be made by or on behalf of EMC, provided the Product can be shipped to the requested destination under a General License, validated license or other license under the U.S. Export Administration Regulations. If a validated or other specific prior license is required under the U.S. Export Administration Regulations, EMC shall, on McDATA's request, provide sufficient information concerning the destination and intended use for McDATA to obtain the export licenses and other export documentation required. McDATA shall not be required to ship any Product to any embargoed countries under the export control regulations of the United States. In addition, McDATA will identify in Exhibit H any countries to which Product may not be exported under any form of license under the 29 -------------------------------------------------------------------------------- U.S. Export Administration Regulations, and shall update such Exhibit on EMC's request. EMC shall not export or reexport any Product to any such country or countries.     7.7.4A Time and rate of delivery are of the essence of this Agreement. The delivery dates shall be those specified in each purchase order issued under this Agreement. Deliveries will be considered on time if they are shipped FOB McDATA's Dock no more than [*] earlier or [*] days later than the delivery date specified in the EMC purchase order. If EMC agrees to take partial delivery of any order, each such partial delivery shall be deemed a separate sale     7.7.5A If McDATA anticipates or becomes aware that it will not supply the Product on the delivery date acknowledged by McDATA, for any reason to include but not be limited to material shortage, process changes, capacity limitations or causes due to common carriers, McDATA shall notify EMC immediately after McDATA has knowledge of the situation. The notification may be communicated by facsimile, telephone, electronic mail or any other method agreed to by the parties, provided that McDATA shall use [*] to obtain EMC's actual acknowledgment of the notice of anticipated delay. McDATA and EMC will jointly develop alternatives to resolve any late delivery of the Product, including use of premium routing. McDATA will develop recovery plans with new committed shipment dates and communicate such plans to EMC [*]of missed shipments and provide written supply line delivery status and updates until resolved. If McDATA is unable to deliver the Product on the acknowledged delivery date, through no fault of EMC, EMC may require McDATA to pay the difference between premium routing rates and standard routing rates. In the event McDATA has an allocation situation, McDATA and EMC will agree on an allocation formula [*].     3. Section 8 of the Agreement is hereby amended and replaced by the following:     8. PRODUCTS. McDATA agrees to sell to EMC the Products listed in Figures A-1, A-2 and A-3 of Exhibit A of this Agreement, as it may be amended from time-to-time, at the prices specified in Figures A-1, A-2 and A-3 of Exhibit A, and under the terms specified in this Agreement, as amended from time-to-time. [*]     4. Section 8.5 of the Agreement is hereby amended and replaced by the following:     8.5 Product Discontinuance. McDATA reserves the right to discontinue Products by notifying EMC in writing [*] prior to the discontinuance date, subject to a mutually agreed upon end of life plan. Prior to such discontinuance date, EMC may place with McDATA a final, non-cancellable, binding purchase order for such discontinued Product. Such final, non-cancellable, binding purchase order may specify that the requested Products be shipped to EMC or EMC's Customers [*].     5. Section 1.1 of Exhibit A of the Agreement is hereby amended and replaced by the following:     1.1 EMC shall purchase Products from McDATA at the prices listed in the attached Figure A-1 (ED1032), A-2 (ED64), and A-3 (Shasta DS16/32).     6. Exhibit A, Figure A-1, ED5000 (also known as ED-1032) Pricing, and Figure A-2, Fuji Pricing are hereby amended and replaced with the attached Exhibit A, Figure A-1 and Exhibit A, Figure A-2 (deletes EC-1100 Cabinet and adds EC-1200 Cabinet).     7. The Agreement is hereby amended by adding the attached Exhibit A, Figure A-3, Shasta 16 and Shasta 32 Pricing. Such pricing shall be effective commencing [*].     8. The Agreement is hereby amended by adding the attached Exhibit A, Figure A-4, EMC Unique Parts and Long Lead-time Items.     9. The Agreement is hereby amended by adding the attached Exhibit A, Figure A-5, Spares Pricing. 30 --------------------------------------------------------------------------------     Except as provided in this Amendment No.2, all other provisions of the Agreement are still in full force and effect. This Amendment No.2 to the OEM Purchase and License Agreement shall not be effective until executed by EMC and accepted by an authorized representative of McDATA.     IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2 to OEM Purchase and License Agreement by their duly authorized representatives. Executed and agreed to:   Executed and agreed to: McDATA Corporation (McDATA)   EMC Corporation (EMC) By: /s/ John F. McDonnell   By: /s/ William Monagle Effective Date: June 21, 2001   Effective Date: June 21, 2001 31 -------------------------------------------------------------------------------- Figure A-1 Pricing (Q2 2001) [*] 32 -------------------------------------------------------------------------------- Figure A-2 FUJI PRICING 2Q2001 [*] 33 -------------------------------------------------------------------------------- Figure A-3 SHASTA PRICING 1Q200 and 2Q2001 [*] 34 -------------------------------------------------------------------------------- EXHIBIT A Figure A-4     McDATA will procure materials to support EMC's forecast and upside requirements according to the lead-time associated with each part plus an additional [*] to account for manufacturing time. EMC is responsible for the liabilities associated with such [*]as defined in the Agreement. [*]     Long-lead time materials are defined as those materials whose lead-times exceed [*]. The following table defines such EMC Approved Long-Lead Time Materials as defined in the Agreement. McDATA will provide [*] with an update [*] prior to the end of the [*] of all such EMC Approved Long-Lead Time Materials. 35 -------------------------------------------------------------------------------- EXHIBIT A Figure A-5 [*] 36 -------------------------------------------------------------------------------- QuickLinks Exhibit 10.13.1 CONFIDENTIAL TREATMENT REQUESTED [*] Redacted Information Amendment No. 2 to OEM Purchase and License Agreement between McDATA and EMC Agreement Figure A-1 Pricing (Q2 2001) [*] Figure A-2 Figure A-3 EXHIBIT A Figure A-4 EXHIBIT A Figure A-5

Excel Publishing, Inc. License Agreement THIS AGREEMENT is made and entered into this 8th day of October 2001, by and between, Excel Publishing, Inc., a Nevada corporation, with its principal place of business at Springville, Utah, hereinafter referred to as "Licensor" and Excel Publishers, Inc., a Utah corporation, with its principal place of business at Springville, Utah, hereinafter referred to as "Licensee". WHEREAS, the Licensor has expended time, effort, and money to develop and obtain expertise in the field of writing, marketing, and distributing a weekly financial newsletter and has successfully established market demand for the newsletter named Sector Fund Wealth Builder. The Licensor is the lawful owner of the Sector Fund Wealth Builder and believes the newsletter signifies a high standard of quality; and WHEREAS, the Licensee desires to write, market, and distribute the aforementioned newsletter established by the Licensor under the Sector Fund Wealth Builder name as hereinafter provided. IT IS THEREFORE AGREED between the parties as follows: 1. License. The Licensee shall have the exclusive U.S. rights to engage, under the terms hereof, in the business of writing, marketing, and distributing the newsletter under theSector Fund Wealth Builder name, as approved by Licensor. 2. Term of license. The term of this license shall commence from the date of this agreement and shall continue for six months and is renewable upon the mutual agreement of both parties. 3. Initial Funds to be paid. The Licensee shall pay to the Licensor, as the initial fee, the sum of Ten Thousand Dollars ( $10,000 ) in cash payable in full upon the execution of this agreement. 4. Reoccurring Funds to be paid. Licensee shall pay a royalty of Ten Percent (10%) of the monthly total revenues from subscription sales. Licensee agrees to pay on or before the tenth day of the month following the month of sale. 5. Territory. The Licensor shall not, while this Agreement is in effect, operate for itself or grant a license to write, market, or distribute in any way the Sector Fund Wealth Builder newsletter or name to any other entity in the United States for the length of this agreement. 6. Product liability. Licensor makes no representations regarding the ability of the Sector Fund Wealth Builder name, to perform any specific function other than as a newsletter. License agrees to indemnify and hold harmless Licensor from all claims. 7. Customer Service. Licensee shall provide customer service and assume responsibility for all stated or implied benefits accruing to all Sector Fund Wealth Builder customers past and present, including fulfillment of subscriptions, inquiries, complaints, charge-backs, and refunds. 8. Confidentiality. The Licensee and Licensor acknowledge the confidential nature of theSector Fund Wealth Builder strategies or information, and neither Licensee or Licensor may disclose to anyone any Sector Fund Wealth Builder strategies or information without the mutual consent of both parties. 9. Reporting Requirements. The Licensee shall submit to the Licensor, such financial and operating information as requested by the Licensor. The Licensor shall not release such information without the prior written approval from the licensee. 10. Vendors accounts. Licensee shall establish vendor accounts, merchant accounts, and subcontractors agreements in its own name. Licensor shall terminate vendor accounts, merchant accounts, and subcontractor agreements established in its name. Licensee may not establish or conduct business under the name of the Licensor or obligate the Licensor in any way. 11. Termination. a. In the event of any failure by the Licensee to pay the royalty payment owed to the Licensor, the Agreement may be terminated by Licensor. b. In the event the Licensor markets the Sector Fund Wealth Builder newsletter itself or through a contractor within the United States the Agreement may be terminated by Licensee. 12. Complete agreement. This agreement contains the entire agreement of the parties, and no representations, inducements, promises, or agreements, oral or otherwise, between the parties not embodied herein shall be of any force or effect. 13. Governing law. This agreement, and all transactions contemplated hereby, shall be governed by, construed and enforced in accordance with the laws of the State of Utah. _/s/ Steven L. White For Excel Publishing, Inc., Steven L. White, President, Licensor _/s/ Anthony Ramon For Excel Publishers, Inc., Anthony Ramon, President, Licensee

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.1 SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT     THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT ("Second Amendment") is made and entered into as of the 16th day of May, 2001, by and among HARVEYS CASINO RESORTS, a Nevada corporation, HARVEYS C.C. MANAGEMENT COMPANY, INC., a Nevada corporation, HARVEYS IOWA MANAGEMENT COMPANY, INC., a Nevada corporation, HARVEYS TAHOE MANAGEMENT COMPANY, INC., a Nevada corporation, HBR REALTY COMPANY, INC., a Nevada corporation, HARVEYS BR MANAGEMENT COMPANY, INC., a Nevada corporation and HCR SERVICES COMPANY, INC., a Nevada corporation (collectively the "Borrowers"), WELLS FARGO BANK, National Association, CREDIT LYONNAIS LOS ANGELES BRANCH, BANK ONE, NA, BANKERS TRUST COMPANY, SOCIETE GENERALE, U.S. BANK NATIONAL ASSOCIATION, FIRST HAWAIIAN BANK, GREATER BAY CORPORATE FINANCE, IMPERIAL BANK, WEST COAST BANK, NATIONAL CITY BANK OF INDIANA and HIBERNIA NATIONAL BANK, as Lenders, WELLS FARGO BANK, National Association, as the Swingline Lender (herein in such capacity, together with its successors and assigns, the "Swingline Lender"), WELLS FARGO BANK, National Association, as the issuer of letters of credit thereunder (herein in such capacity, together with its successors and assigns, the "L/C Issuer"), and WELLS FARGO BANK, National Association, as arranger, administrative and collateral agent for the Lenders, Swingline Lender and L/C Issuer (herein, in such capacity, called the "Agent Bank" and, together with the Lenders, Swingline Lender and L/C Issuer, collectively referred to as the "Banks"). R E C I T A L S :     WHEREAS:     A.  Borrowers and Banks entered into a Second Amended and Restated Credit Agreement dated as of October 5, 1999, as amended by First Amendment to Second Amended and Restated Credit Agreement dated as of April 14, 2000 (collectively, the "Existing Credit Agreement").     B.  For the purpose of this Second Amendment, all capitalized words and terms not otherwise defined herein shall have the respective meanings and be construed herein as provided in Section 1.01 of the Existing Credit Agreement and any reference to a provision of the Existing Credit Agreement shall be deemed to incorporate that provision as a part hereof, in the same manner and with the same effect as if the same were fully set forth herein.     C.  Borrowers and Banks desire to amend the Existing Credit Agreement for the purpose of fully amending and restating Section 5.24 of the Existing Credit Agreement entitled "Interest Rate Protection."     D.  Borrowers and Banks have agreed to the following modifications and amendments to the Existing Credit Agreement on the terms and subject to the conditions and provisions set forth in this Second Amendment.     NOW, THEREFORE, in consideration of the foregoing and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do agree to the waiver, amendments and modifications to the Existing Credit Agreement as specifically hereinafter provided as follows:     1.  Definitions.  As of the Second Amendment Effective Date, Section 1.01 of the Existing Credit Agreement entitled "Definitions" shall be and is hereby amended to include the following definitions. Those terms which are currently defined by Section 1.01 of the Existing Credit Agreement and which are also defined below shall be superseded and restated by the applicable definition set forth below: --------------------------------------------------------------------------------     "Credit Agreement" shall mean the Existing Credit Agreement as amended by the Second Amendment, as it may be further amended, modified, extended, renewed or restated from time to time.     "Existing Credit Agreement" shall have the meaning set forth in Recital Paragraph A of the First Amendment.     "Second Amendment" shall have the meaning set forth in the Preamble of the Second Amendment to Second Amended and Restated Credit Agreement dated as of May 16, 2001, executed by and among Borrowers and Banks.     "Second Amendment Effective Date" shall mean May 16, 2001.     2.  Restatement of Interest Rate Protection Covenant.  As of the Second Amendment Effective Date, Section 5.24 entitled "Interest Rate Protection", shall be and is hereby fully amended and restated in its entirety as follows:     "Section 5.24.  Interest Rate Protection.       a.  Commencing no later than one hundred eighty (180) days following the Amendment Effective Date and continuing for a period of no less than three (3) years following the date of such commencement, Borrowers shall maintain Interest Rate Hedges in an aggregate principal notional amount of no less than fifty percent (50.0%) of the Total Funded Debt (exclusive of Contingent Liabilities) outstanding from time to time; provided, however, that during the period commencing on March 1, 2001 and continuing through July 31, 2001, Seven Million Seven Hundred Dollars ($7,700,000.00) of the Funded Outstanding shall not be subject to the foregoing Interest Rate Hedge requirement.     b.  Commencing no later than one hundred eighty (180) days following the Commitment Increase Effective Date and continuing for a period of no less than three (3) years following the date of such commencement, Borrowers shall maintain Interest Rate Hedges in an aggregate principal notional amount of no less than fifty percent (50.0%) of the amount of the Commitment Increase outstanding from time to time."     3.  Conditions Precedent to Effectiveness of Second Amendment.  The Second Amendment shall become effective as of the date hereof upon receipt by Agent Bank of the following documents and payments, in each case in a form and substance reasonably satisfactory to Agent Bank, and the occurrence of each other condition precedent set forth below:     a.  Due execution by Borrowers and Agent Bank of fourteen (14) duplicate originals of this Second Amendment;     b.  Corporate resolutions or other evidence of requisite authority of Borrowers to execute the Second Amendment;     c.  Reimbursement to Agent Bank by Borrowers for all reasonable fees and out-of-pocket expenses incurred by Agent Bank in connection with the Second Amendment, including, but not limited to, reasonable attorneys' fees of Henderson & Morgan, LLC; and     d.  Such other documents, instruments or conditions as may be reasonably required by Lenders.     4.  Representations of Borrowers.  Borrowers hereby represent to the Banks that as of the date hereof:     a.  The representations and warranties contained in Article IV of the Existing Credit Agreement and contained in each of the other Loan Documents (other than representations and warranties which expressly speak only as of a different date, which shall be true and correct in all material respects as of such date) are true and correct on and as of the date hereof in all material 2 -------------------------------------------------------------------------------- respects as though such representations and warranties had been made on and as of the date hereof, except to the extent that such representations and warranties are not true and correct as a result of a change which is permitted by the Credit Agreement or by any other Loan Document or which has been otherwise consented to by Agent Bank;     b.  Since the date of the most recent financial statements referred to in Section 5.08 of the Existing Credit Agreement, no Material Adverse Change has occurred and no event or circumstance which could reasonably be expected to result in a Material Adverse Change or Material Adverse Effect has occurred;     c.  No event has occurred and is continuing which constitutes a Default or Event of Default under the terms of the Credit Agreement; and     d.  The execution, delivery and performance of this Second Amendment has been duly authorized by all necessary action of Borrowers and this Second Amendment constitutes a valid, binding and enforceable obligation of Borrowers.     5.  Incorporation by Reference.  This Second Amendment shall be and is hereby incorporated in and forms a part of the Existing Credit Agreement.     6.  Governing Law.  This Second Amendment shall be governed by the internal laws of the State of Nevada without reference to conflicts of laws principles.     7.  Counterparts.  This Second Amendment may be executed in any number of separate counterparts with the same effect as if the signatures hereto and hereby were upon the same instrument. All such counterparts shall together constitute one and the same document.     8.  Continuance of Terms and Provisions.  All of the terms and provisions of the Existing Credit Agreement shall remain unchanged except as specifically modified herein. 3 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment as of the day and year first above written.     BORROWERS: HARVEYS CASINO RESORTS, a Nevada corporation     By:   /s/ WADE HUNDLEY    --------------------------------------------------------------------------------         Name:   Wade Hundley         Title:   Executive Vice President     By:   /s/ JOHN MCLAUGHLIN    -------------------------------------------------------------------------------- John McLaughlin, Senior Vice President, Treasurer and CFO     HARVEYS C.C. MANAGEMENT COMPANY, INC., a Nevada corporation     By:   /s/ WADE HUNDLEY    --------------------------------------------------------------------------------         Name:   Wade Hundley         Title:   Executive Vice President     By:   /s/ JOHN MCLAUGHLIN    -------------------------------------------------------------------------------- John McLaughlin, Secretary/Treasurer     HARVEYS IOWA MANAGEMENT COMPANY, INC., a Nevada corporation     By:   /s/ WADE HUNDLEY    --------------------------------------------------------------------------------         Name:   Wade Hundley         Title:   Executive Vice President     By:   /s/ JOHN MCLAUGHLIN    -------------------------------------------------------------------------------- John McLaughlin, Secretary/Treasurer 4 --------------------------------------------------------------------------------     HARVEYS TAHOE MANAGEMENT COMPANY, INC., a Nevada corporation     By:   /s/ WADE HUNDLEY    --------------------------------------------------------------------------------         Name:   Wade Hundley         Title:   Executive Vice President     By:   /s/ JOHN MCLAUGHLIN    -------------------------------------------------------------------------------- John McLaughlin, Secretary/Treasurer     HCR SERVICES COMPANY, INC., a Nevada corporation     By:   /s/ WADE HUNDLEY    --------------------------------------------------------------------------------         Name:   Wade Hundley         Title:   Executive Vice President     By:   /s/ JOHN MCLAUGHLIN    -------------------------------------------------------------------------------- John McLaughlin, Secretary/Treasurer     HBR REALTY COMPANY, INC., a Nevada corporation     By:   /s/ WADE HUNDLEY    --------------------------------------------------------------------------------         Name:   Wade Hundley         Title:   Executive Vice President     By:   /s/ JOHN MCLAUGHLIN    -------------------------------------------------------------------------------- John McLaughlin, Secretary/Treasurer 5 --------------------------------------------------------------------------------     HARVEYS BR MANAGEMENT COMPANY, INC., a Nevada corporation     By:   /s/ WADE HUNDLEY    --------------------------------------------------------------------------------         Name:   Wade Hundley         Title:   Executive Vice President     By:   /s/ JOHN MCLAUGHLIN    -------------------------------------------------------------------------------- John McLaughlin, Secretary/Treasurer     BANKS: WELLS FARGO BANK, National Association, Agent Bank on behalf of itself and each of the Lenders, Swingline Lender and L/C Issuer     By:   /s/ SUE FULLER    -------------------------------------------------------------------------------- Sue Fuller, Vice President 6 -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.1

  [EXECUTION COPY] SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT          This SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT dated as of November 3, 2000 (this “Amendment”), by and among (a) METALLURG, INC., a Delaware corporation having its principal place of business at 6 East 43rd Street, New York, New York 10017 (“MI”), SHIELDALLOY METALLURGICAL CORPORATION, a Delaware corporation having its principal place of business at 12 West Boulevard, Newfield, New Jersey 08344 (“SMC”) and METALLURG INTERNATIONAL RESOURCES, LLC, a Delaware limited liability company (successor by merger to Metallurg International Resources, Inc.) having its principal place of business at 6 East 43rd Street, New York, New York 10017 (“MIR” and together with MI and SMC, the “Borrowers”), (b) METALLURG SERVICES, INC., a New York corporation having its principal place of business at 6 East 43rd Street, New York, New York 10017 (“MSI”), MIR (CHINA), INC., a Delaware corporation having its principal place of business at 6 East 43rd Street, New York, New York 10017 (“MIR China”), and METALLURG HOLDINGS CORPORATION, a New Jersey corporation having its principal place of business at 12 West Boulevard, Newfield, New Jersey 08344 (“MHC” and collectively with MSI and MIR China, the “Guarantors”), (c) FLEET NATIONAL BANK (formerly known as BANKBOSTON, N.A.), a national banking association, as agent (in such capacity the “Agent”) for itself and the other financial institutions from time to time parties to the Loan Agreement referred to below (collectively, the “Banks”); and (d) the BANKS, amends certain provisions of the Amended and Restated Loan Agreement dated as of October 29, 1999, by and among the Borrowers, the Guarantors, the Agent and the Banks (as amended by that certain First Amendment thereto, dated as of October 11, 2000, and as further amended, modified, supplemented or restated and in effect from time to time, the “Loan Agreement”). Terms not otherwise defined herein which are defined in the Loan Agreement shall have the respective meanings herein assigned to such terms in the Loan Agreement.          WHEREAS, on November 3, 2000, the Metallurg International Resources, Inc., a New York corporation (the “Corporation”) and a wholly owned subsidiary of MI, was merged into MIR pursuant to and in accordance with §18-209 of the Delaware Limited Liability Company Act and §904-A of the New York Business Corporation Law (the “Merger”);          WHEREAS, the Majority Banks granted to the Borrowers and the Guarantors that certain Limited Waiver dated as of November 3, 2000 (the “Waiver”), permitting the Merger subject to certain conditions contained therein, and the Borrowers and the Guarantors and the Agent entered into that certain Assumption Agreement dated as of November 3, 2000, pursuant to which MIR assumed all rights and Obligations of the Corporation under and pursuant to the Loan Documents;          WHEREAS, as a condition to the Waiver the Borrowers agreed to amend certain terms of the Loan Documents to reflect the Merger; and          WHEREAS, the Agent and the Banks are willing to so amend the terms of the Loan Agreement in such respects as hereinafter provided upon the terms and subject to the conditions contained herein;          NOW, THEREFORE, in consideration of the mutual agreements contained in the Loan Agreement, herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:          §1.    Defined Terms. Capitalized terms used herein without definition that are defined in the Loan Agreement shall have the same meanings herein as in the Loan Agreement. --------------------------------------------------------------------------------   -2-          §2.    Amendment to Loan Agreement. Subject to the terms and conditions set forth herein and the effectiveness of this Amendment, the Loan Agreement is hereby amended as follows:          (a)     All references in the Loan Agreement to the terms “BankBoston, N.A.”, “BankBoston” and “BKB” are hereby amended to refer to “Fleet National Bank” (except in the event that such references refer to BankBoston, N.A. as the former name of Fleet National Bank).          (b)     Section 1.1 of the Loan Agreement is hereby amended by deleting the definitions of the terms “BKB”, “MIR”, “Security Documents” and “Subsidiary” in their entirety and by substituting therefore the following new defined terms        “Fleet National Bank. Fleet National Bank (f/k/a BankBoston, N.A.), a national banking association, and shall include its successors and assigns.”        “MIR. Metallurg International Resources, LLC a Delaware limited liability company formerly known as Metallurg International Resources, Inc., and a wholly-owned Subsidiary of MI.”        “Security Documents: The Security Agreement, the Stock Pledge Agreements, the Foreign Pledge Agreements, the Canadian Assignment Documents, the Agency Agreements, the Lock Box Agreement, the Membership Interest Pledge Agreement and all other security agreements, mortgages, deeds of trust, assignments, or other instruments or documents, in form and substance satisfactory to the Agent and the Banks, which shall grant to the Agent, for the benefit of the Banks and the Agent, Liens upon all of the Collateral.”        “Subsidiary: Any corporation, association, trust, limited liability company or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding shares of stock or membership interest having voting power, regardless of whether such right to vote depends upon the occurrence of a contingency.”          (c)     Section 1.1 of the Loan Agreement is hereby further amended by inserting the following new definition in the appropriate place in the alphabetical order thereof:        “Membership Interest Pledge Agreement. The Membership Interest Pledge Agreement dated as of November 3, 2000, between MI and the Agent with respect to MI’s membership interest in MIR and in form and substance satisfactory to the Agent and the Banks.”          (d)     The Loan Agreement is hereby amended by deleting §6.1 thereto in its entirety and substituting the following new §6.1:        “6.1 Security of Borrower. The Obligations shall be secured by (a) a perfected first priority security interest (subject only to Permitted Liens entitled to priority under applicable law) in all of the assets of each of the Borrowers (excluding (i) all fee and leasehold interests of the Borrowers in any real property, (ii) 100% of the capital stock of MIR China and MSI, (iii) 35% of the capital stock of MHC and MCL, and (iv) any annuities and trust fund accounts which are dedicated to the payment of environmental liabilities of the Borrowers pursuant to the express provisions of the Settlement --------------------------------------------------------------------------------   -3-   Agreements, but in any event including the Borrowers’ residual interest (if any) in such annuities and trust fund accounts), whether now owned or hereafter acquired, and (b) a pledge of and perfected first priority security interest in 100% of the issued and outstanding capital stock of SMC and the membership interests in MIR, and 65% of the issued and outstanding capital stock of MHC and MCL; all pursuant to the terms of, and to the extent provided in, the Security Documents.          (e)     The Loan Agreement is hereby amended by deleting §7(a) thereto in its entirety and substituting therefor the following new §7(a):        (a)     Each of the Borrowers and each of the Guarantors is duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation or formation and is duly qualified and in good standing in every other jurisdiction where it is doing business and where failure to qualify would have a Materially Adverse Effect, and the execution, delivery and performance by each of the Borrowers and each of the Guarantors of each of the Loan Documents to which it is a party (i) are within its corporate or other organizational authority, (ii) have been duly authorized by all necessary corporate action or other organizational proceedings, (iii) do not conflict with or contravene its Charter Documents.          (f)     The Loan Agreement is hereby amended by deleting §7(h) and (i) thereto in their entirety and substituting therefor the following new §7(h) and (i):        (h)     The execution, delivery, performance of its obligations, and exercise of its rights under the Loan Documents by each of the Borrowers and each of the Guarantors, including borrowing under this Agreement and the obtaining of Letters of Credit (i) do not require any Consents other than those that have been obtained or will be obtained prior to the Restatement Date and that are in full force and effect; and (ii) are not and will not be in conflict with or prohibited or prevented by (A) any Requirement of Law, or (B) any Charter Document, corporate minute or resolution or limited liability company action, instrument, agreement or provision thereof, in each case binding on it or affecting the property of the Borrowers or the Guarantors.        (i)     None of the Borrowers nor any of the Guarantors is in violation of (A) any Charter Document, corporate minute or resolution or limited liability company action, (B) any instrument or agreement, in each case binding on it or affecting its property, which violation could have a Materially Adverse Effect, or (C) any Requirement of Law, in a manner which could have a Materially Adverse Effect, including, without limitation, all applicable federal and state tax laws, ERISA, OSHA and Environmental Laws. Except as set forth in Schedule 7(i), none of the Borrowers nor any of the Guarantors is a party to a collective bargaining agreement.          (g)     The Loan Agreement is hereby amended by deleting §8(a)(ii) thereto in its entirety and substituting therefor the following new §8(a)(ii):        (ii)     All corporate or limited liability company action, third-party consents and governmental approvals necessary for the valid execution, delivery and performance by each of the Borrowers and each of the Guarantors of each of the Loan Documents to which it is a party shall have been duly and effectively taken or (as the --------------------------------------------------------------------------------   -4-   case may be) obtained and evidence thereof satisfactory to the Agent and the Banks shall have been provided to the Agent and the Banks.          (h)     The Loan Agreement is hereby amended by deleting §9(c)(ii) thereto in its entirety and substituting therefor the following new §9(c)(ii):        (ii)     if to the Agent, at One Federal Street, Boston, Massachusetts 02110, USA, Mail Stop: MA DE 10307X, Attention: Mark Schafer, or such other address for notice as the Agent shall last have furnished in writing to the Person giving the notice; and          §3.    Amendment to Loan Documents. Subject to the terms and conditions set forth herein and the effectiveness of this Amendment, each of the Loan Documents other than the Loan Agreement is hereby amended as follows:          (a)     All references in such Loan Documents to the terms “BankBoston, N.A.”, “BankBoston” and “BKB” are hereby amended to refer to “Fleet National Bank”.          (b)     All references in such Loan Documents to the terms “Metallurg International Resources, Inc.” or “MIR” are hereby amended to refer to “Metallurg International Resources, LLC”.          §4.    Change in the Fiscal Year of MI. MI’s board of directors has approved a change in MI’s fiscal year from January 31 to December 31, effective beginning December 31, 2000. The Agent and the Banks hereby consent to such change. In connection with such change in the fiscal year of MI, the Borrowers hereby agree to provide to the Agent and the Banks from time to time as and when requested by the Agent or any Bank such reconciliations and financial information necessary in order for the Agent and the Banks to determine compliance with the requirements of the Loan Agreement, including the financial covenants set forth in §9.3 thereof.          §5.    Representations and Warranties. Each of the Borrowers and the Guarantors represents and warrants to the Agent and the Banks as follows:          (a)     The representations and warranties of the Borrowers and the Guarantors set forth in the Loan Agreement (as amended hereby) and the other Loan Documents, (i) were true and correct in all material respects when made, and (ii) continue to be true and correct in all material respects on the date hereof, except to the extent such representations and warranties by their terms relate solely as of a prior date.          (b)     The execution and delivery by the Borrowers and the Guarantors of this Amendment and the performance by the Borrowers and the Guarantors of their agreements and obligations under this Amendment, the Loan Agreement (as amended hereby) and the other Loan Documents (i) are within the corporate or other organizational authority of each of the Borrowers and the Guarantors, (ii) have been duly authorized by all necessary corporate or other organizational proceedings or actions by each of the Borrowers and the Guarantors, (iii) do not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which the Borrowers or the Guarantors are subject or any judgment, order, writ, injunction, license or permit applicable to the Borrowers or the Guarantor, and (iv) do not conflict with any provision of the corporate charter, by-laws or other constituent document of, or any agreement or other instrument binding upon, the Borrowers or the Guarantors. --------------------------------------------------------------------------------   -5-          (c)     This Amendment, the Loan Agreement (as amended hereby), and the other Loan Documents to which any of the Borrowers or the Guarantors is a party constitute the legal, valid and binding obligations of such Borrowers or Guarantors (as the case may be), duly enforceable against each such Person in accordance with their respective terms, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought.          §6.    Conditions to Effectiveness. This Amendment shall be effective as of the date hereof upon the satisfaction of the following conditions (each of the following to be in form and substance satisfactory to the Agent):          (a)     delivery to the Agent of original counterpart signature pages to this Amendment, duly executed and delivered by the Borrowers, the Guarantors and the Majority Banks;          (b)     delivery to the Agent of a legal opinion of Clifford Chance Rogers & Wells LLP as to the consummation of the Merger and the continued enforceability of the Loan Documents as against MIR;          (c)     MIR or the other Borrowers or Guarantors shall have executed and delivered to the Agent, as the case may be, (i) an Assumption Agreement substantially in the form of Exhibit A attached hereto; (ii) a Membership Interest Pledge Agreement substantially in the form of Exhibit B attached hereto, and evidence of the registration of the pledge created thereby shall have been registered on the books and records of MIR; (iii) a Perfection Certificate of MIR; and (iv) such UCC-1 financing statements and UCC-3 amendments as the Agent shall have requested, each to be in form and substance satisfactory to the Agent;          (d)     the Borrowers shall have delivered to the Agent, (i) an incumbency certificate, signed by the member or MIR and giving the name and bearing the signature of each individual who shall be authorized to sign this Amendment and the other Loan Documents to which MIR is a party in the name and on behalf of MIR, (ii) certified true and complete copies of all of MIR’s organizational and constituent documents as in effect on the date hereof, (iii) a certified copy of MIR’s certificate of formation, (iv) a certified copy of MIR’s certificate of conversion, (v) board resolutions or other documents evidencing authorization of the Conversion and the transactions contemplated by this Amendment and (v) evidence that MIR shall have filed applications to do business as a foreign limited liability company in all jurisdictions where such qualification is necessary; and          (e)     all proceedings in connection with the transactions contemplated by this Amendment shall be reasonably satisfactory in substance and form to the Agent, and the Agent shall have received all information and such documents as the Agent may reasonably request.          §7.    Affirmation and Covenants of Borrowers and Guarantors.          (a)     Each of the Borrowers hereby affirms its absolute and unconditional promise to perform and pay, to the Banks and the Agent, all Obligations under the Loan Agreement (as amended hereby) and the other Loan Documents at the times and in the amounts provided for therein.          (b)     Each of the Guarantors hereby acknowledges that it has read and is aware of the provisions of this Amendment. Each of the Guarantors hereby reaffirms its absolute and unconditional --------------------------------------------------------------------------------   -6- guaranty of the Borrowers’ payment and performance of the Obligations under the Loan Agreement (as amended hereby) and the other Loan Documents.          (c)     Each of the Borrowers hereby covenants and agrees that it shall or shall cause MIR to deliver to the Agent within thirty (30) days of the date hereof certificates evidencing that MIR is qualified to do business as a foreign limited liability company in all jurisdictions where such qualification is necessary.          §8.    Costs and Expenses. The Borrowers acknowledge and jointly and severally agree that the reasonable costs and expenses incurred by the Agent (including attorneys’ fees) in the preparation, negotiation and execution of this Amendment and the other documents and instruments contemplated hereby are for the account of the Borrowers as provided in §16 of the Loan Agreement.          §9.    Miscellaneous Provisions.          (a)     Except as otherwise expressly provided by this Amendment, all of the terms, conditions and provisions of the Loan Agreement shall remain the same. It is declared and agreed by each of the parties hereto that the Loan Agreement, as amended hereby, shall continue in full force and effect, and that this Amendment and the Loan Agreement shall be read and construed as one instrument.          (b)     THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT UNDER SEAL AND SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED ACCORDING TO, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW).          (c)     This Amendment may be executed in any number of counterparts, but all such counterparts shall together constitute but one instrument. In making proof of this Amendment it shall not be necessary to produce or account for more than one counterpart signed by each party hereto against which enforcement hereof is sought.          (d)     Headings or captions used in this Amendment are for convenience of reference only and shall not define or limit the provisions hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] --------------------------------------------------------------------------------   -7-          IN WITNESS WHEREOF, the undersigned have duly executed this Amendment as a sealed instrument as of the date first above written.   METALLURG, INC.   By:                                                    Name: Title:   SHIELDALLOY METALLURGICAL CORPORATION   By:                                                    Name: Title:   METALLURG INTERNATIONAL RESOURCES, LLC (successor by merger to Metallurg International Resources, Inc.)   By:                                                    Name: Title:   METALLURG SERVICES, INC.   By:                                                    Name: Title:   MIR (CHINA), INC.   By:                                                    Name: Title:   METALLURG HOLDINGS CORPORATION   By:                                                    Name: Title: --------------------------------------------------------------------------------   -8-   FLEET NATIONAL BANK (formerly known as BANKBOSTON, N.A.), individually and as Agent   By:                                                    Name: Title:   BANK OF SCOTLAND   By:                                                    Name: Title:   NATIONAL BANK OF CANADA   By:                                                    Name: Title:   By:                                                    Name: Title:

MINUTES OF ACTION BY THE SHAREHOLDERS OF BIOIMMUNE, INC AT THE SPECIAL SHAREHOLDERS MEETING ON JUNE 22, 2001 at 10:30 A.M. Local Time ------------------------------------------------------------------- WHEREAS, the By-Laws of the Corporation provide that a Special Shareholders Meeting be held to conduct only business within the purposes described in the meeting notice to all registered Shareholders as of June 1, 2001. WHEREAS, there were represented by proxy or in person 3,913,000 Shares of the Corporation which constituted a quorum, there currently being 7,034,329 Shares issued and outstanding and; WHEREAS, being all the Directors of the Corporation, desire that the Board of Directors shall take action expressed in the Resolution herewith in set forth; NOW THEREFORE, we the undersigned, do hereby declare that the action expressed in the following Resolution shall be and hereby taken by majority vote of the Shareholders of the Corporation as of this date hereof; RESOLVED, that the Company changed it's name from CancerOption.com, Inc. to "BioImmune, Inc." to reflect the business model. RESOLVED, that the use of stock options for employees and Board of Directors, in the amount of 1,000,000 (million) shares for 2001 at a strike price of $1.00 USD. RESOLVED, that to maintain the current Officers of the Company. RESOLVED, that to maintain the current Board of Directors of the Company. I, Arnold Takemoto, do hereby certify that I respectively the duly elected President of BioImmune, Inc., formerly CancerOption.com, Inc., a Corporation presently organized and existing under the laws of the State of Florida, and that above is a true and correct copy of the Resolution duly adopted at the Special Shareholders Meeting thereof, convened and held in accordance with law and By-Laws of the said Corporation on the 22nd day of June, 2001 and that said, the Resolution is now in full force and effect. There being no further business for discussion and upon motion duly made and second, the meeting was adjourned at 10:39 A.M. /s/ Sir. Arnold Takemoto Sir. Arnold Takemoto, President, CEO and Director

EXHIBIT 10.35   SUBLEASE              THIS SUBLEASE is made and entered into this ___1__ day of August 2000, by and between FIRST ALBANY COMPANIES INC., a New York corporation having an address at 30 South Pearl Street, Albany, New York 12207-0052 (“First Albany") and FIRST UNION SECURITIES, INC., a Delaware corporation having an address at 901 East Byrd Street, Riverfront Plaza, East Tower, Richmond, Virginia 23219 ("First Union"). I Basic Provisions              A.Prime Landlord: One Penn Plaza LLC, a New York limited liability company having an address c/o MRC Management LLC, 330 Madison Avenue, New York, New York 10017              B.Prime Lease: The lease (the "Initial Lease") dated as of March 21, 1996, by and between Mid-City Associates ("Mid City"), as landlord, and First Albany, as tenant, which Initial Lease has heretofore been amended by the following instruments:                            (i)Lease Modification Agreement (the "First Amendment") dated as of June 17, 1996, by and between Mid City, as landlord, and First Albany, as tenant;                            (ii) Second Lease Modification Agreement (the "Second Amendment") dated as of July 12, 1996, by and between Mid City, as landlord, and First Albany, as tenant;                            (iii)Third Amendment of Lease (the "Third Amendment") dated as of December 1, 1999, by and between Prime Landlord, as landlord, and First Albany, as tenant; and                            (iv)Fourth Amendment of Lease (the "Fourth Amendment") dated as of August 1, 2000, by and between Prime Landlord, as landlord, and First Albany, as tenant. The Initial Lease, as amended by the First Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment, is herein called the "Prime Lease". The premises leased by Prime Landlord to First Albany pursuant to the Prime Lease is herein called the "Prime Lease Premises".              C.Property Address: One Penn Plaza, New York, New York (the "Building").              D.Description of Sublet Premises: A portion of the forty-first (4lst) floor of the Building, consisting of approximately nineteen thousand eight hundred twenty-six (19,826) square feet, as shown on Exhibit A to the First Amendment, identified as the "41st Floor Space" in the First Amendment (the "Sublet Premises").              E.First Albany's Address for Notices: 30 South Pearl Street, Albany, New York 12207, Attn:  General Counsel.              F.First Albany's Address for Payment of Rent: 30 South Pearl Street, ALbany, New York 12207, Attn: Accounting Department.                G.Asset Purchase Agreement: The Asset Purchase Agreement dated as of May 8, 2000 by and among First Union Securities, Inc., First Albany and First Albany Corporation with respect to the sale of the business of First Albany Corporation's Private Client Group.              H.First Union's Percentage: First Union's Percentage shall be 32.1438%.              I.Consent to Sublease: The Consent to Sublease dated as of _________________ 2000 by and among Prime Landlord, as landlord, First Albany, as tenant, and First Union, as subtenant.              J.Other Definitions: Any capitalized term not expressly defined in this Sublease shall have the meaning ascribed in the Prime Lease. 2.Sublease Term              A.The term of this Sublease (the "Term") shall commence on the date upon which the transaction contemplated by the Asset Purchase Agreement shall unconditionally close (the "Sublease Commencement Date") and shall end on the day before the third (3rd) anniversary of the Sublease Commencement Date (the "Sublease Expiration Date"), unless sooner terminated as provided in this Sublease).              B.If First Union shall remain in possession of the Sublet Premises at any time after the expiration or termination of the Term, First Union shall be deemed to be a holdover tenant. The provisions of Section 18.02 of the Initial lease shall apply as between First Albany and First Union in such circumstances. 3.Sublease              For and in consideration of the Rent payable by First Union, and the covenants and agreements to be performed by first Union, pursuant to the provisions of this Sublease, First Albany hereby subleases the Sublet Premises to First Union, and First Union hereby accepts the Sublet Premises from First Albany, subject to the terms and conditions of this Sublease (including, without limitation, the terms and conditions of both the Prime Lease and the Consent to Sublease, to the extent that such terms and conditions are incorporated by reference into this Sublease). 4.Rent              A.Commencing on the Sublease Commencement Date, and on the first day of each month thereafter during the Term, First Union shall pay a fixed base rent (the "Base Rent") for the Sublet Premises in the applicable amount set forth below:                            (i)during the period commencing on the Sublease Commencement Date and expiring on October 31, 2001, the amount of fifty-eight thousand eight hundred seven and 03/100 ($58,807.03) dollars, corresponding to an annual rate of seven hundred five thousand six hundred eighty-four and 30/100 ($705,684.30) dollars; and                            (iii)during the period commencing on November 1, 2001 and continuing thereafter for the remaining balance of the Term, the amount of sixty thousand four hundred fifty-nine and 19/100 ($60,459.19) dollars, corresponding to an annual rate of seven hundred twenty-five thousand five hundred ten and 30/100 ($725,510.30) dollars.1 If the Sublease Commencement Date is other than the first day of a month, and/or the Sublease Expiration Date is other than the last day of a month, the Base Rent for the month(s) in which such day(s) occur shall be suitably pro-rated.              B.In addition to the Base Rent, First Union shall also pay the following amounts, as and when set forth below:                            (i)the monthly installments of Base Rent payable by First Union to First Albany under this Sublease shall be increased on account of the monthly ERIF included, pursuant to Section 27.04 of the Prime Lease, in the corresponding installments of fixed annual rent payable by First Albany to Prime Landlord, as follows:                                          (a)if, at any time during the Term, the amount of the then monthly ERIF with respect to the Sublet Premises shall be identified by Landlord, in a rent bill or otherwise, separately from the amount of the then monthly ERIF with respect to the balance of the Prime Lease Premises, the amount of the Base Rent payable by First Union to First Albany pursuant to this Sublease during such portion of the Term shall be increased by an amount equal to such separately identified monthly ERIF, as the same may be increased or decreased by Prime Landlord pursuant to the provisions of the Prime Lease; and                                          (b)if, at any time during the Term, the amount of the then monthly ERIF with respect to the Sublet Premises shall not be separately identified as set forth in subparagraph (a) above, the amount of the Base Rent payable by First Union to First Albany pursuant to this Sublease during such portion of the Term shall be increased by an amount equal to First Union's Percentage of the monthly ERIF then in effect with respect to the Prime Lease Premises, as the same may be increased or decreased by Prime Landlord pursuant to the provisions of the Prime Lease; monthly ERIF then in effect with respect to the Prime Lease Premises, as the same may be increased or decreased by Prime Landlord pursuant to the provisions of the Prime Lease; -------------------------------------------------------------------------------- 1           It is the intention of the parties that the Base Rent payable under this Sublease, before any increase thereof pursuant to Paragraph 4B(i) hereof, shall be at an annual rate equal to one hundred thousand ($100,000.00) dollars in excess of the fixed annual rent from time to time payable by First Albany to Prime Landlord pursuant to the Prime Lease on account of the Sublet Premises (before increase on account of the ERIF pursuant to Section 27.04 of the Prime Lease, but after any increase on account of the Escalated Amount pursuant to Paragraph B of Section 45 thereof). The amounts set forth in Paragraphs 4A(i) and 4A(ii) hereof have been computed on such a basis, assuming that the aforesaid Escalated Amount is equal to fifty-five (55C) cents per square foot based upon information received from Prime Landlord. However, Prime Landlord has yet to bill First Albany for the increase in its fixed annual rent due to the inclusion of the Escalated Amount effective January 1, 2000.  If, once Prime Landlord so bills First Union, the Escalated Amount shall be other than fifty-five (55c) cents per square foot, the amounts of Base Rent payable under this Sublease shall be adjusted retroactive to the Sublease Commencement Date, on request of either party hereto, to reflect the actual Escalated Amount billed to First Albany.                            (ii)First Union shall pay to First Albany amounts equal to First Union's Percentage of the respective amounts from time to time payable by First Albany to Prime Landlord under Article 46 of the Prime Lease, which amounts shall be due and payable as follows:                                          (a)with respect to those amounts payable by First Albany to Prime Landlord pursuant to the said Article 46 on a monthly basis together with the fixed rent payable under the Prime Lease, the corresponding amounts payable by First Union to First Albany pursuant to this subparagraph (ii) shall be due and payable together with the corresponding installments of the Base Rent payable under this Sublease; and                                          (b)with respect to those amounts payable by First Albany to Prime Landlord pursuant to the said Article 46 other than on a monthly basis, the corresponding amounts payable by First Union to First Albany pursuant to this subparagraph (ii) shall be due and payable on the same basis as provided in the Prime Lease, but each such payment shall be due under this Sublease five (5) days prior to the due date for the corresponding payment under the Prime Lease;                            (iii)First Union shall pay to First Albany one hundred (100%) percent of any amount or amounts from time to time payable by First Albany to Prime Landlord pursuant to Section 27.03(c) of the Prime Lease as a result of First Union's use of ventilation, air-conditioning, or heating in the Sublet Premises at times other than regular business hours, each of which payments shall be due under this Sublease five (5) days prior to the due date for the corresponding payment under the Prime Lease;                            (iv)in the event that any charge or charges shall be payable, at any time or from time to time, by First Albany to Prime Landlord pursuant to Section 27.06 of the Prime Lease as a result of the purposes for which First Union uses water in the Sublet Premises, First Union shall pay to First Albany one hundred (100%) percent of such charge or charges, each of which payments shall be due under this Sublease five (5) days prior to the due date for the corresponding charge or charges under the Prime Lease;                            (v)in the event that any charge or charges shall be payable, at any time or from time to time, by First Albany to Prime Landlord pursuant to Section 27.08 and/or Section 27.12 of the Prime Lease as a result of the character, nature, or location in the Sublet Premises of First Union's refuse and/or rubbish, First Union shall pay to First Albany one hundred (100%) percent of such charge or charges, each of which payments shall be due under this Sublease five (5) days prior to the due date for the corresponding charge or charges under the Prime Lease;                            (vi)in the event that any charge or charges shall be payable, at any time or from time to time, by First Albany to Prime Landlord pursuant to Paragraph D of Article 51 of the Prime Lease as a result of First Union's use of freight elevator service outside of such elevator's normal hours of operation, First Union shall pay to First Albany one hundred (100%) percent of such charge or charges, each of which payments shall be due under this Sublease five (5) days prior to the due date for the corresponding charge or charges under the Prime Lease, and                              (vii)in the event that any charge or charges shall be payable, at any time or from time to time, by First Albany to Prime Landlord pursuant to any other provision of the Prime Lease that are allocable to, and/or arise from, First Union's use and/or occupancy of the Sublet Premises (including, without limitation, any charge or charges payable under the Prime Lease or the Consent to Sublease as a consequence of a breach by First Union of its obligations under this Sublease or under the Consent to Sublease), First Union shall pay to First Albany one hundred (100%) percent of such charge or charges, each of which payments shall be due under this Sublease five (5) days prior to the due date for the corresponding charge or charges under the Prime Lease.              C.All charges, costs and sums required to be paid by First Union to First Albany pursuant to this Sublease (including, without limitation, all charges, costs and sums required to be paid pursuant to the Prime Lease, as incorporated herein by reference), other than the Base Rent reserved herein, shall be deemed to be "Additional Rent", for default in the payment of which First Albany shall have the same rights and remedies as for a default in the payment of Base Rent.              D.All Base Rent and Additional Rent (collectively, the "Rent") payable by First Union to First Albany under this Sublease shall be paid, as and when the same shall become due and payable hereunder, in lawful money of the United States that shall be legal tender in payment of all debts and dues, public and private, at the time of payment at the office of First Albany identified in Section 1 or at such other place as First Albany may designate, without any set-off, offset, abatement, or deduction whatsoever. 5.Prime Lease              A.First Albany is the tenant under the Prime Lease with the Prime Landlord. First Albany represents and warrants to First Union that:                            (i)the Prime Lease is, as of the date hereof, in full force and effect;                            (ii)no default has been committed by First Albany under the Prime Lease that has remained uncured past the applicable period of time to cure following the service of the applicable notice of default upon First Albany (an "Event of Default"); and                            (iii)to First Albany's knowledge, no event has occurred and is continuing that would constitute an Event of Default under the Prime Lease but for the requirement of the service of notice and/or the expiration of the period of time to cure.                B.This Sublease, and all the rights of parties hereunder, are subject and subordinate in all respects to the Prime Lease and the Consent to Sublease. Neither party shall, by its act or omission to act, cause a default under the Prime Lease or the Consent to Sublease. In furtherance of the foregoing, the parties hereby confirm, each to the other, that it is not practical in this Sublease to enumerate all of the rights and obligations of the various parties under the Prime Lease or the Consent to Sublease, and to specifically allocate those rights and obligations in this Sublease. Accordingly, in order to afford to First Union the benefits of this Sublease, and to protect First Albany against a default by First Union that might cause a default or an Event of Default by First Albany under the Prime Lease or the Consent to Sublease, the parties agree, as between themselves, as follows:                            (i)First Albany shall perform all of its covenants and obligations under the Prime Lease and the Consent to Sublease that are not otherwise required to be performed by First Union on behalf of First Albany pursuant to the provisions of this Sublease;                            (ii)First Union shall perform all of its covenants and obligations under the Consent to Sublease;                            (iii)First Union shall perform all affirmative covenants of the Prime Lease pertaining to the Sublet Premises (other than any monetary obligation of First Albany to Prime Landlord thereunder, which monetary obligations, as between First Union and First Albany, shall be deemed to be superceded by the provisions of Paragraph 4 above), and shall refrain from any act or omission to act pertaining to the Sublet Premises that is prohibited by any of the negative covenants of the Prime Lease, where the obligation to so perform or so refrain is by its nature imposed upon the party in possession of the Sublet Premises (including, but not limited to, the performance of any repairs required to be made by First Albany to the Sublet Premises in accordance with the terms of the Prime Lease); and                            (iv)First Albany shall not agree to any amendment to the Prime Lease that might have an adverse effect on First Union's occupancy of the Sublet Premises, unless First Albany obtains First Union's prior written consent to such amendment (which consent shall not be unreasonably withheld or delayed). If practicable, First Union shall perform each of the affirmative covenants referred to in subparagraphs (ii) and (iii) above at least five (5) days prior to the date when the same shall be required to be performed pursuant to the Consent to Sublease or the Prime Lease (as the case may be). First Albany shall have the right to enter the Sublet Premises, at any time and from time to time, to cure any default(s) by First Union under this Sublease (including, without limitation, any default(s) under subsection (ii) and/or (iii) above).                C.First Albany shall have no duty to perform any obligations of Prime Landlord that are, by their nature, the obligation of an owner, operator, or manager of real property. First Albany shall have no responsibility for, nor shall First Albany be liable to First Union for, any default, failure, or delay on the part of Prime Landlord in the performance or observance by Prime Landlord of any of its obligations under the Prime Lease. However, upon receipt of a written notice from First Union specifying in reasonable detail any such default, failure, or delay by Prime Landlord and requesting First Albany's assistance with respect to the same, First Albany shall use its reasonable commercial efforts to cause Prime Landlord to perform its obligations under the Prime Lease, provided, however, that First Albany shall not be required hereunder to make any financial or other concessions to Prime Landlord, or to engage in any litigation against Prime Landlord, in order to cause Prime Landlord to fulfill its obligations under the Prime Lease.              E.In no event shall the provisions of Articles 39, 48, 49, 50 and 52 of the Prime Lease, Paragraphs F, G and H of Article 45 thereof, Paragraphs L and M of Article 51 thereof, Paragraph 3(c), 3(d), 10, or 11 of the First Amendment, Paragraph 3(c) or 3(d) of the Second Amendment, or Paragraph 3(b)(iv) of the Third Amendment be deemed to be incorporated into this Sublease, by reference or otherwise.   6.Condition of Premises              A.First Albany shall deliver possession of the Sublet Premises to First Union, on or before the Sublease Commencement Date, in their condition as of the date of this Sublease, "AS IS". First Albany shall have no obligation to perform any work or make any installations to prepare the Sublet Premises for First Union's occupancy.              B.First Union agrees to accept possession of the Sublet Premises, not later than the Sublease Commencement Date, in their condition as of the date of this Sublease, 'AS IS', without any agreements, representations, understandings or obligations on First Albany's part. 7.First Union's Use              The Sublet Premises shall be used and occupied solely for the purposes set forth in Article 2 of the Prime Lease. In no event shall the Sublet Premises be used in any manner, or for any purpose, that is inconsistent with any of the provisions of the Prime Lease (including, without limitation, Article 2 thereof). 8.Quiet Enjoyment              First Albany represents that it has full power and authority to enter into this Sublease, subject to the consent of the Prime Landlord. So long as First Union is not in default in the performance of its covenants and agreements in this Sublease, First Union's quiet and peaceable enjoyment of the Sublet Premises shall not be disturbed or interfered with by First Albany, or by any person claiming by, through, or under First Albany. 9.Assignment or Subletting              First Union shall not, unless First Union obtains the prior written consent of both First Albany and Prime Landlord in each instance:                              (i)assign its rights or delegate its duties under this Sublease (whether by operation of law, transfers of interests in First Union or otherwise), mortgage, or encumber its interest in this Sublease, in whole or in part;                            (iii)sublet, or permit the subletting of, the Sublet Premises or any part thereof; or                            (iv)permit the Sublet Premises, or any part thereof, to be occupied or used for desk space, mailing privileges, or otherwise, by any person or entity other than First Union. In the event that both First Albany and Prime Landlord grants its consent to any action proposed to be taken by First Union hereunder, such consent shall not be deemed or construed as a waiver of the obligation of First Union to obtain the prior written consent of both First Albany and Landlord to any further such action proposed to be taken by First Union. 10.Alterations              A.Any alterations, installations, improvements, additions or other physical changes (other than decorations) in, to, or about the Sublet Premises (as the case may be, 'Alterations’) must be made in accordance with the provisions of the Prime Lease. In each instance where, pursuant to the Prime Lease, the prior written consent of Prime Landlord shall be required in connection with any Alteration proposed to be made by First Union in, to or about the Sublet Premises, the prior written consent of First Albany shall be required as well.              B.First Union shall indemnify, defend and hold harmless First Albany against liability, loss, cost, damage, lien and/or expense imposed on First Albany arising out of the performance of any Alterations by First Union in, to, or about the Sublet Premises.              C.In the event that First Albany shall so request in writing not later than thirty (30) days after the expiration or termination of the Term, First Union shall, subject to the applicable provisions of the Prime Lease and at First Union's sole cost and expense, remove those Alterations, theretofore made by First Union in, to, or upon the Sublet Premises, specified in First Albany's request, as well as repair and restore the Sublet Premises with respect thereto. Provided that First Albany shall make such a request more than ninety (90) days prior to the expiration or termination of the Term, First Union shall cause such work to be completed not later than such expiration or termination date.              D.In the event that the Prime Lease shall be terminated prior to the Sublease Expiration Date by reason of any default by First Albany under the Prime Lease, and either:                            (i)First Union shall be required, pursuant to the provisions of clause (iii) of Paragraph 7A of the Consent to Sublease, to restore the Sublet Premises to Building standard condition; or                            (ii)First Union shall be required, pursuant to the provisions of clause (iii) of Paragraph 7B of the Consent to Sublease, to reimburse Prime Landlord for any of the costs therein set forth, then, and in either such event, First Albany shall reimburse First Union for all of the costs and expenses incurred by First Union in order to comply with such obligation under the Consent to Sublease. Such reimbursement shall be made promptly after First Albany's receipt of a written demand from First Union therefor, which demand shall be delivered to First Albany together with paid bills and invoices evidencing, or other reasonable evidence of, the amount to be so reimbursed. 11.Inndemnity              First Union shall indemnify First Albany, and hold First Albany harmless, from and against all losses, damages, costs, liabilities and expenses of any kind or nature (including, but not limited to, attorneys' fees and other defense costs) that First Albany may incur, and/or for which First Albany may be liable to Prime Landlord, arising from the acts or omissions of First Union that are the subject matter of any indemnity or hold harmless agreement of First Albany in favor of Prime Landlord under the Prime Lease or the Consent to Sublease. The provisions of this Section 12 shall survive the expiration or termination of the Term with respect to any liability, suit, obligation, fine, damage, penalty, claim, cost, charge, or expense arising out of, or in connection with, any act, omission, or any other matter occurring during the Term.     12.First Albany's Reserved Rights              First Union shall permit First Albany, Prime Landlord and their respective agents, representatives, designees, contractors, appraisers and prospective successors and assigns to enter the Sublet Premises at all reasonable times (but not more frequently than is reasonable under the circumstances), on reasonable notice, except in the case of an emergency in accordance with the provisions of Article 11 of the Prime Lease. 13.Defaults              Any one or more of the following events shall be considered "Events of Default", as said term is used herein:                            (i)if First Union shall be adjudged an involuntary bankrupt, or a decree or order approving, as properly filed, a petition or answer filed against First Union asking reorganization of First Union under the Federal bankruptcy laws (as now or hereafter amended), or under the laws of any State, shall be entered, and any such decree or judgment or order shall not have been vacated, stayed, or set aside within sixty (60) days from the date of the entry or granting thereof; or                            (ii)if First Union shall file, or admit the jurisdiction of the court and the material allegations contained in, any petition in bankruptcy, or any petition pursuant, or purporting to be pursuant, to the Federal bankruptcy laws (now or hereafter amended), or First Union shall institute any proceedings for relief of First Union under any bankruptcy or insolvency laws, or any laws relating to the relief of debtors, readjustment of indebtedness, reorganization, arrangements, composition, or extension; or                              (iii)if First Union shall make any assignment for the benefit of creditors, or shall apply for, or consent to, the appointment of a receiver for First Union or any of the property of First Union; or                            (iv)if First Union shall admit in writing its inability to pay its debts as they become due; or                            (v)if the Sublet Premises are subject to any lien or levy; or                            (vi)if a decree or order appointing a receiver of the property of First Union shall be made, and such decree or order shall not have been vacated, stayed or set aside within sixty (60) days from the date of entry or granting thereof; or                            (vii)if First Union shall default in any payment required to be made by First Union hereunder when due as herein provided, and such default shall continue for ten (10) days after notice thereof in writing to First Union; or                            (viii)if First Union shall, by its act or omission to act, cause a default under the Prime Lease, and such default shall not be cured within the time, if any, permitted for such cure under the Prime Lease, as applicable; or                            (ix)if First Union shall default in any of the other covenants and agreements herein contained to be kept, observed and performed by First Union, and such default shall continue for twenty (20) days after notice thereof in writing to First Union. 14.Remedies              Upon the occurrence of any one or more Events of Default, First Albany may exercise any remedy against First Union which Prime Landlord may exercise for default by First Albany under the Prime Lease. 15.Notices and Consents              All notices, demands, requests, consents, or approvals that may or are required to be given by either party to the other shall be in writing, and shall be deemed given when received or refused if sent by United States registered or certified mail, postage prepaid, return receipt requested, or if sent by overnight commercial courier service:                            (i)if to First Union, addressed to First Union at the address specified in Section 1 or at such other place as First Union may from time to time designate by notice in writing to First Albany; or                            (ii)if to First Albany, addressed to First Albany at the address specified in Section I or at such other place as First Albany may from time to time designate by notice in writing to First Union. Each party agrees promptly to deliver a copy of each notice, demand, request, consent, or approval from such party to Prime Landlord, and promptly to deliver to the other party a copy of any notice, demand request, consent, or approval received from Prime Landlord. 16.Brokerage              Each party warrants to the other that it has had no dealings with any broker or agent, other than Cushman & Wakefield, Inc. (the "Broker"), in connection with this Sublease, and covenants to pay, hold harmless and indemnify the other party from and against any and all cost (including, without limitation, reasonable attorneys' fees), expense, or liability for any compensation, commissions and/or charges claimed by any broker or other agent, other than the Broker, with respect to this Sublease or the negotiations thereof on behalf of such party. 17.Late Charges              If First Union shall fail to pay any installment of Base Rent, or any other item of Rent, when due, and shall fail to cure such default within five (5) days after notice thereof in writing to First Union, First Union shall pay to First Albany, in addition to such installment of Base Rent or other item of Rent, as the case may be, as a late charge, a sum equal to the lesser of:                            (i)a fixed rate equal to four (4) percentage points above the published prime rate of Citibank, N.A., New York, New York, for one-year commercial loans ("Citibank Prime") in effect on the date such amount was due and payable, or                            (ii)the maximum rate of interest permitted by law. Notwithstanding the foregoing grace period, the foregoing late charge, if payable as above set forth, shall be computed from the date upon which the Base Rent or other item of Rent was due to the date upon which the same is actually paid to First Albany. 18.Taxes              First Union shall pay all taxes imposed on its personal property, the conduct of its business and its use and occupancy of the Sublet Premises. 19.Counterpart Signatures              This Sublease may be executed in several counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement.              IN WITNESS WHEREOF, the parties have duly executed and delivered this Sublease as of the day and year first above Written. FIRST ALBANY COMPANIES INC.       BY:         Name: Stephen Wink   Title: Secretary & GC   FIRST UNION SECURITIES, INC.     By:         Name: William S Trausau   Title:VP             STATE OF NEW YORK )   )  ss. : COUNTY OF ALBANY )              On the 1st day of August in the year 2000, before me, the undersigned, a Notary Public in and for said State, personally appeared Stephen Wink, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.                Notary Public   LENORE ALQUIST Notory Public, State of New York No. 01AH5081405 Qualified In Saratoga County Commission Expires June 30, 2OO1   STATE OF NORTH CAROLINA )   )  ss. : COUNTY OF Mecklenburg ) On the 31st day of JULY in the year 2000, before me, the undersigned, a Notary Public in and for said State personally appeared William S Trausau personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name) is subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument.     Notary Public       My Commission Expires March 4 2001                

      $35,000,000.00 REVOLVING CREDIT AGREEMENT Among UNITED ARTISTS THEATRE COMPANY, a Delaware corporation; UNITED ARTISTS THEATRE CIRCUIT, INC., a Maryland corporation; UNITED ARTISTS REALTY COMPANY, a Delaware corporation; UNITED ARTISTS PROPERTIES I CORP., a Colorado corporation; and UNITED ARTISTS PROPERTIES II CORP., a Colorado corporation; and THE LENDERS PARTY HERETO and BANKERS TRUST COMPANY, as Administrative Agent Dated as of February 2, 2001     Arranged By: Deutsche Banc Alex. Brown Inc. REVOLVING CREDIT AGREEMENT This REVOLVING CREDIT AGREEMENT, dated as of February 2, 2001 is entered into by and among UNITED ARTISTS THEATRE COMPANY, a Delaware corporation ("UAT"), UNITED ARTISTS THEATRE CIRCUIT, INC., a Maryland corporation and a Subsidiary of UAT ("UATC"), UNITED ARTISTS REALTY COMPANY, a Delaware corporation and a Subsidiary of UAT ("UARC"), UNITED ARTISTS PROPERTIES I CORP., a Colorado corporation and a Subsidiary of UARC ("Prop I"), and UNITED ARTISTS PROPERTIES II CORP. ("Prop II"), a Colorado corporation and a Subsidiary of UARC (UAT, UATC, UARC, Prop I and Prop II being hereinafter collectively referred to as "Borrowers," and each individually as a "Borrower"), jointly and severally, the several lenders party to this Agreement (collectively, the "Lenders"; individually, a "Lender"), and BANKERS TRUST COMPANY ("BTCo"), as administrative agent (the "Administrative Agent"). RECITALS A.     On September 5, 2000, Borrowers and certain of their Subsidiaries filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court, for the District of Delaware (the "Bankruptcy Court"), with all such cases being jointly administered for procedural purposes under the Case No. 00-00-3514 (SRL). B.     On January 22, 2001, the Bankruptcy Court entered its order confirming Borrowers' Plan of Reorganization (as defined below). C.     Proceeds from the revolving credit facility provided hereunder are to be used to repay up to $25,000,000 plus accrued interest owed under the DIP Credit Agreement (as defined below) and to fund Borrowers' general working capital needs after confirmation of the Plan of Reorganization, including payment of interest and scheduled amortization payments due pursuant to the Restructured Term Credit Agreement (as defined below). NOW, THEREFORE, in consideration of the above recitals and in order to induce the Lenders to make this revolving credit facility available to Borrowers, the parties hereto agree as follows: DEFINITIONS 1. Defined Terms .  In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings: "Additional Debt" means additional indebtedness for borrowed money, Capital Lease Obligations, and related Swap Contracts, on an unsecured or secured (relating to Capital Expenditures only) basis, not to exceed $5,000,000 in the aggregate. "Adjusted Eurodollar Rate" means, for any Interest Rate Determination Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per annum obtained by dividing (i) the arithmetic average (rounded upward to the nearest 1/16 of one percent) of the offered quotations, if any, to first class banks in the interbank Eurodollar market by BTCo for U.S. dollar deposits of amounts in same day funds comparable to the respective principal amounts of the Eurodollar Rate Loans of BTCo for which the Adjusted Eurodollar Rate is then being determined with maturities comparable to such Interest Period as of approximately 10:00 A.M. (New York time) on such Interest Rate Determination Date by (ii) a percentage equal to 100% minus the stated maximum rate of all reserve requirements (including any marginal, emergency, supplemental, special or other reserves) applicable on such Interest Rate Determination Date to any member bank of the Federal Reserve System in respect of "Eurocurrency liabilities" as defined in Regulation D (or any successor category of liabilities under Regulation D). "Administrative Agent" means BTCo, in its representative capacity as the Administrative Agent for the Lenders hereunder, and any permitted successor Administrative Agent. "Administrative Agent-Related Persons" means BTCo and any successor Administrative Agent under Section 9.5, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Affected Lender" has the meanings assigned to that term in Section 2.6(c). "Affected Loan" has the meaning assigned to that term in Section 2.6(c). "Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person.  A Person shall be deemed to control another Person if the controlling person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise.  Without limitation, any director, executive officer or beneficial owner of 10% or more of the equity of a Person shall for the purposes of this Agreement, be deemed to control the other Person.  In no event shall the Lenders be deemed an "Affiliate" of Borrowers or of any Subsidiary of Borrowers. "Agreement" means this Revolving Credit Agreement, as amended, modified, supplemented, renewed, replaced, or restated from time to time in accordance with the terms hereof. "Aggregate Amount Due" has the meaning assigned to that term in Section 10.5. "Aggregate Commitment" means the revolving credit Commitments of the Lenders, in the principal amount of Thirty Five Million Dollars ($35,000,000.00), as such amount may or shall be reduced from time to time pursuant to this Agreement. "Anschutz" means The Anschutz Corporation. "Anschutz Sub Debt" means additional subordinated indebtedness for borrowed money incurred by Borrowers or preferred stock issued by Borrowers, not to exceed $25,000,000 in the aggregate, with pay-in-kind interest or pay-in-kind dividends, payable to Anschutz or any of its subsidiaries or affiliates, as amended, modified, supplemented or restated from time to time to the extent permitted pursuant to Sections 7.18 and 7.19 hereof.  Notwithstanding any other provision contained herein, any Anschutz Sub Debt:  (i) shall be subordinate to Borrowers' Obligations under this Agreement; (ii) shall be payable from Borrowers only, with no upstream credit support of any Subsidiaries of Borrowers; (iii) shall have no cash payment (whether principal, interest, dividend or otherwise) until the later of (x) the maturity of the Anschutz Sub Debt or (y) payment in full in cash of all Obligations (other than Contingent Obligations and indemnities that survive the repayment of the Loans) under this Agreement; and (iv) shall have a maturity date no earlier than one (1) year after the Termination Date. "Applicable Base Rate Margin" has the meaning assigned to that term in Section 2.2(a). "Applicable Eurodollar Rate Margin" has the meaning assigned to that term in Section 2.2(a). "Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. "Assignment Agreement" means an Assignment Agreement in substantially the form of Exhibit N annexed hereto. "Assistant Secretary" means any Assistant Secretary of a Borrower. "Attorney Costs" means and includes all reasonable fees and disbursements of any law firm or other external counsel, including the reasonable cost of retaining consultants and financial advisors. "Audited Financial Statement" means the audited consolidated balance sheet of Borrowers and their Subsidiaries for the fiscal year ended December 30, 1999, and the related consolidated statements of income and cash flows for such fiscal year of Borrowers and their Subsidiaries. "Auditors" means Arthur Andersen LLP or other independently certified public accountants of recognized national standing reasonably acceptable to the Lenders. "Bankruptcy Code" means the Title 11 of the United States Code entitled "Bankruptcy," as now and hereafter in effect, or any successor statute. "Bankruptcy Court" shall have the meaning ascribed to such term in the Recitals to this Agreement. "Base Rate" means, at any time, the higher of (i) the Prime Rate or (ii) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate. "Base Rate Loans" means Loans bearing interest at rates determined by reference to the Base Rate as provided in Section 2.2(a). "BofA" means Bank of America, N.A. "Borrowers" has the meaning specified in the introductory paragraph to this Agreement. "Borrowing" means a borrowing hereunder consisting of Loans made to Borrowers by the Lenders pursuant to Section 2.1. "BTCo" shall mean Bankers Trust Company. "Business Day" means (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close, and (ii) with respect to all notices, determinations, fundings and payments in connection with the Eurodollar Rate or any Eurodollar Rate Loans, any day that is a Business Day described in clause (i) above and that is also a day for trading by and between banks in Dollar deposits in the interbank Eurodollar market. "Capital Expenditures" means, for any reporting period and with respect to any Borrower the aggregate of all principal amounts for any acquisition and the amount of any financing or leasing by such Borrower and its Subsidiaries for the acquisition, financing or leasing of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period and all amounts paid or accrued on Capital Leases and Indebtedness incurred or assumed to acquire capital assets) which are placed into service and should be capitalized under GAAP on a consolidated balance sheet of such Borrower and its Subsidiaries.  For purposes of this definition, the purchase price of equipment that is purchased substantially contemporaneously with the trade-in of existing equipment or with insurance proceeds paid on account of loss or of damage to the assets being replaced or restored, or with the proceeds from the sale of assets being replaced or restored, shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment for the equipment being traded in at such time or the amount of proceeds from insurance or asset sale, as the case may be. "Capital Lease" means any leasing or similar arrangement which, in accordance with GAAP, would be capitalized on the balance sheet of such Person. "Capital Lease Obligations" means all monetary obligations of Borrowers or any of their Subsidiaries under any Capital Lease. "Capital Stock" means the capital stock or other equity interests of a Person. "Cases" means the Chapter 11 cases concerning Borrowers and certain of their Subsidiaries, commenced on the Petition Date, described in Recital A hereof and pending in the Bankruptcy Court. "Cash" means money, currency or a credit balance in a Deposit Account. "Cash Equivalents" means: a. securities issued or fully guaranteed or insured by the United States Government or any agency thereof and backed by the full faith and credit of the United States having maturities of not more than six months from the date of acquisition; b. certificates of deposit, time deposits, Eurodollar time deposits, repurchase agreements, reverse repurchase agreements, or bankers' acceptances, having in each case a tenor of not more than six months, issued by any Lender, or by any U.S. commercial lender or any branch or agency of a non-U.S. lender licensed to conduct business in the U.S. having combined capital and surplus of not less than $500,000,000 whose short-term debt securities are rated at least A-1 by Standard & Poor's Corporation or any successor rating agency or P-1 by Moody's Investors Service, Inc. or any successor rating agency; and c. commercial paper rated at least A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc. and in either case having a tenor of not more than six months. "CERCLA" has the meaning specified in the definition of "Environmental Laws." "Certificate re Non-Bank Status" means a certificate substantially in the form of Exhibit B annexed hereto delivered by a Lender to Administrative Agent to pursuant to Section 2.7(b)(iii). "Change of Control Event" means, with respect to any Person, an event or series of events by which: d. during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of such Person cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above, constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or whose election or nomination to that board or other equivalent governing body was approved by persons or entities appointing or nominating the persons referred to in clauses (i) and (ii) above; or e. Anschutz and/or any Affiliates of Anschutz cease to beneficially own and control, directly or indirectly, at least 25% of the issued and outstanding shares of capital stock of each Borrower entitled (without regard to the occurrence of any contingency) to vote for the election of members of the Governing Body of such Borrower. "Closing Date" means the date on which all conditions precedent set forth in Section 4.2 are satisfied or waived by all the Lenders and the Administrative Agent. "Code" means the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder. "Collateral" means any property or assets of Borrowers, whether real property or personal property, tangible or intangible, that now or hereafter are subject to a security interest pursuant to this Agreement and the Security Agreements. "Collateral Agent" means BofA, in its representative capacity as Collateral Agent for the Lenders hereunder and the lenders under the Restructured Term Credit Agreement, and any successor Collateral Agent. "Collateral Agent - Related Person" means BofA and any successor Collateral Agent pursuant to Section 9.5, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Commercial Letter of Credit" means any letter of credit or similar instrument issued for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by any Borrower or any Subsidiary the ordinary course of business of such Borrower or such Subsidiary. "Commitment" means the commitment of a Lender to make Loans to Borrowers pursuant to Section 2.1(a). "Confirmation Date" means January 22, 2001, the date upon which the Confirmation Order was entered by the Bankruptcy Court. "Confirmation Order" means the order of the Bankruptcy Court confirming the Plan of Reorganization pursuant to Section 1129 of the Bankruptcy Code. "Consolidated" means, as applied to any financial or accounting term with reference to any Person, such term determined on a consolidated basis for such Person in accordance with GAAP, including principles of consolidation, consistently applied. "Contingent Obligation" means, as to any Borrower (a) any Guaranty Obligation of that Borrower; and (b) any direct or indirect obligation or liability, contingent or otherwise, of that Borrower, (i) in respect of any letter of credit or similar instrument issued for the account of that Borrower or as to which that Borrower is otherwise liable for reimbursement of drawings or payments or (ii) to purchase any materials, supplies or other property from, or to obtain the services of, another Borrower if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other property, or for such services, shall be made regardless of whether delivery of such materials, supplies or other property is ever made or tendered.  The amount of any Contingent Obligation shall (subject, in the case of Guaranty Obligations, to the last sentence of the definition of "Guaranty Obligation") be deemed equal to the maximum reasonably anticipated liability in respect thereof. "Contractual Obligations" means, as to any Borrower, any provision of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Borrower is a party or by which it or any of its property is bound. "Controlled Group" means Borrowers and all Persons (whether or not incorporated) under common control or treated as a single employer with Borrowers or any of their Subsidiaries pursuant to Section 414(b), (c), (m) or (o) of the Code, except Anschutz and its subsidiaries and affiliates other than Borrowers and their Subsidiaries. "Deeds of Trust" means those certain Deeds of Trust with Security Agreement, Assignment of Leases and Rents and Fixture Filing, entered into between a Borrower and the Collateral Agent, all as modified by the Modifications of Deed of Trust. "Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. "DIP Credit Agreement" means the Revolving Credit Agreement dated as of September 5, 2000 by and among Borrowers and Anschutz. "Disposition" means (a) the sale, lease, conveyance, transfer or other disposition of Property, including but not limited to a Sale-and-Leaseback Transaction, (b) the sale or transfer by Borrowers or any Subsidiary of Borrowers of any equity securities issued by any Subsidiary of Borrowers and held by such transferor Person (other than (i) PIK payment in respect of the Anschutz Sub Debt and (ii) grant of stock options duly approved by the board of directors for the Borrower granting the stock options as an employee or director incentive and the issuance of equity securities upon the exercise thereof), and (c) sale or transfer of any accounts and notes receivables, with or without recourse. "Dollars," "dollars" and "$" each mean lawful money of the United States. "EBITDA" means with respect to any Person for any period, (a) the gross operating revenues of such Person for such period derived in the ordinary course of its business from operations (including, in the case of Borrowers, revenues received as management fees under agreements entered into by Subsidiaries of Borrowers), minus, (b) all operating expenses from operations of such Person for such period, including without limitation, technical, film, actual operating lease rent (including actual operating lease rent payable to an Affiliate of such Person), selling, advertising, general and administrative expenses and corporate overhead of such Person during such period, plus (c) depreciation, amortization, and other non-cash charges in each case including, without limitation, any increase or decrease, resulting from any adjustments for appreciation or depreciation in the value of any option to acquire the common stock of Borrowers to the extent deducted in calculating operating income from continuing operations of such Person for such period, but only to the extent not paid in cash. In the calculation of EBITDA there shall be excluded interest expense, interest income, extraordinary items and gains or losses on (and proceeds from) sales or dispositions of assets.  With respect to the consolidated EBITDA of any Person, the effect of revenues and expenses associated with any minority interest in Subsidiaries of such Person, and intercompany transactions, including the payment of dividends by Subsidiaries of such Person shall be excluded.  All dividends of unconsolidated (owned 50% or less) subsidiaries or other Persons shall be included to the extent they are paid in cash. In the case of the sale, transfer or other disposition, or an acquisition of an operating theatre by any such Person during any period, EBITDA shall be adjusted as it would have been if such acquisition, sale, transfer or other disposition had been consummated on the first day of the most recently completed last twelve month period of such Person. "Effective Date" means the date on which the Plan of Reorganization becomes effective. "Eligible Assignee" means (a) a financial institution organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (b) a commercial lender organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such lender is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; (c) any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act or any successor thereto) which extends credit or buys loans as one of its businesses, including but not limited to, insurance companies, mutual funds and lease financing companies; (d) a Lender; (e) an Affiliate of a Lender; (f) an Approved Fund; and (g) any other Person (other than a natural Person) approved by the Administrative Agent, in the case of any assignment of a Loan and, unless (x) such Person is taking delivery of an assignment in connection with physical settlement of a credit derivatives transaction or (y) an Event of Default or Default has occurred and is continuing, Borrowers (each such approval not to be unreasonably withheld or delayed); provided, however, no Person who competes with Borrowers in the motion picture exhibition business or is an affiliate to or a subsidiary of a Person who competes with Borrowers in the motion picture exhibition business can be an Eligible Assignee. "Employee Benefit Plan" means a "pension plan"(as defined in Section 3(2) of ERISA) maintained by Borrowers or any of their respective ERISA Affiliates or as to which Borrowers or any such ERISA Affiliate has contributed or otherwise may have any liability. "E.N." means E.N. Investment Company, a wholly-owned Subsidiary of Anschutz. "Environmental Claims" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any applicable Environmental Law, or for release or injury to the environment or threat to public health, personal injury (including sickness, disease or death), property damage, natural resources damage, or otherwise alleging liability or responsibility for damages (punitive or otherwise), cleanup, removal, remedial or response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the presence, placement, discharge, emission or release (including intentional and unintentional, negligent and non-negligent, sudden or non-sudden, accidental or non-accidental placement, spills, leaks, discharges, emissions or releases) of any Hazardous Material at, in, or from Property, whether or not owned by Borrowers, or (b) any other circumstances forming the basis of any violation, or alleged violation, of any applicable Environmental Law. "Environmental Laws" means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities applicable to Borrowers, in each case relating to environmental, health, safety and land use matters; including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Emergency Planning and Community Right-to-Know Act, and any similar state or local law in effect, each as amended from time to time. "Environmental Permits" has the meaning specified in Section 5.10(b). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and regulations promulgated thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) which is under common control or would be considered a single employer with such person pursuant to Section 414(b), (c), (n) or (o) of the Code or pursuant to Section 4001(b) of ERISA. "Eurodollar Rate Loans" means Loans bearing interest at rates determined by reference to the Adjusted Eurodollar Rates as provided in Section 2.2(a). "Event of Default" means any of the events or circumstances specified in Section 8.1. "Event of Loss" means, with respect to any Property (tangible or intangible, real or personal) any of the following:  (a) any loss, destruction or damage of such Property; or (b) any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such Property, or confiscation of such property or asset or the requisition of the use of such Property. "Exchange Act" means the Securities and Exchange Act of 1934 and regulations promulgated thereunder. "Federal Funds Effective Rate" means, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Administrative Agent from three Federal funds brokers of recognized standing selected by Administrative Agent. "Filing Subsidiaries" means, collectively, those Subsidiaries of Borrowers who filed the Plan of Reorganization with the Bankruptcy Court in the Cases. "Fund" means any Person (other than a natural Person) that is, or will be, engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. "Funding and Payment Office" means (i) the office of Administrative Agent located at One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006 or (ii) such other office of Administrative Agent as may from time to time hereafter be designated as such in a written notice delivered by Administrative Agent to Borrowers and Lenders. "Funded Indebtedness" means, without duplication, all Indebtedness for borrowed money and all Contingent Obligations relating thereto, Capital Lease Obligations and any net obligations of such Person under Swap Contracts on or after termination of the applicable Swap Contract. "Funding Date" means the date of the funding of a Loan. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination, consistently applied.  If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either Borrowers or the Lenders shall so request, the Administrative Agent, the Lenders and Borrowers shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Lenders), provided that, until so amended, (a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) Borrowers shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. "Governing Body" means the board of directors or other body having the power to direct or cause the direction of the management and policies of a Person that is a corporation, partnership, trust or limited liability company. "Governmental Authority" means (a) any federal, state, county or municipal government, or political subdivision thereof, (b) any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality, central bank or public body, or (c) any court, administrative tribunal or public utility having jurisdiction over Borrowers. "Governmental Acts" has meanings specified in Section 3.5(a). "Guaranty Obligation" means, as applied to any Borrower any direct or indirect liability of that Borrower with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of other Borrowers or their Subsidiaries (the "primary obligor"), including any obligation of other Borrowers or their Subsidiaries whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor, or (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation, or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, or (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof.  The amount of any Guaranty Obligation shall be deemed equal to the stated or determinable amount of the related primary obligation in respect of which such Guaranty Obligation is made (except where the Guaranty Obligation is of limited recourse, then such lesser amount of the related primary obligation in respect of which such limited-recourse Guaranty Obligation is made) or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof. "Hazardous Materials" means all those substances which are regulated by, or which may form the basis of liability under, any applicable Environmental Law, including all substances identified under any applicable Environmental Law as a pollutant, contaminant, hazardous waste, hazardous constituent, special waste, hazardous substance, hazardous material, or toxic substance, or petroleum or petroleum derived substance or waste. "Indebtedness" means, as to any Person at a particular time without duplication, all of the following: f. all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; g. net obligations under any Swap Contract in an amount equal to (i) if such Swap Contract has been closed out, the termination value thereof, or (ii) if such Swap Contract has not been closed out, the mark-to market value thereof determined on the basis of readily available quotations provided by any recognized dealer in such Swap Contract; h. whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; i. lease payment obligations under Capital Leases or Synthetic Lease Obligations; j. all Guaranty Obligations of such Person in respect of any of the foregoing; and k. all Contingent Obligations (other than Guaranty Obligations); provided that obligations constituting contingent liabilities of such Person as a general partner or joint venturer in respect of operating liabilities of the partnership or joint venture in which it is such a general partner or joint venturer shall constitute Indebtedness only when and to the extent that such contingent liabilities become due and payable obligations of such general partner or joint venturer. "Indebtedness Proceeds" means the proceeds of any indebtedness incurred for borrowed money and/or equity securities other than grant of stock options duly approved by the board of directors of each of the Borrowers granting the stock options as an employee or director incentive and the issuance of equity securities upon the exercise thereof issued by Borrowers or any of their Subsidiaries except for the following:  (i) Indebtedness incurred by a Subsidiary that is not directly or indirectly wholly owned by any of the Borrowers; (ii) Additional Debt not to exceed five million dollars ($5,000,000); (iii) Anschutz Sub Debt; (iv) Restructured Term Credit Agreement not to exceed $252,069,405.42; and (v) Indebtedness (1) secured by Liens or Negative Pledges on Property, which Liens or Negative Pledges were created pursuant to Contractual Obligations in effect when such Property was purchased; and (2) secured by purchase money security interests incurred in the Ordinary Course of Business. "Indemnitees" has the meaning specified in Section 10.3. "Indemnified Liabilities" has the meaning specified in Section 10.3. "Intercreditor and Subordination Agreement" means that certain Intercreditor and Subordination Agreement dated as of even date herewith by and among BTCo, in its capacity as administrative agent for the Lenders, and BofA, in its capacity as administrative agent for the lenders under the Restructured Term Credit Agreement, BofA, in its capacity as the collateral agent for the Lenders and the lenders under the Restructured Term Credit Agreement and the lenders under the Restructured Term Credit Agreement. "Interest Coverage Ratio" means the ratio, determined as of the end of each fiscal quarter of Borrowers listed in the corresponding column under Section 7.14, of (i) consolidated EBITDA of Borrowers and their Subsidiaries, after giving effect on a pro forma basis to any acquisition of any assets or Persons permitted under Sections 7.3(a)(ii) and 7.4 and/or Permitted Dispositions under Section 7.2 (as if such acquisition or disposition occurred on the first day of the trailing four quarters) for the trailing four fiscal quarters to (ii) consolidated Interest Expense of Borrowers and their Subsidiaries for such trailing four fiscal quarters, except that during the first year after the Effective Date, consolidated Interest Expense shall be calculated by multiplying the average daily Interest Expense during the period from the Effective Date through the last day of the most recent quarter by 365 or 366, as applicable. "Interest Expense" means, for any Person for any fiscal period, the sum of the amount of all interest on Funded Indebtedness that was paid, payable and/or accrued for such fiscal period. "Interest Payment Date" means the last Business Day of each month. "Interest Period" has the meaning specified in Section 2.2(b). "Interest Rate Determination Date" means, with respect to any Interest Period, the second Business Day prior to the first day of such Interest Period. "Issuing Lender" means, with respect to any Letter of Credit, a Lender which agrees or is otherwise obligated to issue such Letter of Credit, determined as provided in Section 3.1(b)(ii); provided that any Issuing Lender may be an Affiliate of BTCo (including, without limitation, Deutsche Bank (AG) so long as (i) BTCo is a Lender under this Agreement and (ii) such Affiliate shall have become party to this Agreement on or prior to the date of any issuance of any Letter of Credit by such Affiliate. "Laws" or "Law" means all applicable international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority. "Leasehold Deeds of Trust" means those certain Leasehold Deeds of Trust and Fixture Filing and Assignment of Leases and Rents, substantially in the form of Exhibit I, entered into between a Borrower, a trustee appointed in each relevant jurisdiction and the Collateral Agent, as modified to conform to the requirements of any given jurisdiction. "Lender" has the meaning specified in the introductory paragraph hereto and includes successors and permitted assigns pursuant to Section 10.1. "Lender Affiliate" means a Person which is an Affiliate of a Lender. "Lending Office" means, with respect to any Lender, the office or offices of the Lender specified as its "Lending Office" opposite its name on the applicable signature page hereto, or such other office or offices of the Lender as it may from time to time specify to Borrowers and the Administrative Agent. "Letter of Credit" or "Letters of Credit" means Commercial Letters of Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders for the account of Borrowers pursuant to Section 3.1. "Letter of Credit Usage" means, as at any date of determination, the sum of (i) the maximum aggregate amount which is or at any time thereafter may become available for drawing under all Letters of Credit then outstanding plus (ii) the aggregate amount of all drawings under Letters of Credit honored by Issuing Lenders and not theretofore reimbursed by Borrowers (including any such reimbursement out of the proceeds of Loans pursuant to Section 3.3(b)). "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement (in the nature of compensating balances, cash collateral accounts or security interests), encumbrance, lien (statutory or other), charge, or priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable Laws of any jurisdiction), including the interest of a purchaser of accounts receivable. "Loan(s)" means extensions of credit by a Lender to or for the benefit of Borrowers pursuant to Section 2.1. "Loan Documents" means this Agreement, the Notes, the Security Agreements, the Intercreditor and Subordination Agreement, all documents, agreements, certificates, or instruments delivered to the Administrative Agent, the Collateral Agent, or the Lenders in connection therewith, and any amendments, supplements, modifications, renewals, or restatements thereto. "Loan Exposure" means, with respect to any Lender as of any date of determination (i) prior to the termination of the Commitments, that Lender's Commitment and (ii) after the termination of the Commitments, the sum of (a) the aggregate outstanding principal amount of the Loans of that Lender plus (b) in the event that Lender is an Issuing Lender, the aggregate Letter of Credit Usage in respect of all Letters of Credit issued by that Lender (in each case net of any participations purchased by other Lenders in such Letters of Credit or any unreimbursed drawings thereunder) plus (c) the aggregate amount of all participations purchased by that Lender in any drawings under Letters of Credit honored by Issuing Lenders and not theretofore reimbursed by Borrowers. "Majority Lenders" means, at any time, the Lenders then having or holding more than fifty percent (50%) of the Aggregate Commitment. "Margin Stock" means "margin stock" as such term is defined in Regulation T, U or X of the Federal Reserve Board. "Material Adverse Effect" means any set of circumstances or events (other than the filing and prosecution of the Cases and as may be contemplated by the Plan of Reorganization) which (a) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of any Loan Document, (b) is or could reasonably be expected to be material and adverse to the condition (financial or otherwise), business, assets or operations of Borrowers and their Subsidiaries, taken as a whole, or (c) materially impairs or could reasonably be expected to materially impair the ability of Borrowers and their Subsidiaries, taken as a whole, to perform the Obligations. "Material Subsidiary" means, at any particular time, any Wholly-Owned Subsidiary of Borrowers that, together with the Subsidiaries of such Subsidiary, (a) accounted for more than five percent (5%) of EBITDA for the most recently completed four fiscal quarters of Borrowers and their Subsidiaries on a Consolidated basis or (b) was the owner of more than five percent (5%) of the Consolidated assets of Borrowers and their Subsidiaries as at the end of the most recent fiscal quarter of Borrowers. "Modifications of Deed of Trust" means the instruments, substantially in the form of Exhibit J, pursuant to which the Deeds of Trust are modified in connection with the execution of this Agreement. "Multiemployer Plan" means a "multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA) and to which any member of the Controlled Group makes, is making, or is obligated to make contributions or has within the immediately preceding period including five full Plan years made, or been obligated to make, contributions. "Mortgages" means the deeds of trust, mortgages and other documents executed and delivered by Borrowers to the Collateral Agent, at the Administrative Agent's option, in connection with encumbering in favor of the Collateral Agent, on behalf of the Lenders and the lenders pursuant to the Restructured Term Credit Agreement, the real property more specifically described in Schedule 1.2 attached hereto. "Negative Pledge" means a Contractual Obligation that contains a covenant binding on Borrowers or any of their Subsidiaries that prohibits Liens on any of their Property in favor of the Collateral Agent for the benefit of the Lenders party hereto, other than any such covenant contained in a Contractual Obligation which affects only the Property that is the subject of such Contractual Obligation. "Net Proceeds" means the gross proceeds in cash, checks or other cash equivalent financial instruments (including Cash Equivalent) as and when received by Borrowers or their Subsidiaries making a Disposition (other than a Permitted Disposition), net of (a) the direct costs relating to such Disposition (including fees, expenses and commissions with respect to legal, accounting, financial advisory, brokerage and other professional services provided in connection with such Disposition) excluding amounts payable to Borrowers or any Affiliate of Borrowers, (b) sale, use or other transaction taxes paid or payable as a result thereof, but not actual or estimated income taxes payable on any gain from the Disposition (provided, that a reasonable estimate of income taxes on the gain from the Disposition as Borrowers actually expect to pay in the year in which such Disposition occurs or such Net Proceeds are received may be netted), and (c) amounts required to be applied to repay principal, interest and prepayment premiums and penalties on Indebtedness secured by a Lien on the asset which is the subject of such Disposition.  "Net Proceeds" shall also include proceeds received by any Person in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents in respect of any Event of Loss net of (i) all money actually applied (or committed to be applied within six months of the Disposition) to repair or reconstruct the damaged property or property affected by the condemnation or taking, (ii) all of the costs and expenses reasonably incurred in connection with the collection of such proceeds, award or other payments and (iii) any amounts retained by or paid to parties having superior rights to such proceeds, awards or other payments. "Non-US Lender" shall have the meaning ascribed to such term in Section 2.7(b)(iii)a. "Note" means a promissory note of Borrowers payable to the order of a Lender in substantially the form of Exhibit A, evidencing the aggregate indebtedness of Borrowers to such Lender resulting from a Loan made by such Lender which indebtedness constitutes the joint and several obligations of each of Borrowers and its Subsidiaries. "Notice of Borrowing" means a notice substantially in the form of Exhibit K annexed hereto delivered by Borrowers to Administrative Agent pursuant to Section 2.1(b) with respect to a proposed borrowing. "Notice of Conversion/Continuation" means a notice substantially in the form of Exhibit L annexed hereto delivered by Borrowers to Administrative Agent pursuant to Section 2.2(d) with respect to a proposed conversion or continuation of the applicable basis for determining the interest rate with respect to the Loans specified therein. "Notice of Lien" means any notice of lien or similar document intended to be filed or recorded with any court, registry, recorder's office, central filing office or other Governmental Authority for the purpose of evidencing, creating, perfecting or preserving the priority of a Lien securing obligations owing to a Governmental Authority. "Notice to Depositary Institution" means, with respect to each deposit account in which any of Borrowers have an interest, a notice signed by the relevant Borrower and the Collateral Agent, in the form of Exhibit E, to be given to the depositary institution where such deposit account is maintained, for the purpose of notifying such depositary institution of the security interest of the Collateral Agent in such deposit account, and for the purpose of perfecting such security interest to the extent that it may be perfected by the giving of such a notice. "Obligations" means all Loans, and other Indebtedness, advances, debts, liabilities, obligations, covenants and duties owing by Borrowers to any Lender or the Administrative Agent and the Collateral Agent in its capacity as the Collateral Agent for the Lenders under this Agreement, of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, arising under this Agreement or under any other Loan Document, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, guaranty, indemnification, or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. "Operating Lease" means, as applied to any Borrower, any lease of Property which is not a Capital Lease. "Ordinary Course of Business" means, in respect of any transaction involving Borrowers or any Subsidiary of Borrowers, the ordinary course of such Person's business, as conducted by any such Person reasonably in accordance with past practice and undertaken by such Person in good faith and not for purposes of evading any covenant or restriction in any Loan Document. "Organization Documents" means, for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of shareholders of such corporation. "Permitted Disposition" has the meaning specified in Section 7.2. "Permitted Liens" has the meaning specified in Section 7.1. "Person" means any individual, trustee, corporation, general partnership, limited partnership, limited liability company, joint stock company, trust, unincorporated organization, bank, business association, firm, joint venture, Governmental Authority, or otherwise. "Petition Date" means September 5, 2000, the date on which Borrowers filed their respective petitions for relief commencing the Cases. "PIK" means paid-in-kind. "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which Borrowers or any member of the Controlled Group sponsors or maintains or to which Borrowers or member of the Controlled Group makes or is obligated to make contributions, and includes any Multiemployer Plan or a Qualified Plan. "Plan of Reorganization" means the Chapter 11 Joint Plan of Reorganization of Borrowers and their Filing Subsidiaries filed in the Cases on September 5, 2000, as amended and as it may be further modified or amended from time to time; provided that any amendment or modification materially adverse to the rights and interests of the Lenders shall require prior written consent of the Majority Lenders, such consent not to be unreasonably withheld or delayed. "Pledged Subsidiaries" means Subsidiaries of Borrowers, all the issuing and outstanding capital stock or other ownership interest of which are pledged pursuant to the Security Agreements. "Pro Rata Share" means, with respect to each Lender, the percentage obtained by dividing (x) the Loan Exposure of that Lender by (y) the aggregate Loan Exposure of all Lenders, as such percentage may be adjusted by assignments permitted pursuant to Section 10.1.  The initial Pro Rata Share of each Lender is set forth opposite the name of that Lender in Schedule 2.1 annexed hereto. "Property" means any estate or interest in any kind of property or asset of Borrowers, whether real, personal or mixed, and whether tangible or intangible including, without limitation, all Capital Leases and Operating Leases, and any assets constituting Collateral under the terms of this Agreement. "Qualified Plan" means a pension plan (as defined in Section 3(2) of ERISA) intended to be tax-qualified under Section 40.1(a) of the Code and which any member of the Controlled Group sponsors, maintains, or to which it makes or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding period including five full Plan years; but excluding any Multiemployer Plan. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Reimbursement Date" has the meaning assigned to that term in Section 3.3(b). "Request for Issuance of Letter of Credit" means a request substantially in the form of Exhibit M annexed hereto delivered by Borrowers to Administrative Agent pursuant to Section 3.1(b)(i) with respect to the proposed issuance of a Letter of Credit. "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. "Related Agreements" means the Restructured Term Credit Agreement and the Intercreditor and Subordination Agreement. "Responsible Officer" means the president or chief financial officer of a Borrower.  Any document or certificate hereunder that is signed by a Responsible Officer of a Borrower shall, absent manifest error, be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Borrower and such Responsible Officer shall, absent manifest error, be conclusively presumed to have acted on behalf of such Borrower. "Restructured Term Credit Agreement" means the Restructured Term Credit Agreement to be executed by and among Borrowers, BofA and other lenders party thereto, as amended, modified, supplemented, renewed, replaced, or restated from time to time to the extent permitted by Sections 7.18 and 7.19 hereof. "Sale-and-Leaseback Transaction" means any transaction or series of related transactions pursuant to which any of Borrowers or their Subsidiaries sells or transfers any real or tangible property or asset in connection with the leasing, or the resale against installment payments, or as part of an arrangement involving the leasing or the resale against installment payments, of such property or asset to the seller or transferor. "Secretary" means the Secretary of a Borrower. "Security Agreement" means that certain Security Agreement of even date herewith, entered into between Borrowers and the Collateral Agent, at the option of the Administrative Agent, substantially in the form of Exhibit F. "Security Agreements" means the Security Agreement, the UAPH II Stock Pledge Agreement, the Stock Pledge Agreement, the Modifications of Deed of Trust, the Deeds of Trust, the Mortgages, the Leasehold Deeds of Trust, UCC Financing Statements and any one or more of them, together with all other Collateral documents, if any, executed in connection with this Agreement. "Standby Letter of Credit" means any standby letter of credit or similar instrument issued for the purpose of supporting (i) Indebtedness of any Borrower or any Subsidiary in respect of industrial revenue or development bonds or financings, (ii) workers' compensation liabilities of any Borrower or any Subsidiary of Borrowers, (iii) the obligations of third party insurers of any Borrower or any Subsidiary of Borrowers arising by virtue of the laws of any jurisdiction requiring third party insurers, (iv) obligations with respect to Capital Leases or Operating Leases of any Borrower or any Subsidiary of Borrowers and (v) performance, payment, deposit or surety obligations of Borrowers or any of its Subsidiaries, in any case if required by law or governmental rule or regulation or in accordance with custom and practice in the industry; provided that Standby Letters of Credit may not be issued for the purpose of supporting (a) trade payables or (b) any Indebtedness constituting "antecedent debt" (as that term is used in Section 547 of the Bankruptcy Code). "Stock Pledge Agreement" means that certain Stock Pledge Agreement dated of even date herewith, entered into between Borrowers and the Collateral Agent, at the option of the Administrative Agent, substantially in the form of Exhibit G. "Stockholders' Agreement" means that certain Stockholders' Agreement by and among UAT, Anschutz, the Lenders, and other stockholders party thereto from time to time. "Subsidiary" of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which greater than fifty percent (50%) of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of Borrowers. "Swap Contract" means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any, such transaction is governed by or subject to any master agreement and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, as amended, restated, extended supplemented or otherwise modified in writing from time to time, a "Master Agreement"), including any such obligations or liabilities under any Master Agreement. "Synthetic Lease Obligations" means all monetary obligations of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations which do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the Indebtedness of such Person (without regard to accounting treatment). "Taxes" means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided that "Tax on the overall net income" of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which that Person is organized or in which that Person's principal office (and/or, in the case of a Lender, its lending office) is located or in which that Person (and/or, in the case of a Lender, its lending office) is deemed to be doing business on all or part of the net income, profits or gains (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its lending office). "Term Sheet" means that certain Term Sheet, dated as of November 3, 2000, by and among BTCo and Borrowers. "Termination Date" means the earlier to occur of: i. August 2, 2004; and ii. the date on which the Commitments shall terminate, or shall be reduced to zero, in accordance with the provisions of this Agreement including, without limitation, due to a Default or an Event of Default. "Theatre" or "Theatres" means theatres owned or operated by any of Borrowers or their Subsidiaries from time to time. "Total Leverage Ratio" means the ratio, determined as of the end of each fiscal quarter of Borrowers listed in the corresponding column under Section 7.14, of (i) consolidated total Funded Indebtedness of Borrowers and their Subsidiaries at the end of such quarter to (ii) consolidated EBITDA of Borrowers and their Subsidiaries after giving effect on a pro forma basis to any acquisition of any assets or Persons permitted under Sections 7.3(a)(ii) and 7.4 and/or Permitted Dispositions under Section 7.2 (as if such acquisitions or dispositions occurred on the first day of the trailing four quarters) for such trailing four quarters. "Total Utilization of Aggregate Commitment" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Loans (other than Loans made for the purposes of reimbursing the applicable Lender for any amount drawn under any Letter of Credit but not yet so applied) plus (ii) the Letter of Credit Usage. "UAPH II" means UA Property Holding II, Inc., a Colorado corporation. "UAPH II Stock Pledge Agreement" means that certain Stock Pledge Agreement dated of even date herewith, entered into between UAPH II and the Collateral Agent, at the option of the Administrative Agent, substantially in the form of Exhibit H . "UARC Leases" means (a) the Lease Agreement, dated as of November 1, 1988, between Prop I and UAT, as amended or otherwise modified by (i) the First Amendment thereto, dated as of May 1, 1990, (ii) the Second Amendment thereto, dated as of September 1, 1990, and (iii) the Assignment of Lease Agreement, dated as of November 1, 1988, from Prop I to The Connecticut Lender, and (b) the Master Lease Agreement and Master Sublease Agreement, each dated as of the date of the Indenture, between UARC and UAT, in each case, as such agreements are amended, supplemented or otherwise modified as permitted hereunder. "UCC" means the Uniform Commercial Code as in effect in any applicable jurisdiction. "UCC Financing Statements" means the financing statements to be signed and delivered by Borrowers to the Collateral Agent, at the Administrative Agent's option, to perfect the security interests granted in the Security Agreements (to the extent that such security interests may be perfected by the filing of financing statements), in form and substance satisfactory to the Collateral Agent, as they may from time to time be amended, modified, or continued. "Unfunded Pension Liabilities" means the excess of the present value of a Plan's accrued benefits, as defined in Section 3(23) of ERISA, as of the most recent valuation date for such Plan utilizing the actuarial assumptions set forth in such valuation, over the current value of that Plan's assets, as defined in Section 3(26) of ERISA, as of such date. "United States" and "U.S." each means the United States of America. "Wholly-Owned Subsidiary" means any corporation in which (other than directors' qualifying shares required by law) 100% of the capital stock of each class having ordinary voting power, and 100% of the capital stock of every other class, in each case, at the time as of which any determination is being made, is owned, beneficially and of record, by Borrowers, or by one or more of the other direct or indirect Wholly-Owned Subsidiaries, or both. 1. Other Interpretive Provisions. Defined Terms .  Unless otherwise specified herein or therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto.  The meaning of defined terms shall be equally applicable to the singular and plural forms of the defined terms.  Terms (including uncapitalized terms) not otherwise defined herein and that are defined in the California UCC shall have the meanings therein described. The Agreement .  The words "hereof," "herein," "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, section, schedule and exhibit references are to this Agreement unless otherwise specified.  All exhibits and schedules to this Agreement are hereby deemed incorporated herein by this reference as a part of this Agreement. Certain Common Terms . The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced; The term "including" is not limiting and means "including without limitation"; and The term "or" is not exclusive and has the meaning commonly associated with the phrase "and/or." a. Performance; Time.  Whenever any performance obligation hereunder shall be stated to be due or required to be satisfied on a day other than a Business Day, such performance shall be made or satisfied on the next succeeding Business Day.  In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding," and the word "through" means "to and including."  If any provision of this Agreement refers to any action taken or to be taken by any Person, or which such Person is prohibited from taking, such provision shall be interpreted to encompass any and all commercially reasonable means, direct or indirect, of taking, or not taking, such action. Contract .  Unless otherwise expressly provided herein or therein, references in the Loan Documents to agreements and other contractual instruments shall be deemed to include all subsequent amendments, modifications, renewals, extensions, replacements, supplements to, and restatements thereto, but only to the extent the same are not prohibited by the terms of any Loan Document. Laws .  References to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. Captions .  The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. Independence of Provision .  The parties acknowledge that this Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters, and that such limitations, tests and measurements are cumulative and must each be performed, except as expressly stated to the contrary in this Agreement. 2. Accounting Principles. a. Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. b. References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of Borrowers. 3. Rounding. Any financial ratios required to be maintained by Borrowers pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed in this Agreement and rounding the result up or down to the nearest number (with a round-up if there is no nearest number) to the number of places by which such ratio is expressed in this Agreement. 4. Exhibits and Schedules.  All exhibits and schedules to this Agreement, either as originally existing or as the same may from time to time be supplemented, modified or amended, are incorporated herein by this reference.  A matter disclosed on any Schedule shall be deemed disclosed on all Schedules. THE REVOLVING CREDIT 1. Commitments; Making of Loans; Notes. a. Commitments .  Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Borrowers herein set forth, each Lender hereby severally agrees, subject to the limitations set forth below with respect to the maximum amount of Loans permitted to be outstanding from time to time, to lend to Borrowers from time to time during the period from the Closing Date to but excluding the Termination Date an aggregate amount not exceeding its Pro Rata Share of the amount of the Aggregate Commitment.  The original amount of each Lender's Commitment is set forth opposite its name on Schedule 2.1 annexed hereto and the original amount of the Aggregate Commitment is $35,000,000; provided that the Commitment of a Lender shall be adjusted to give effect to any assignments of such Lender's Commitment pursuant to Section 10.1(b); and provided , further that the amount of the Aggregate Commitment shall be reduced from time to time by the amount of any reductions thereto made pursuant to Section 2.4.  Each Lender's Commitment shall expire on the Termination Date and all Loans and all other amounts owed hereunder with respect to the Loans and the Aggregate Commitment shall be paid in full no later than that date; provided that each Lender's Commitment shall expire immediately and without further action on June 5, 2001 if the conditions specified in Section 4.2 hereof have not been satisfied on or prior to such date.  Amounts borrowed under this Section 2.1(a) may be repaid and reborrowed at any time from the Closing Date to but excluding the Termination Date. Anything contained in this Agreement to the contrary notwithstanding, the Loans and the Aggregate Commitment shall be subject to the limitations that in no event shall the Total Utilization of Aggregate Commitment at any time exceed the Aggregate Commitment then in effect.  Borrowers shall prepay the Loans to the extent necessary so that the Total Utilization of Aggregate Commitments do not at any time exceed the Aggregate Commitment then in effect. Borrowing Mechanics .  Loans made on any Funding Date (other than Loans made pursuant to Section 3.3(b) for the purpose of reimbursing any Lender for the amount of a drawing under a Letter of Credit issued by it) shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $500,000 in excess of that amount.  Whenever any Borrower desires that Lenders make Loans it shall deliver to Administrative Agent a Notice of Borrowing no later than 10:00 A.M. (New York City time) at least three Business Days in advance of the proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least one Business Day in advance of the proposed Funding Date (in the case of a Base Rate Loan).  The Notice of Borrowing shall specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the amount of Loans requested, (iii) whether such Loans shall be Base Rate Loans or Eurodollar Rate Loans, and (iv) in the case of any Loans requested to be made as Eurodollar Rate Loans, the initial Interest Period requested therefor.  Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided in Section 2.2(d).  In lieu of delivering the above-described Notice of Borrowing, Borrowers may give Administrative Agent telephonic notice by the required time of any proposed borrowing under this Section 2.1(b); provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing to Administrative Agent on or before the applicable Funding Date. Neither Administrative Agent nor any Lender shall incur any liability to any Borrower in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to be genuine and to have been given by a duly authorized officer or other person authorized to borrow on behalf of Borrowers or for otherwise acting in good faith under this Section 2.1(b), and upon funding of Loans by Lenders in accordance with this Agreement pursuant to any such telephonic notice Borrowers shall have effected Loans hereunder. Borrowers shall notify Administrative Agent prior to the funding of any Loans in the event that any of the matters to which Borrowers are required to certify in the applicable Notice of Borrowing is no longer true and correct as of the applicable Funding Date, and the acceptance by any Borrower of the proceeds of any Loans shall constitute a re-certification by Borrowers, as of the applicable Funding Date, as to the matters to which Borrowers are required to certify in the applicable Notice of Borrowing. Except as otherwise provided in Sections 2.6(b), 2.6(c) and 2.6(g), a Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Borrowers shall be bound to make a borrowing in accordance therewith unless Borrowers pay all costs and expenses payable under Section 2.6(d). Disbursement of Funds .  All Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make a Loan requested hereunder nor shall the Commitment of any Lender be increased or decreased as a result of a default by any other Lender in that other Lender's obligation to make a Loan requested hereunder.  Promptly after receipt by the Administrative Agent of a Notice of Borrowing pursuant to Section 2.1(b) (or telephonic notice in lieu thereof), the Administrative Agent shall notify each Lender of the proposed borrowing.  Each Lender shall make the amount of its Loan available to the Administrative Agent, in same day funds in Dollars, at the Funding and Payment Office, not later than 12:00 Noon (New York City time) on the applicable Funding Date.  Except as provided in Section 3.3(b) with respect to Loans used to reimburse any Lender for the amount of a drawing under a Letter of Credit issued by it, upon satisfaction or waiver of the conditions precedent specified in Sections 4.1 and 4.2, the Administrative Agent shall make the proceeds of such Loans available to Borrowers on the applicable Funding Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Loans received by the Administrative Agent from Lenders to be credited to the account of Borrowers at the Funding and Payment Office. Unless the Administrative Agent shall have been notified by any Lender prior to the Funding Date for any Loans that such Lender does not intend to make available to the Administrative Agent the amount of such Lender's Loan requested on such Funding Date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such Funding Date and the Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to the applicable Borrower a corresponding amount on such Funding Date.  If such corresponding amount is not in fact made available to the Administrative Agent by such Lender, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Funding Date until the date such amount is paid to the Administrative Agent, at the customary rate set by the Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate.  If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the applicable Borrower and the applicable Borrower shall immediately pay such corresponding amount to the Administrative Agent together with interest thereon, for each day from such Funding Date until the date such amount is paid to the Administrative Agent, at the rate payable under this Agreement for Base Rate Loans.  Nothing in this Section 2.1(c) shall be deemed to relieve any Lender from its obligation to fulfill its Commitment hereunder or to prejudice any rights that Borrowers may have against any Lender as a result of any default by such Lender hereunder. Notes .  Borrowers shall execute and deliver to each Lender (or to Administrative Agent for that Lender) on the Closing Date a Note substantially in the form of Exhibit A annexed hereto to evidence that Lender's Loans, in the principal amount of that Lender's Commitment and with other appropriate insertions. Interest on the Loans. Rate of Interest.   Subject to the provisions of Sections 2.6 and 2.7, each Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Base Rate or the Adjusted Eurodollar Rate.  The applicable basis for determining the rate of interest with respect to any Loan shall be selected by Borrower initially at the time a Notice of Borrowing is given with respect to such Loan pursuant to Section 2.1(b), and the basis for determining the interest rate with respect to any Loan may be changed from time to time pursuant to Section 2.2(d).  If on any day a Loan is outstanding with respect to which notice has not been delivered to the Administrative Agent in accordance with the terms of this Agreement specifying the applicable basis for determining the rate of interest, then for that day that Loan shall bear interest determined by reference to the Base Rate. Subject to the provisions of this Section 2.2(a)(i) and (ii) and Section 2.2(e) and 2.7, the Loans shall bear interest through maturity as follows: i. If a Base Rate Loan, then at the sum of the Base Rate plus the margin (the "Applicable Base Rate Margin") set forth in the table below opposite the Total Leverage Ratio for the four-Fiscal Quarter period for which the applicable Compliance Certificate is being delivered pursuant to Section 6.2(a); or ii. if a Eurodollar Rate Loan, then at the sum of the Adjusted Eurodollar Rate plus the margin (the "Applicable Eurodollar Rate Margin") set forth in the table below opposite the Total Leverage Ratio for the four-Fiscal Quarter period for which the applicable Compliance Certificate is being delivered pursuant to Section 6.2(a): Consolidated Leverage Ratio Applicable Eurodollar Rate Margin Applicable Base Rate Margin Greater than or equal to 4.00:1:00 3.25% 2.25% Greater than or equal to 3.50:1.00 but less than 4.00:1.00 3.00% 2.00% Greater than or equal to 3.00:1.00 but less than 3.50:1.00 2.75% 1.75% Less than 3.00:1.00 2.50% 1.50% Upon delivery of a Compliance Certificate by Borrowers to the Administrative Agent pursuant to Section 6.2(a), the Applicable Base Rate Margin and the Applicable Eurodollar Rate Margin shall automatically be adjusted in accordance with such Compliance Certificate, such adjustment to become effective on the next succeeding Business Day following the receipt by the Administrative Agent of such Compliance Certificate; provided that until the delivery of the first Compliance Certificate after the six-month anniversary of the Closing Date, the Applicable Eurodollar Rate Margin and Applicable Base Rate Margin for Loans shall be 3.00% per annum and 2.00% per annum, respectively; provided further that at any time a Compliance Certificate is not delivered at the time required pursuant to Section 6.2(a), from the time such Compliance Certificate was required to be delivered until delivery of such Compliance Certificate, the Applicable Eurodollar Rate Margin shall be 3.25% per annum and the Applicable Base Rate Margin shall be 2.25% per annum for all Loans; provided further that if a Compliance Certificate erroneously indicates an applicable margin more favorable to Borrowers than would be afforded by the actual calculation of the Total Leverage Ratio, Borrowers shall promptly pay such additional interest and letter of credit fees upon determination of such error as shall correct for such error. Interest Periods .  In connection with each Eurodollar Rate Loan, Borrowers may, pursuant to the applicable Notice of Borrowing or Notice of Conversion/Continuation, as the case may be, select an interest period (each an "Interest Period") of one, two or three months to be applicable to such Loan; provided that: i. the initial Interest Period for any Eurodollar Rate Loan shall commence on the Funding Date in respect of such Loan, in the case of a Loan initially made as a Eurodollar Rate Loan, or on the date specified in the applicable Notice of C onversion/Continuation, in the case of a Loan converted to a Eurodollar Rate Loan; ii. in the case of immediately successive Interest Periods applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice of Conversion/Continuation, each successive Interest Period shall commence on the day on which the immediately preceding Interest Period expires; iii. if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that, if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the immediately preceding Business Day; iv. any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (v) of this Section 2.2(b), end on the last Business Day of a calendar month; v. no Interest Period with respect to any portion of the Loans shall extend beyond the Termination Date; and vi. there shall be no more than five Interest Periods outstanding at any time. Interest Payments .  Subject to the provisions of Section 2.2(e), interest on each Loan shall be payable in arrears on and to each Interest Payment Date, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid) and at maturity (including final maturity); provided that in the event any Loans are prepaid pursuant to Section 2.4, interest accrued on such Loans through the date of such prepayment shall be payable on the next succeeding Interest Payment Date applicable (or, if earlier, at final maturity). Conversion or Continuation .  Subject to the provisions of Section 2.6, Borrowers shall have the option (i) to convert at any time all or any part of its outstanding Loans equal to $1,000,000 and integral multiples of $500,000 in excess of that amount from Loans bearing interest at a rate determined by reference to one basis to Loans bearing interest at a rate determined by reference to an alternative basis or (ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any portion of such Loan equal to $1,000,000 and integral multiples of $500,000 in excess of that amount as a Eurodollar Rate Loan; provided , however , that a Eurodollar Rate Loan may only be converted into a Base Rate Loan on the expiration date of an Interest Period applicable thereto. Borrowers shall deliver a Notice of Conversion/Continuation to the Administrative Agent no later than 10:00 A.M. (New York City time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan).  A Notice of Conversion/Continuation shall specify (i) the proposed conversion/continuation date (which shall be a Business Day), (ii) the amount of the Loan to be converted/continued, (iii) the nature of the proposed conversion/continuation, (iv) in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan, the requested Interest Period, and (v) in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan, that no Default or Event of Default has occurred and is continuing.  In lieu of delivering the above-described Notice of Conversion/Continuation, Borrowers may give Agent telephonic notice by the required time of any proposed conversion/continuation under this Section 2.2(d); provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Conversion/Continuation to the Administrative Agent on or before the proposed conversion/continuation date.  Upon receipt of written or telephonic notice of any proposed conversion/continuation under this Section 2.2(d), the Administrative Agent shall promptly transmit such notice by telefacsimile or telephone to each Lender. Neither the Administrative Agent nor any Lender shall incur any liability to Borrowers in acting upon any telephonic notice referred to above that the Administrative Agent believes in good faith to be genuine and to have been given by a duly authorized officer or other person authorized to act on behalf of Borrowers or for otherwise acting in good faith under this Section 2.2(d), and upon conversion or continuation of the applicable basis for determining the interest rate with respect to any Loans in accordance with this Agreement pursuant to any such telephonic notice Borrowers shall have effected a conversion or continuation, as the case may be, hereunder. Except as otherwise provided in Sections 2.6(b), 2.6(c) and 2.6G(g), a Notice of Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Borrowers shall be bound to effect a conversion or continuation in accordance therewith, unless Borrowers pay all costs and expenses payable under Section 2.6(d). Default Rate .  Upon the occurrence and during the continuation of any Event of Default, the outstanding principal amount of all Loans and, to the extent permitted by applicable law, any interest payments thereon not paid when due and any fees and other amounts then due and payable hereunder, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable upon demand at a rate that is 2.00% per annum in excess of the interest rate otherwise payable under this Agreement with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is 2.00% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans); provided that, in the case of Eurodollar Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is 2.00% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans.  Payment or acceptance of the increased rates of interest provided for in this Section 2.2(e) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of the Administrative Agent or any Lender. Computation of Interest .  Interest on the Loans shall be computed on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues.  In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; provided that if a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan. Fees. Commitment Fees .  Borrowers agree to pay to the Administrative Agent, for distribution to each Lender in proportion to that Lender's Pro Rata Share, commitment fees for the period from and including the Closing Date to and excluding the Termination Date equal to the average of the daily excess, if any, of the Aggregate Commitment over the Total Utilization of Aggregate Commitment multiplied by 0.50% per annum, such commitment fees to be calculated on the basis of a 360-day year and the actual number of days elapsed and to be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on the first such date to occur after the Closing Date, and on the Termination Date. Other Fees .  Borrowers agree to pay to the Administrative Agent and Collateral Agent such fees in the amounts and at the times separately agreed upon between Borrowers and the Administrative Agent and Borrowers and Collateral Agent. Prepayments and Reductions in Aggregate Commitment; Prepayments and Reductions in Revolving Loan Commitments; General Provisions Regarding Payments. a. In the event that Borrowers intend to make any prepayments on the obligations under the Restructured Term Credit Agreement from any Net Proceeds or Indebtedness Proceeds, Borrowers will give the Administrative Agent at least ten (10) Business Days advance written notice thereof specifying the amount and source of such proposed prepayment. b. In addition, with respect to any Disposition giving rise to such Net Proceeds, Borrowers will also provide Administrative Agent at least ten Business Days prior to the consummation of such Disposition with a Compliance Certificate demonstrating that after giving effect to such Disposition, on a pro forma basis, that Borrowers will be in compliance with Section 7.14 hereof, with respect to Borrowers' twelve-month trailing EBITDA, as of the most recently ended fiscal quarter for which a Compliance Certificate has been delivered, and certifying that no Default or Event of Default under this Agreement then exists or would arise after giving effect to the proposed Disposition.  Borrowers shall promptly provide Administrative Agent with such additional information with respect to such Disposition and the proposed prepayment as may be reasonably requested by Administrative Agent. Voluntary Prepayments . Borrowers may, upon not less than one Business Day's prior written or telephonic notice, in the case of Base Rate Loans, and three Business Days' prior written or telephonic notice, in the case of Eurodollar Rate Loans, in each case given to the Administrative Agent by 12:00 Noon (New York City time) on the date required and, if given by telephone, promptly confirmed in writing to the Administrative Agent (which original written or telephonic notice the Administrative Agent will promptly transmit by telefacsimile or telephone to each Lender), at any time and from time to time prepay any Loans on any Business Day in whole or in part in an aggregate minimum amount for Base Rate Loans of $500,000 and integral multiples of $250,000 in excess of that amount and for Eurodollar Rate Loans of $1,000,000 and integral multiples of $500,000 in excess of that amount; provided, however, that a Eurodollar Rate Loan may only be prepaid on the expiration of the Interest Period applicable thereto unless Borrowers shall pay to Lenders all amounts payable under Section 2.6(d) with respect to such prepayment.  Notice of prepayment having been given as aforesaid, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein.  Any such voluntary prepayment shall be applied as specified in Section 2.4(f). Voluntary Reductions of Revolving Loan Commitments . Borrowers may, upon not less than three Business Days' prior written or telephonic notice confirmed in writing to the Administrative Agent (which original written or telephonic notice the Administrative Agent will promptly transmit by telefacsimile or telephone to each Lender), at any time and from time to time terminate in whole or permanently reduce in part, without premium or penalty, the Aggregate Commitments in an amount up to the amount by which the Aggregate Commitments exceed the Total Utilization of Aggregate Commitments at the time of such proposed termination or reduction; provided, that any such partial reduction of the Aggregate Commitments shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $500,000 in excess of that amount.  Borrowers' notice to the Administrative Agent shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Aggregate Commitments shall be effective on the date specified in Borrowers' notice and shall reduce the Commitment of each Lender proportionately to its Pro Rata Share. Application of Prepayments to Base Rate Loans and Eurodollar Rate Loans . Any prepayment of the Loans shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by Borrowers pursuant to Section 2.6(d). General Provisions Regarding Payments. i. Manner and Time of Payment .  All payments by Borrowers of principal, interest, fees and other Obligations hereunder and under the Notes shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to the Administrative Agent not later than 12:00 Noon (New York City time) on the date due at the Funding and Payment Office for the account of Lenders; funds received by the Administrative Agent after that time on such due date shall be deemed to have been paid by Borrower on the next succeeding Business Day.  Borrowers hereby authorize the Administrative Agent to charge its accounts with the Administrative Agent in order to cause timely payment to be made to the Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose). Application of Payments to Principal and Interest .  Except as provided in Section 2.2(c), all payments in respect of the principal amount of any Loan shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to such Loan) shall be applied to the payment of interest before application to principal. Apportionment of Payments .  Aggregate principal and interest payments in respect of Loans shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to Lenders' respective Pro Rata Shares.  The Administrative Agent shall promptly distribute to each Lender, at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request, its Pro Rata Share of all such payments received by the Administrative Agent and the commitment fees of such Lender when received by the Administrative Agent pursuant to Section 2.3.  Notwithstanding the foregoing provisions of this Section 2.4(f)(iii), if, pursuant to the provisions of Section 2.6(c), any Notice of Conversion/Continuation is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, the Administrative Agent shall give effect thereto in apportioning payments received thereafter. Payments on Non-Business Days .  Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees or the letter of credit fees hereunder, as the case may be. Notation of Payment .  Each Lender agrees that before disposing of any Note held by it, or any part thereof (other than by granting participations therein), that Lender will make a notation thereon of all Loans evidenced by that Note and all principal payments previously made thereon and of the date to which interest thereon has been paid in full; provided that the failure to make (or any error in the making of) a notation of any Loan made under such Note shall not limit or otherwise affect the obligations of Borrowers hereunder or under such Note with respect to any Loan or any payments of principal or interest on such Note. Use of Proceeds. Loans .  Borrowers will use the proceeds of the Loans to repay up to $25,000,000 owed on the DIP Credit Agreement and to fund general working capital needs after confirmation of the Plan of Reorganization including payment of interest and scheduled amortization payments due pursuant to the Restructured Term Credit Agreement. Margin Regulations .  No portion of the proceeds of any borrowing under this Agreement shall be used by Borrowers or any of their Subsidiaries in any manner that might cause the borrowing or the application of such proceeds to violate Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of such Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds. Special Provisions Governing Eurodollar Rate Loans. Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to Eurodollar Rate Loans as to the matters covered: Determination of Applicable Interest Rate .  As soon as practicable after 10:00 A.M. (New York City time) on each Interest Rate Determination Date, the Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Borrowers and each Lender. Inability to Determine Applicable Interest Rate .  In the event that the Administrative Agent reasonably and in good faith shall have determined (which determination absent manifest error shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that by reason of circumstances affecting the interbank Eurodollar market reasonable and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Adjusted Eurodollar Rate, the Administrative Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Borrowers and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans until such time as the Administrative Agent notifies Borrowers and Lenders that the circumstances giving rise to such notice no longer exist and (ii)  any Notice of Borrowing or Notice of Conversion/Continuation given by Borrowers with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by Borrowers. Illegality or Impracticability of Eurodollar Rate Loans .  In the event that on any date any Lender shall have reasonably and in good faith determined (which determination absent manifest error shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Borrowers and the Administrative Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) applicable to it or (ii) has become impracticable, or would cause such Lender material hardship, as a result of contingencies occurring after the date of this Agreement which materially and adversely affect the interbank Eurodollar market or the position of such Lender in that market, then, and in any such event, such Lender shall be an " Affected Lender " and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Borrowers and the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each other Lender).  Eurodollar Rate Loans adversely impacted by conditions, factors and events described in (i) and (ii) of this Section 2.6(c) hereto shall be " Affected Loans ."  Thereafter (a) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (b) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by Borrowers pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, the Affected Lender shall make such Loan as (or convert such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (d) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination.  Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by Borrowers pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, Borrowers shall have the option, subject to the provisions of Section 2.6(d), to rescind such Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to the Administrative Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above (which notice of rescission the Administrative Agent shall promptly transmit to each other Lender).  Except as provided in the immediately preceding sentence, nothing in this Section 2.6(c) shall affect the obligation of any Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement. Compensation For Breakage or Non-Commencement of Interest Periods .  Borrowers shall compensate each Lender, upon written request by that Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including any interest paid by that Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by that Lender in connection with the liquidation or re-employment of such funds) which that Lender may sustain: (i) if for any reason (other than a default by that Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Borrowing or a telephonic request for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Conversion/Continuation or a telephonic request for conversion or continuation, (ii) if any prepayment (including any prepayment pursuant to Section 2.4(c) or other principal payment or any conversion of any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Borrowers, or (iv) as a consequence of any other default by Borrowers in the repayment of its Eurodollar Rate Loans when required by the terms of this Agreement. Booking of Eurodollar Rate Loans .  Subject to the provisions of Section 2.8, any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of that Lender. Assumptions Concerning Funding of Eurodollar Rate Loans .  Calculation of all amounts payable to a Lender under this Section 2.6 and under Section 2.7(a) shall be made as though that Lender had actually funded each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Lender to a domestic office of that Lender in the United States of America; provided , however , that each Lender may fund each of its Eurodollar Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section 2.6 and under Section 2.7(a). Eurodollar Rate Loans After Default .  After the occurrence of and during the continuation of a Default or an Event of Default, (i) Borrowers may not elect to have a Loan be made or maintained as, or converted to, a Eurodollar Rate Loan after the expiration of any Interest Period then in effect for that Loan and (ii) subject to the provisions of Section 2.6(d), any Notice of Borrowing or Notice of Conversion/Continuation given by Borrowers with respect to a requested borrowing or conversion/continuation that has not yet occurred shall be deemed to be rescinded by Borrowers. Increased Costs; Taxes; Capital Adequacy. Compensation for Increased Costs and Taxes .  Subject to the provisions of Section 2.7(b) (which shall be controlling with respect to the matters covered thereby), in the event that any Lender shall reasonably and in good faith determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): i. subjects such Lender (or its applicable lending office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this Agreement or any of its obligations hereunder or any payments to such Lender (or its applicable lending office) of principal, interest, fees or any other amount payable hereunder; ii. imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Adjusted Eurodollar Rate); or iii. imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the interbank market; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, Borrowers shall promptly pay to such Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be reasonably necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder.  Such Lender shall deliver to Borrowers (with a copy to the Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Lender under this Section 2.7(a), which statement shall be conclusive and binding upon all parties hereto absent manifest error. Withholding of Taxes . Payments to Be Free and Clear .  All sums payable by Borrowers under this Agreement and the other Loan Documents shall (except to the extent required by law) be paid free and clear of, and without any deduction or withholding on account of, any Tax (other than a Tax on the overall net income of any Lender) imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is made by or on behalf of Borrowers. Grossing-up of Payments .  If any Borrower or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by such Borrower to the Administrative Agent or any Lender under any of the Loan Documents: a. Borrowers shall notify the Administrative Agent of any such requirement or any change in any such requirement promptly after Borrowers become aware of it; b. Borrowers shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on Borrowers) for their own account or (if that liability is imposed on the Administrative Agent or such Lender, as the case may be) on behalf of and in the name of the Administrative Agent or such Lender; c. the sum payable by Borrowers in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, the Administrative Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and d. within 30 days after paying any sum from which it is required by law to make any deduction or withholding, and within 30 days after the due date of payment of any Tax which it is required by clause (b) above to pay, applicable Borrower shall deliver to the Administrative Agent evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority; provided that no such additional amount shall be required to be paid to any Lender under clause (c) above except to the extent that any change after the date hereof (in the case of each Lender listed on the signature pages hereof) or after the date of the Assignment Agreement pursuant to which such Lender became a Lender (in the case of each other Lender) in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the date of this Agreement or at the date of such Assignment Agreement, as the case may be, in respect of payments to such Lender. Evidence of Exemption from U.S. Withholding Tax . a. Each Lender that is organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof (for purposes of this Section 2.7(b)(iii), a "Non-US Lender") shall deliver to the Administrative Agent for transmission to Borrowers, on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be reasonably necessary in the determination of Borrowers or the Administrative Agent (each in the reasonable exercise of its discretion), (1) two original copies of Internal Revenue Service Form W-8BEN or W-8ECI (Parts I and II) (or any successor forms), properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Loan Documents or (2) if such Lender is not a "bank" or other Person described in Section 881(c)(3) of the Internal Revenue Code and cannot deliver either Internal Revenue Service Form W-8BEN or W-8ECI (Parts I and II) pursuant to clause (1) above, a Certificate re Non-Bank Status together with two original copies of Internal Revenue Service Form W-8 BEN (Part I) (or any successor form), properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of interest payable under any of the Loan Documents. b. Each Lender required to deliver any forms, certificates or other evidence with respect to United States federal income tax withholding matters pursuant to Section 2.7(b)(iii)a hereby agrees, from time to time after the initial delivery by such Lender of such forms, certificates or other evidence, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence obsolete or inaccurate in any material respect, that such Lender shall promptly (1) deliver to the Administrative Agent for transmission to Borrowers two new original copies of Internal Revenue Service Form W-8BEN or W-8ECI (Parts I and II), or a Certificate re Non-Bank Status and two original copies of Internal Revenue Service Form W-8 BEN (Part I), as the case may be, properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required in order to confirm or establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to payments to such Lender under the Loan Documents or (2) notify the Administrative Agent and Borrowers of its inability to deliver any such forms, certificates or other evidence. c. Borrowers shall not be required to pay any additional amount to any Non-US Lender under Section 2.7(b)(ii) if such Lender shall have failed to satisfy the requirements of clause a or b (1) of this Section 2.7(b)(iii); provided that if such Lender shall have satisfied the requirements of Section 2.7(b)(iii)a on the Closing Date (in the case of each Lender listed on the signature pages hereof) or on the date of the Assignment Agreement pursuant to which it became a Lender (in the case of each other Lender), nothing in this Section 2.7(b)(iii)c shall relieve Borrowers of its obligation to pay any additional amounts pursuant to clause c of Section 2.7(b)(ii) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described in Section 2.7(b)(iii)a. Capital Adequacy Adjustment .  If any Lender shall have reasonably and in good faith determined that the adoption, effectiveness, phase-in or applicability after the date hereof of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its applicable lending office) with any guideline, 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 the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender's Loans or Commitment or Letters of Credit or participations therein or other obligations hereunder with respect to the Loans or the Letters of Credit to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by any Borrower from such Lender of the statement referred to in the next sentence, such Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction.  Such Lender shall deliver to Borrowers (with a copy to Agent) a written statement, setting forth in reasonable detail the basis of the calculation of such additional amounts, which statement shall be conclusive and binding upon all parties hereto absent manifest error. Obligation of Lenders to Mitigate. Each Lender agrees that, as promptly as practicable after the officer of such Lender responsible for administering the Loans or Letters of Credit of such Lender, as the case may be, becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender to receive payments under Section 2.7 or Section 3.6, it will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or maintain the Commitment of such Lender or the affected Loans or Letters of Credit of such Lender through another lending or letter of credit office of such Lender, or (ii) take such other measures as such Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender pursuant to Section 2.7 or Section 3.6 would be materially reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of such Commitment or Loans or Letters of Credit through such other lending or letter of credit office or in accordance with such other measures, as the case may be, would not otherwise materially adversely affect such Commitment or Loans or Letters of Credit or the interests of such Lender; provided that such Lender will not be obligated to utilize such other lending or letter of credit office pursuant to this Section 2.8 unless applicable Borrower agrees to pay all incremental expenses incurred by such Lender as a result of utilizing such other lending or letter of credit office as described in clause (i) above.  A certificate as to the amount of any such expenses payable by applicable Borrower pursuant to this Section 2.8 (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender to Applicable Borrower (with a copy to the Administrative Agent) shall be conclusive absent manifest error. Joint Borrower Provisions.  Each Borrower represents to the Lenders that each is an integral part of a consolidated enterprise, and that each Borrower will receive direct and indirect benefits from the availability of the joint credit facility provided for herein, and from the ability to access the collective credit resources of the consolidated enterprise that are Borrowers.  Each Borrower irrevocably authorizes each other Borrower to act on its behalf in requesting, authorizing, and using the proceeds of the Loans made hereunder, and each Borrower agrees to be bound by the acts of each of the others in connection with the Loan Documents. Each Borrower is, and at all times shall be, jointly and severally liable for each and every one of the Obligations hereunder, regardless of which Borrower requested, received, used, or directly enjoyed the benefit of the extensions of credit hereunder.  Unless otherwise expressly set forth to the contrary in any of the Security Agreements, all of the Collateral provided under the Security Agreements shall secure all of the Obligations.  Each Borrower's Obligations under this Agreement are independent Obligations and are absolute and unconditional.  Each Borrower, to the extent permitted by law, hereby waives any defense to such Obligations that may arise by reason of the disability or other defense or cessation of liability of any other Borrower for any reason other than payment in full.  Each Borrower also waives any defense to such Obligations that it may have as a result of any holder's election of or failure to exercise any right, power, or remedy, including, without limitation, the failure to proceed first against such other Borrower or any security it holds for such other Borrower's Obligations under any Loan Document, if any.  Without limiting the generality of the foregoing, each Borrower expressly waives all demands and notices whatsoever (except for any demands or notices, if any, that such Borrower expressly is entitled to receive pursuant to the terms of any Loan Document), and agrees that the Lenders and the Administrative Agent may, without notice (except for such notice, if any, as such Borrower expressly is entitled to receive pursuant to the terms of any Loan Document) and without releasing the liability of such Borrower, extend for the benefit of any other Borrower the time for making any payment, waive or extend the performance of any agreement or make any settlement of any agreement for the benefit of any other Borrower, and may proceed against each Borrower, directly and independently of any other Borrower, as such obligee may elect in accordance with this Agreement. Each Borrower acknowledges that the Obligations of such Borrower undertaken herein or in the other Loan Documents, and the grants of security interests and liens by such Borrower to secure Obligations of the other Borrowers could be construed to consist, at least in part, of the guaranty of Obligations of the other Borrowers and, in full recognition of that fact, each Borrower consents and agrees as hereinafter set forth in the balance of this Section 2.9.  The consents, waivers, and agreements of the Borrowers that are contained in the balance of this Section 2.9 are intended to deal with the suretyship aspects of the transactions evidenced by the Loan Documents (to the extent that a Borrower may be deemed a guarantor or surety for the Obligations of another Borrower) and thus are intended to be effective and applicable only to the extent that any Borrower has agreed to answer for the Obligations of another Borrower or has granted a lien or security interest in Collateral to secure the Obligations of another Borrower.  Conversely, the consents, waivers, and agreements of the Borrowers that are contained in the balance of this Section 2.9 shall not be applicable to the direct Obligations of a Borrower with respect to credit extended directly to such Borrower, and shall not be applicable to security interests or liens on Collateral of a Borrower given to directly secure direct Obligations of such Borrower where no aspect of guaranty or suretyship is involved.  Each Borrower consents and agrees that the Lenders may, at any time and from time to time, without notice or demand, whether before or after any actual or purported termination, repudiation or revocation of this Agreement by any one or more Borrowers, and without affecting the enforceability or continuing effectiveness hereof as to such Borrower, in accordance with the terms of the Loan Documents:  (a) supplement, restate, modify, amend, increase, decrease, extend, renew, accelerate or otherwise change the time for payment or the terms of the Obligations or any part thereof, including any increase or decrease of the rate(s) of interest thereon; (b) supplement, restate, modify, amend, increase, decrease or waive, or enter into or give any agreement, approval or consent with respect to, the Obligations or any part thereof, or any of the Loan Documents or any security or guarantees granted or entered into by any Person(s) other than such Borrower, or any condition, covenant, default, remedy, right, representation or term thereof or thereunder; (c) accept new or additional instruments, documents or agreements in exchange for or relative to any of the Loan Documents or the Obligations or any part thereof, (d) accept partial payments on the Obligations; (e) receive and hold additional security or guarantees for the Obligations or any part thereof, (f) release, reconvey, terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute, transfer or enforce any security or guarantees, and apply any security and direct the order or manner of sale thereof as the Lenders in their sole and absolute discretion may determine; (g) release any other Person (including, without limitation, any other Borrower) from any personal liability with respect to the Obligations or any part thereof, (h) with respect to any Person other than such Borrower (including, without limitation, any other Borrower), settle, release on terms satisfactory to the Lenders or by operation of applicable laws or otherwise liquidate or enforce any Obligations and any security therefor or guaranty thereof in any manner, consent to the transfer of any security and bid and purchase at any sale; or (i) consent to the merger, change or any other restructuring or termination of the corporate or partnership existence of any other Borrower or any other Person, and correspondingly agree, in accordance with all applicable provisions of the Loan Documents, to the restructure of the Obligations, and any such merger, change, restructuring or termination shall not affect the liability of any Borrower or the continuing effectiveness hereof, or the enforceability hereof with respect to all or any part of the Obligations. Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent and the Collateral Agent may enforce the Loan Documents independently as to each Borrower and independently of any other remedy the Administrative Agent or the Collateral Agent at any time may have or hold in connection with the Obligations, and, subject to the provisions of Section 8.3 and the terms of the Intercreditor and Subordination Agreement, it shall not be necessary for the Administrative Agent or the Collateral Agent to marshal assets in favor of any Borrower or any other Person or to proceed upon or against or exhaust any security or remedy before proceeding to enforce this Agreement or any other Loan Documents.  Each Borrower expressly waives, subject to the provisions of Section 8.3, any right to require the Administrative Agent or the Collateral Agent to marshal assets in favor of any Borrower or any other Person or to proceed against any other Borrower or any Collateral provided by any Person, and agrees that, subject to the provisions of Section 8.3, the Administrative Agent and the Collateral Agent may proceed against Borrowers or any Collateral in such order as they shall determine in their sole and absolute discretion. The Administrative Agent and the Collateral Agent may file a separate action or actions against any Borrower, whether action is brought or prosecuted with respect to any security or against any other Person, or whether any other Person is joined in any such action or actions.  Each Borrower agrees, for itself, that the Administrative Agent, the Collateral Agent and any other Borrower, or any Affiliate of any other Borrower (other than such Borrower itself), may deal with each other in connection with the Obligations or otherwise, or alter any contracts or agreements now or hereafter existing between any of them, in any manner whatsoever, all without in any way altering or affecting the continuing efficacy as to such Borrower of the Loan Documents. Subject to the terms of the Intercreditor and Subordination Agreement, the Administrative Agent's, the Collateral Agent's and the Lenders' rights hereunder shall be reinstated and revived, and the enforceability of this Agreement shall continue, with respect to any amount at any time paid on account of the Obligations which thereafter shall be required to be restored or returned by the Administrative Agent, the Collateral Agent or the Lenders (including, without limitation, the restoration or return of any amount pursuant to a court order or judgment (whether or not final or non-appealable), or pursuant to a good faith settlement of a pending or threatened avoidance or recovery action, or pursuant to good faith compliance with a demand made by a Person believed to be entitled to pursue an avoidance or recovery action (such as a bankruptcy trustee or a Person having the avoiding powers of a bankruptcy trustee, or similar avoiding powers), and without requiring the Administrative Agent, the Collateral Agent or the Lenders to oppose or litigate avoidance or recovery demands or actions that it believes in good faith to be meritorious or worthy of settlement or compliance, or pursue or exhaust appeals), all as though such amount had not been paid.  The rights of the Administrative Agent, the Collateral Agent or the Lenders created or granted herein and the enforceability of the Loan Documents at all times shall remain effective to cover the full amount of all the Obligations even though the Obligations, including any part thereof or any other security or guaranty therefor, may be or hereafter may become invalid or otherwise unenforceable as against any other Borrower and whether or not any other Borrower shall have any personal liability with respect thereto. To the maximum extent permitted by applicable law, each Borrower, for itself, expressly waives any and all defenses now or hereafter arising or that otherwise might be asserted by reason of (a) any disability or other defense of any other Borrower with respect to the Obligations or with respect to the enforceability of the Collateral Agent's security interest in or Lien on any collateral securing any of the Obligations (including, without limitation, the Collateral), (b) the unenforceability or invalidity of any security or guaranty for the Obligations or the lack of perfection or continuing perfection or failure of priority of any security for the Obligations, (c) the cessation for any cause whatsoever of the liability of any other Borrower (other than by reason of the full payment and performance of all Obligations), (d) any failure of the Administrative Agent or the Collateral Agent to give notice of sale or other disposition of Collateral to any other Borrower or any other Person other than such waiving Borrower, or any defect in any notice that may be given to any other Borrower for any other Person other than such waiving Borrower, in connection with any sale or disposition of any collateral securing the Obligations or any of them (including, without limitation, the Collateral), (e) any failure of the Administrative Agent or the Collateral Agent to comply with applicable law in connection with the sale or other disposition of any collateral or other security for any Obligation that is owned by another Borrower or by any other Person other than such waiving Borrower, including any failure of the Administrative Agent to conduct a commercially reasonable sale or other disposition of any such collateral or other security for any Obligation, (f) any act or omission of the Administrative Agent or others that directly or indirectly results in or aids the discharge or release of any other Borrower, or the Obligations of any other Borrower, or any security or guaranty therefor, by operation of law or otherwise, or (g) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a surety's or guarantor's obligation in proportion to the principal obligation.  Until such time, if any, as all of the Obligations (other than contingent obligations and indemnities which survive repayment of the Loans) have been paid and performed in full and no portion of any commitment of the Lenders to any Borrower under any Loan Document remains in effect, no Borrower shall have any right of subrogation, contribution, reimbursement or indemnity, and each Borrower expressly waives any right to enforce any remedy that the Administrative Agent and the Collateral Agent now have or hereafter may have against any other Person and waives the benefit of, or any right to participate in, any collateral now or hereafter held by the Administrative Agent or the Collateral Agent.  Except to the extent expressly provided for in any Loan Document, each Borrower expressly waives, to the maximum extent permitted by applicable law, all rights or entitlements to presentments, demands for payment or performance, notices of nonpayment or nonperformance, protests, notices of protest, notices of dishonor and all other notices or demands of any kind or nature whatsoever with respect to the Obligations, and all notices of acceptance of the Loan Documents or of the existence, creation or incurring of new or additional Obligations. In the event that all or any part of the Obligations at any time should be or become secured by any one or more deeds of trust or mortgages or other instruments creating or granting liens on any interests in real property, each Borrower authorizes the Collateral Agent, upon the occurrence of and during the continuance of any Event of Default, at its sole option, without notice or demand except as is or may be expressly required by the terms of any Loan Document or by the provisions of any applicable law, to foreclose any or all of such deeds of trust or mortgages or other instruments by judicial or non-judicial sale, without affecting or diminishing, except to the extent of the effect of the application of the proceeds realized therefrom, and except to the extent mandated by any non-waivable provision of applicable law, the Obligations of any Borrower (other than the Obligations of a grantor of a foreclosed deed of trust, mortgage, or other instrument, to the extent, if any, that applicable law affects or diminishes the Obligations of such grantor), the enforceability of this Agreement or any other Loan Document, or the validity or enforceability of any remaining security interests or liens of, or for the benefit of, the Lenders, the Administrative Agent and the Collateral Agent on any Collateral. Each Borrower hereby agrees to keep each other Borrower fully apprised at all times as to the status of its business, affairs, finances, and financial condition, and its ability to perform its Obligations under the Loan Documents, and in particular as to any adverse developments with respect thereto.  Each Borrower hereby agrees to undertake to keep itself apprized at all times as to the status of the business, affairs, finances, and financial condition of each other Borrower, and of the ability of each other Borrower to perform its Obligations under the Loan Documents, and in particular as to any adverse developments with respect to any thereof.  Each Borrower hereby agrees, in light of the foregoing mutual covenants to inform each other, and to keep themselves and each other informed as to such matters, that the Lenders, the Administrative Agent and the Collateral Agent shall have no duty to inform any Borrower of any information pertaining to the business, affairs, finances, or financial condition of any other Borrower, or pertaining to the ability of any other Borrower to perform its Obligations under the Loan Documents, even if such information is adverse, and even if such information might influence the decision of one or more of the Borrowers to continue to be jointly and severally liable for, or to provide Collateral for, Obligations of one or more of the other Borrowers.  To the fullest extent permitted by applicable law, each Borrower hereby expressly waives any duty of the Lenders, the Administrative Agent and the Collateral Agent to inform any Borrower of any such information. Borrowers and each of them warrant and agree that each of the waivers and consents set forth herein are made after consultation with legal counsel and with full knowledge of their significance and consequences, with the understanding that events giving rise to any defense or right waived may diminish, or otherwise adversely affect rights that Borrowers otherwise may have against other Borrowers, Lenders, the Administrative Agent, the Collateral Agent, or others, or against Collateral, and that, under the circumstances, the waivers and consents herein given are reasonable.  If any of the waivers or consents herein is determined to be contrary to any applicable law or public policy, such waivers and consents shall be effective to the maximum extent permitted by law. LETTERS OF CREDIT 1. Issuance of Letters of Credit and Lenders' Purchase of Participations Therein . Letters of Credit .  In addition to Borrowers requesting that Lenders make Loans pursuant to Section 2.1(a), Borrowers may request, in accordance with the provisions of this Section 3.1, from time to time during the period from the Closing Date to the 30 th day prior to the Termination Date, that one or more Lenders issue Letters of Credit for the account of Borrowers for the purposes specified in the definitions of Commercial Letters of Credit and Standby Letters of Credit.  Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Borrowers herein set forth, any one or more Lenders may, but (except as provided in Section 3.1(b)(ii)) shall not be obligated to, issue such Letters of Credit in accordance with the provisions of this Section 3.1; provided that Borrowers shall not request that any Lender issue (and no Lender shall issue): i. any Letter of Credit if, after giving effect to such issuance, the Total Utilization of Aggregate Commitments would exceed the Aggregate Commitments then in effect; ii. any Letter of Credit if, after giving effect to such issuance, the Letter of Credit Usage would exceed $10,000,000; iii. any Standby Letter of Credit having an expiration date later than the earlier of (a) ten days prior to the Termination Date and (b) the date which is one year from the date of issuance of such Standby Letter of Credit; provided that the immediately preceding clause (b) shall not prevent any Issuing Lender from agreeing that a Standby Letter of Credit will automatically be extended for one or more successive periods not to exceed one year each unless such Lender elects not to extend for any such additional period; and provided, further that such Lender shall elect not to extend such Standby Letter of Credit if it has knowledge that an Event of Default has occurred and is continuing (and has not been waived in accordance with Section 10.6) at the time such Lender must elect whether or not to allow such extension; or iv. any Commercial Letter of Credit having an expiration date (a) later than the earlier of (X) the Termination Date and (Y) the date which is 180 days from the date of issuance of such Commercial Letter of Credit or (b) that is otherwise unacceptable to the applicable Issuing Lender in its reasonable discretion; or v. any Letter of Credit denominated in a currency other than dollars; or vi. any Letter of Credit which would require drawings other than sight. Mechanics of Issuance . Notice of Issuance .  Whenever any Borrower desires the issuance of a Letter of Credit, it shall deliver to the Administrative Agent a Request for Issuance of Letter of Credit in the form of Exhibit M annexed hereto no later than 12:00 Noon (New York City time) at least three Business Days (in the case of Standby Letters of Credit) or five Business Days (in the case of Commercial Letters of Credit), or in each case such shorter period as may be agreed to by the Issuing Lender in any particular instance, in advance of the proposed date of issuance.  The Request for Issuance of Letter of Credit shall specify (a) the proposed date of issuance (which shall be a Business Day), (b) whether the Letter of Credit is to be a Standby Letter of Credit or a Commercial Letter of Credit, (c) the face amount of the Letter of Credit, (d) the expiration date of the Letter of Credit, (e) the name and address of the beneficiary, and (f) either the verbatim text of the proposed Letter of Credit or the proposed terms and conditions thereof, including a precise description of any documents to be presented by the beneficiary which, if presented by the beneficiary prior to the expiration date of the Letter of Credit, would require the Lender to make payment under the Letter of Credit; provided that the Lender, in its reasonable discretion, may require changes in the text of the proposed Letter of Credit or any such documents. Borrowers shall notify the applicable Lender (and the Administrative Agent, if the Administrative Agent is not such Lender) prior to the issuance of any Letter of Credit in the event that any of the matters to which Borrowers are required to certify in the applicable Request for Issuance of Letter of Credit is no longer true and correct as of the proposed date of issuance of such Letter of Credit, and upon the issuance of any Letter of Credit Borrowers shall be deemed to have re-certified, as of the date of such issuance, as to the matters to which Borrowers are required to certify in the applicable Request for Issuance of Letter of Credit. Determination of Issuing Lender .  Upon receipt by the Administrative Agent of a Request for Issuance of Letter of Credit pursuant to Section 3.1(b)(i) requesting the issuance of a Letter of Credit, in the event the Administrative Agent elects to issue such Letter of Credit, the Administrative Agent shall promptly so notify the applicable Borrower, and the Administrative Agent shall be the Issuing Lender with respect thereto.  In the event that the Administrative Agent, in its sole discretion, elects not to issue such Letter of Credit, the Administrative Agent shall promptly so notify the applicable Borrower, whereupon the applicable Borrower may request any other Lender to issue such Letter of Credit by delivering to such Lender a copy of the applicable Request for Issuance of Letter of Credit.  Any Lender so requested to issue such Letter of Credit shall promptly notify the applicable Borrower and the Administrative Agent whether or not, in its reasonable discretion, it has elected to issue such Letter of Credit.  In the event that all other Lenders shall have declined to issue such Letter of Credit, notwithstanding the prior election of the Administrative Agent not to issue such Letter of Credit, the Administrative Agent shall be obligated to issue such Letter of Credit, notwithstanding the fact that the Letter of Credit Usage with respect to such Letter of Credit and with respect to all other Letters of Credit issued by the Administrative Agent, when aggregated with the Administrative Agent's outstanding Loans, may exceed the Administrative Agent's Commitment then in effect. Issuance of Letter of Credit .  Upon satisfaction or waiver (in accordance with Section 10.6 of the conditions set forth in Section 4.3, the Issuing Lender shall issue the requested Letter of Credit in accordance with the Issuing Lender's standard operating procedures. Notification to Lenders .  Promptly after the issuance or amendment of a Letter of Credit, the applicable Issuing Lender shall notify the Administrative Agent and Borrowers in writing of such issuance or amendment and the notice to the Administrative Agent shall be accompanied by a copy of such issuance or amendment.  Upon receipt of such notice, the Administrative Agent shall promptly notify each Lender in writing of such issuance or amendment and if so requested by any Lender, the Administrative Agent shall provide such Lender with copies of such issuance or amendment. Lenders' Purchase of Participations in Letters of Credit .  Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby agrees to, have irrevocably purchased from Issuing Lender a participation in such Letter of Credit and any drawings honored thereunder in an amount equal to such Lender's Pro Rata Share of the maximum amount which is or at any time may become available to be drawn thereunder. Letter of Credit Fees. Borrowers agree to pay the following amounts with respect to Letters of Credit issued hereunder: i. with respect to each Letter of Credit (a) a fronting fee, payable directly to the applicable Issuing Lender for its own account, equal to 0.25% per annum of the daily amount available to be drawn under such Letter of Credit; provided that in any event, the minimum fronting fee for any Letter of Credit shall be $500 per year per Letter of Credit and (b) a letter of credit fee, payable to the Administrative Agent for the account of Lenders, equal to the Applicable Eurodollar Rate Margin set forth in Section 2.2(a) hereof for Eurodollar Rate Loans multiplied by the daily amount available from time to time to be drawn under such Letter of Credit, each such fronting fee or letter of credit fee to be payable in arrears on and to (but excluding) each March 15, June 15, September 15 and December 15 of each year and computed on the basis of a 360-day year for the actual number of days elapsed; and ii. with respect to the issuance, amendment or transfer of each Letter of Credit and each payment of a drawing made thereunder (without duplication of the fees payable under clause (i) above), documentary and processing charges payable directly to Lender who issued such Letter of Credit for its own account in accordance with such Lender's standard schedule for such charges in effect at the time of such issuance, amendment, transfer or payment, as the case may be. For purposes of calculating any fees payable under clause (i) of this Section 3.2, the daily amount available to be drawn under any Letter of Credit shall be determined as of the close of business on any date of determination.  Promptly upon receipt by the Administrative Agent of any amount described in clause (i)b of this Section 3.2, the Administrative Agent shall distribute to each Lender its Pro Rata Share of such amount. Drawings and Reimbursement of Amounts Paid Under Letters of Credit. Responsibility of Issuing Lender With Respect to Drawings .  In determining whether to honor any drawing under any Letter of Credit by the beneficiary thereof, Lender who issued such Letter of Credit shall be responsible only to examine the documents delivered under such Letter of Credit with reasonable care so as to ascertain whether they appear on their face to be in accordance with the terms and conditions of such Letter of Credit. Reimbursement by Borrowers of Amounts Paid Under Letters of Credit .  In the event the Lender who issued such Letter of Credit has determined to honor a drawing under a Letter of Credit issued by it, such Lender shall immediately notify Borrowers and the Administrative Agent, and such Borrowers shall reimburse such Lender on or before the Business Day immediately following the date on which such drawing is honored (the " Reimbursement Date ") in an amount in Dollars and in same day funds equal to the amount of such drawing; provided that, anything contained in this Agreement to the contrary notwithstanding, (i) unless Borrowers shall have notified the Administrative Agent and such Lender prior to 10:00 A.M. (New York City time) on the date such drawing is honored that Borrowers intend to reimburse such Lender for the amount of such drawing with funds other than the proceeds of Loans, Borrowers shall be deemed to have given a timely Notice of Borrowing to the Administrative Agent requesting Lenders to make Loans that are Base Rate Loans on the Reimbursement Date in an amount in Dollars equal to the amount of such drawing and (ii) subject to satisfaction or waiver of the conditions specified in Section 4.3, Lenders shall, on the Reimbursement Date, make Loans that are Base Rate Loans in the amount of such honored drawing, the proceeds of which shall be applied directly by the Administrative Agent to reimburse such Lender who issued such Letter of Credit for the amount of such honored drawing; and provided , further that if for any reason proceeds of Loans are not received by such Lender on the Reimbursement Date in an amount equal to the amount of such drawing, Borrowers shall reimburse such Lender who issued such Letter of Credit, on demand, in an amount in same day funds equal to the excess of the amount of such drawing over the aggregate amount of such Loans, if any, which are so received.  Nothing in this Section 3.3(b) shall be deemed to relieve any Lender from its obligation to make Loans on the terms and conditions set forth in this Agreement, and Borrowers shall retain any and all rights it may have against any Lender who issued such Letter of Credit resulting from the failure of such Lender who issued such Letter of Credit to make such Loans under this Section 3.3(b). Payment by Lenders of Unreimbursed Amounts Paid Under Letters of Credit . i. Payment by Lenders.  In the event that Borrowers shall fail for any reason to reimburse any Issuing Lender who issued such Letter of Credit as provided in Section 3.3(b) in an amount equal to the amount of any drawing honored by such Lender who issued such Letter of Credit under a Letter of Credit issued by it, such Lender shall promptly notify each other Lender of the unreimbursed amount of such drawing and of such other Lender's respective participation therein based on such Lender's Pro Rata Share.  Each Lender shall make available to such Lender who issued such Letter of Credit an amount equal to its respective participation, in Dollars and in same day funds, at the office of such Lender specified in such notice, not later than 12:00 Noon (New York City time) on the first business day (under the laws of the jurisdiction in which such office of such Lender who issued such Letter of Credit is located) after the date notified by such Lender.  In the event that any Lender fails to make available to such Lender who issued such Letter of Credit on such business day the amount of such Lender's participation in such Letter of Credit as provided in this Section 3.3(c), such Lender who issued such Letter of Credit shall be entitled to recover such amount on demand from such Lender together with interest thereon at the rate customarily used by such Lender who issued such Letter of Credit for the correction of errors among banks for three Business Days and thereafter at the Base Rate.  Nothing in this Section 3.3(c) shall be deemed to prejudice the right of any Lender to recover from any Lender who issued such Letter of Credit any amounts made available by such Lender to such Lender who issued such Letter of Credit pursuant to this Section 3.3(c) in the event that it is determined by the final judgment of a court of competent jurisdiction that the payment with respect to a Letter of Credit by such Lender who issued such Letter of Credit in respect of which payment was made by such Lender constituted gross negligence or willful misconduct on the part of such Lender who issued such Letter of Credit . Distribution to Lenders of Reimbursements Received From Borrowers .  In the event any Lender who issued such Letter of Credit shall have been reimbursed by other Lenders pursuant to Section 3.3(c)(i) for all or any portion of any drawing honored by such Lender who issued such Letter of Credit under a Letter of Credit issued by it, such Lender who issued such Letter of Credit shall distribute to each other Lender which has paid all amounts payable by it under Section 3.3(c)(i) with respect to such honored drawing such other Lender's Pro Rata Share of all payments subsequently received by such Lender who issued such Letter of Credit from Borrowers in reimbursement of such honored drawing when such payments are received.  Any such distribution shall be made to a Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request. Interest on Amounts Paid Under Letters of Credit . Payment of Interest by Borrowers .  Borrowers agree to pay to each Lender who issued such Letter of Credit, with respect to drawings honored under any Letters of Credit issued by it, interest on the amount paid by such Lender who issued such Letter of Credit in respect of each such drawing from the date such drawing is honored to but excluding the date such amount is reimbursed by Borrowers (including any such reimbursement out of the proceeds of Loans pursuant to Section 3.3(b)) at a rate equal to (a) for the period from the date such drawing is honored to but excluding the Reimbursement Date, the rate then in effect under this Agreement with respect to Loans that are Base Rate Loans and (b) thereafter, a rate which is 2% per annum in excess of the rate of interest otherwise payable under this Agreement with respect to Loans that are Base Rate Loans.  Interest payable pursuant to this Section 3.3(d)(i) shall be computed on the basis of a 360-day year for the actual number of days elapsed in the period during which it accrues and shall be payable on demand or, if no demand is made, on the date on which the related drawing under a Letter of Credit is reimbursed in full. Distribution of Interest Payments by Issuing Lender .  Promptly upon receipt by any Lender who issued such Letter of Credit of any payment of interest pursuant to Section 3.3(d)(i) with respect to a drawing under a Letter of Credit issued by it, (a) such Lender who issued such Letter of Credit shall distribute to each other Lender, out of the interest received by such Lender who issued such Letter of Credit in respect of the period from the date such drawing is honored to but excluding the date on which such Lender who issued such Letter of Credit is reimbursed for the amount of such drawing (including any such reimbursement out of the proceeds of Loans pursuant to Section 3.3(b)), the amount that such other Lender would have been entitled to receive in respect of the letter of credit fee that would have been payable in respect of such Letter of Credit for such period pursuant to Section 3.2 if no drawing had been honored under such Letter of Credit, and (b) in the event such Lender who issued such Letter of Credit shall have been reimbursed by other Lenders pursuant to Section 3.3(c)(i) for all or any portion of such drawing, such Lender who issued such Letter of Credit shall distribute to each other Lender which has paid all amounts payable by it under Section 3.3(c)(i) with respect to such drawing such other Lender's Pro Rata Share of any interest received by such Lender who issued such Letter of Credit in respect of that portion of such drawing so reimbursed by other Lenders for the period from the date on which such Lender who issued such Letter of Credit was so reimbursed by other Lenders to but excluding the date on which such portion of such drawing is reimbursed by Borrowers.  Any such distribution shall be made to a Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request. Obligations Absolute. The obligation of Borrowers to reimburse each Lender who issued such Letter of Credit for drawings made under the Letters of Credit issued by it and to repay any Loans made by Lenders pursuant to Section 3.3(b) and the obligations of Lenders under Section 3.3(c)(i) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including any of the following circumstances: i. any lack of validity or enforceability of any Letter of Credit; ii. the existence of any claim, set-off, defense or other right which Borrowers or any Lender may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), any Lender or any other Person or, in the case of a Lender, against Borrowers, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Borrower or one of its Subsidiaries and the beneficiary for which any Letter of Credit was procured); iii. any 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; iv. payment by the applicable Lender under any Letter of Credit against presentation of a draft or other document which does not substantially comply with the terms of such Letter of Credit; v. any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of any Borrower or any of its Subsidiaries; vi. any breach of this Agreement or any other Loan Document by any party thereto; vii. any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; or viii. the fact that a Default or an Event of Default or a Potential Event of Default shall have occurred and be continuing; provided , in each case, that payment by the applicable Lender under the applicable Letter of Credit shall not have constituted gross negligence or willful misconduct of such Issuing Lender under the circumstances in question (as determined by a final judgment of a court of competent jurisdiction); provided, further, that reimbursement by Borrowers of an Issuing Lender shall not constitute a waiver by Borrowers of any claims against the Issuing Lender for gross negligence or willful misconduct based upon any of the circumstances described above. Indemnification; Nature of Issuing Lenders' Duties. Indemnification .  In addition to amounts payable as provided in Section 3.6, Borrowers hereby agree to protect, indemnify, pay and save harmless each Lender who issued such Letter of Credit from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which such Lender who issued such Letter of Credit may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit by such Lender, other than as a result of (a) the gross negligence or willful misconduct of such Lender as determined by a final judgment of a court of competent jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor by such Lender of a proper demand for payment made under any Letter of Credit issued by it or (ii) the failure of such Lender to honor a drawing under any such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions herein called " Governmental Acts "). Nature of Issuing Lenders' Duties .  As between Borrowers and any Lender who issued such Letter of Credit, Borrowers assume all risks of the acts and omissions of, or misuse of the Letters of Credit issued by such Lender who issued such Letter of Credit by, the respective beneficiaries of such Letters of Credit.  In furtherance and not in limitation of the foregoing, such Lender shall not be responsible for:  (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of such Lender, including any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of such Lender's rights or powers hereunder. In furtherance and extension and not in limitation of the specific provisions set forth in the first paragraph of this Section 3.5(b), any action taken or omitted by any Lender who issued such Letter of Credit under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted reasonably and in good faith, shall not put such Lender under any resulting liability to Borrowers. Notwithstanding anything to the contrary contained in this Section 3.5, Borrowers shall retain any and all rights it may have against any Lender who issued such Letter of Credit for any liability arising out of the gross negligence or willful misconduct of such Lender, as determined by a final judgment of a court of competent jurisdiction. Increased Costs and Taxes Relating to Letters of Credit. Subject to the provisions of Section 2.7(b) (which shall be controlling with respect to the matters covered thereby), in the event that any Lender shall reasonably and in good faith determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by any Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): i. subjects such Lender (or its applicable lending or letter of credit office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to the issuing or maintaining of any Letters of Credit or the purchasing or maintaining of any participations therein or any other obligations under this Article 3, whether directly or by such being imposed on or suffered by any particular Lender; ii. imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement in respect of any Letters of Credit issued by any Lender or participations therein purchased by any Lender; or iii. imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending or letter of credit office) regarding this Article 3 or any Letter of Credit or any participation therein; and the result of any of the foregoing is to increase the cost to such Issuing Lender or Lender of agreeing to issue, issuing or maintaining any Letter of Credit or agreeing to purchase, purchasing or maintaining any participation therein or to reduce any amount received or receivable by such Issuing Lender or Lender (or its applicable lending or letter of credit office) with respect thereto; then, in any case, Borrowers shall promptly pay to such Issuing Lender or Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts as may be necessary to compensate such Issuing Lender or Lender for any such increased cost or reduction in amounts received or receivable hereunder.  Such Issuing Lender or Lender shall deliver to Borrowers a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Issuing Lender or Lender under this Section 3.6, which statement shall be conclusive and binding upon all parties hereto absent manifest error. CONDITIONS PRECEDENT AND CONDITIONS SUBSEQUENT Conditions of Loans.  The obligations of Lenders to make Loans on each Funding Date are subject to the following conditions precedent: a. Administrative Agent shall have received before that Funding Date, in accordance with the provisions of Section 2.1(b), an originally executed Notice of Borrowing, in each case signed by the chief executive officer, the chief financial officer or the treasurer of Borrowers or by an executive officer of Borrowers designated by any of the above-described officers on behalf of Borrowers in a writing delivered to the Administrative Agent. b. As of that Funding Date: i. The representations and warranties contained herein and in the other Loan Documents shall be true and correct in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date; ii. No event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by such Notice of Borrowing that would constitute a Default or an Event of Default; iii. No order, judgment or decree of any court, arbitrator or governmental authority shall purport to enjoin or restrain any Lender from making the Loans to be made by it on that Funding Date; and iv. The making of the Loans requested on such Funding Date shall not violate any Requirement of Law including Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System. Loan Documents.  The obligation of each Lender to make its Loans on the initial Funding Date hereunder is subject to the condition that the Administrative Agent shall have received on or before the Closing Date all of the following, in form and substance satisfactory to the Administrative Agent and each Lender and, with respect to original Loan Documents other than the Notes, in sufficient copies for each Lender:  the Loan Documents, executed by each Borrower, the Administrative Agent and each Lender, as applicable; and in addition: a. Resolutions; Incumbency. i. copies of the resolutions of the board of directors of each Borrower approving and authorizing the execution, delivery and performance by such Person of this Agreement and the other Loan Documents to be delivered hereunder, and authorizing the borrowing of the Loans, certified as of the Closing Date by the Secretary or an Assistant Secretary of such Person; and ii. a certificate of the Secretary or Assistant Secretary of each Borrower certifying the names and true signatures of the offices of such Person authorized to execute and deliver and perform, as applicable, this Agreement, and all other Loan Documents to be delivered hereunder. b. Articles of Incorporation, By-laws and Good Standing.  For each Borrower, each of the following documents: i. the articles or certificate of incorporation of such Person, as in effect on the Closing Date, certified by the Secretary of State of the state of incorporation of the Person as of a recent date and by the Secretary or Assistant Secretary of the Person as of the Closing Date; ii. the by-laws of such Person, as in effect on the Closing Date; and iii. a good standing certificate from the Secretary of State or equivalent officer with respect to each state specified with respect to such Borrower on Schedule 4.2(b)(ii). c. Legal Opinion.  An opinion of counsel to Borrowers, addressed to the Administrative Agent and the Lenders, substantially in the form of Exhibit C. Payment of Fees .  Borrowers shall have paid all accrued and unpaid reasonable fees, costs and expenses due hereunder to the extent then due and payable on the Closing Date, together with Attorney Costs accrued hereunder to the extent invoiced prior to or on the Closing Date. Certificate .  A certificate signed by a Responsible Officer of each Borrower, dated as of the Closing Date, stating that: i. the representations and warranties contained in Article 5 and in the Security Agreements are true and correct in all material respects on and as of such date, as though made on and as of such date; ii. no Default or Event of Default exists or would result from any Borrowing made on such date; iii. all Liens granted pursuant to the DIP Financing Orders have been released and terminated, all loans have been prepaid and all commitments under the DIP Credit Agreement terminated; iv. there has not occurred, since the Confirmation Date, any event or circumstance that could reasonably be expected to result in a Material Adverse Effect; v. no notice of appeal or writ of certiorari has been filed with respect to the Confirmation Order; and vi. from the Confirmation Date, no law or regulation has been adopted, no order, final judgment or decree of any Governmental Authority (other than the Confirmation Order) has been issued, and no litigation are pending or threatened (other than the Cases ), which could reasonably be expected to have a Material Adverse Effect. Confirmation Order .  The Administrative Agent shall have received a copy of the Confirmation Order, which (i) shall be in form and substance reasonably satisfactory to the Administrative Agent (without limiting the generality of the foregoing, the Confirmation Order shall confirm a Plan of Reorganization that conforms in all material respects to the Term Sheet), (ii) shall have been entered upon an application of Borrowers reasonably satisfactory in form and substance to the Administrative Agent, and (iii) shall be in full force and effect.  Notwithstanding the foregoing, the Collateral Agent shall have the right, exercisable by action of the Majority Lenders, but not the obligation, to record any lien and/or security interest granted hereby pursuant to any applicable state or other law method.  Borrowers shall bear all reasonable costs and expenses incurred by Collateral Agent in recording any lien or security interest granted hereby and shall pay such reasonable costs and expenses to the Collateral Agent. d. Insurance Certificates.  Receipt of the following (in form and substance reasonably satisfactory to the Collateral Agent):  (i) evidence that the Collateral Agent, on behalf of the Lenders, the Administrative Agent and the Collateral Agent, has been named lender loss payee for all insurance maintained by Borrowers relating to encumbered real property, contents, earthquake and employee dishonesty, (ii) evidence of business interruption insurance and (iii) evidence that 30 days cancellation notice will be sent to the Collateral Agent for each insurance policy maintained by Borrowers. e. Other Documents.  Such other approvals, opinions, or documents as the Administrative Agent may reasonably request.  Without limiting the generality of the foregoing sentence, except to the extent, if any, that the Administrative Agent in its discretion may have agreed that all or some of the preceding items listed in sub-paragraphs (a) through (g) above, may be delivered within a specified interval of time after the Closing Date as conditions subsequent to the obligations of the Administrative Agent and the Lenders hereunder, and only to such extent, if any, the Administrative Agent shall have received, with respect to each deposit account identified on a Schedule 6.11 delivered to the Administrative Agent at least three (3) Business Days before the Closing Date, a properly completed Notice to Depositary Institution signed by the Borrower having rights in or with respect to such deposit account. f. Stock Pledge Agreement.  The Stock Pledge Agreement, duly executed and delivered to the Collateral Agent by Borrowers, together with all certificates and instruments representing all stock and other equity ownership interests in the Subsidiaries of Borrowers, as more particularly described in the Stock Pledge Agreement, together with undated stock transfer powers duly executed in blank for each such stock certificate, the foregoing to be in form and substance reasonably satisfactory to the Administrative Agent. g. UAPH II Stock Pledge Agreement.  The UAPH II Stock Pledge Agreement, duly executed and delivered to the Collateral Agent by UAPH II, together with all certificates and instruments representing all stock and other equity ownership interests in the Subsidiaries of UAPH II, as more particularly described in the UAPH II Stock Pledge Agreement, together with undated stock transfer powers duly executed in blank for each such stock certificate, the foregoing to be in form and substance reasonably satisfactory to the Administrative Agent. h. Security Agreement.  The Security Agreement, duly executed and delivered to the Collateral Agent by Borrowers, the foregoing to be in form and substance reasonably satisfactory to the Administrative Agent. i. Deeds of Trust, etc.  The Deeds of Trust, the Modifications of Deed of Trust, the Mortgages, the Leasehold Deeds of Trust, and UCC Financing Statements, all duly executed and delivered to the Collateral Agent by Borrowers, the foregoing to be in form and substance reasonably satisfactory to the Administrative Agent. Title Insurance .  The Collateral Agent for the benefit of Lenders shall be named as an additional insured Party under Borrowers' title insurance policy.  Collateral Agent shall have for the benefit of Lenders a valid, perfected, enforceable and first priority security interest in the Collateral. Delivery of Collateral .  Borrowers have delivered to the Administrative Agent and the Collateral Agent a description of the location of Collateral and deposit accounts in accordance with Section 6.11. Corporate and Capital Structure .  The corporate and capital structure, management and ownership of Borrowers shall be reasonably satisfactory to the Administrative Agent. Intercreditor and Subordination Agreement .  The Intercreditor and Subordination Agreement shall be reasonably satisfactory in form and substance to the Administrative Agent and shall have been executed and delivered by each of the parties thereto. Restructured Term Credit Agreement .  The Restructured Term Credit Agreement shall be reasonably satisfactory in form and substance to the Administrative Agent and shall have been executed and delivered by each of the parties thereto. Conditions to Letters of Credit.  The issuance of any Letter of Credit hereunder (whether or not the applicable Issuing Lender is obligated to issue such Letter of Credit) is subject to the following conditions precedent: a. On or before the date of issuance of the initial Letter of Credit pursuant to this Agreement the conditions precedent set forth in Section 4.2 shall have been satisfied; or b. On or before the date of issuance of such Letter of Credit, the Administrative Agent shall have received, in accordance with the provisions of Section 3.1(b)(i), an originally executed Request for Issuance of Letter of Credit, in each case signed by the chief executive officer, the chief financial officer or the treasurer of Borrowers or by any executive officer of Borrowers designated by any of the above-described officers on behalf of Borrowers in a writing delivered to the Administrative Agent, together with all other information specified in Section 3.1(b)(i) and such other documents or information as the applicable Issuing Lender may reasonably require in connection with the issuance of such Letter of Credit. c. On the date of issuance of such Letter of Credit, all conditions precedent described in Section 4.1(b) shall be satisfied to the same extent as if the issuance of such Letter of Credit were the making of a Loan and the date of issuance of such Letter of Credit were a Funding Date. REPRESENTATIONS AND WARRANTIES Borrowers represent and warrant to the Administrative Agent and each Lender that: 1. Corporate Existence and Power.  Each Borrower: a. is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; b. subject to the entry of the Confirmation Order, has the power and authority to own its assets, carry on its business and to execute, deliver, and perform its obligations under, the Loan Documents, except to the extent the failure to so have could not reasonably be expected to have a Material Adverse Effect; c. is duly qualified as a foreign corporation, licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect; and d. is in compliance with all Requirements of Law, except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. 2. Corporate Authorization, No Contravention.  Subject to the entry of the Confirmation Order, the execution, delivery and performance by Borrowers of this Agreement, and any other Loan Document and any Related Agreement to which such Person is party, have been duly authorized by all necessary corporate action, and do not and will not: a. contravene the terms of any of that Person's Organization Documents; b. conflict with or result in any breach or contravention of any order, injunction, writ or decree of any Governmental Authority to which such Person or its Property is subject, except to the extent that such failure could not reasonably be expected to have a Material Adverse Effect; or c. violate any Requirement of Law except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. 3. Governmental Authorization.  All consents and approvals of, filings and registrations with, and other actions in respect of, all governmental agencies, authorities or instrumentalities which are or will be required in connection with the execution, delivery and performance of the Loan Documents have been or, prior to the time when required, will have been, obtained, given, filed or taken and are or will be in full force and effect, other than any which the failure to obtain, give, file or take would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 4. Binding Effect.  This Agreement and each other Loan Document and any Related Agreement to which Borrowers are a party will constitute the legal, valid and binding obligations of Borrowers, enforceable against Borrowers in accordance with their respective terms and the Confirmation Order (subject to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting creditors' rights generally and to general principles of equity). 5. Litigation.  Except as set forth in Schedule 5.5 hereto, there are no actions, suits, proceedings, claims or disputes pending, or to the actual knowledge of Borrowers, threatened or contemplated that are not stayed, at law, in equity, in arbitration or before any Governmental Authority, against Borrowers, or their Subsidiaries or any of their respective Properties which: a. purport to affect or pertain to this Agreement, or any other Loan Document, or any Related Agreement, or any of the transactions contemplated hereby or thereby; or b. if determined adversely to Borrowers or their Subsidiaries, could reasonably be expected to have a Material Adverse Effect.  No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery and performance of this Agreement or any other Loan Document, or any Related Agreement, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. 6. No Default.  No Default or Event of Default exists or would result from the incurring of any Obligations by Borrowers.  Neither Borrowers nor any of their Subsidiaries is in default under or with respect to any post-petition Contractual Obligation in any respect which, taken as a whole, could reasonably be expected to have a Material Adverse Effect. 7. ERISA. a. Schedule 5.7 lists all Plans maintained or sponsored by Borrowers or to which it is obligated to contribute as of the Closing Date, and separately identifies Plans intended to be Qualified Plans and Multiemployer Plans as of the Closing Date. b. Each Plan set forth on Schedule 5.7, which is maintained or sponsored by Borrowers, is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state law, including all requirements under the Code or ERISA for filing reports (which are true and correct in all material respects as of the date filed), and benefits have been paid in accordance with the provisions of the Plan, except as would not have a reasonable likelihood of having a Material Adverse Effect. c. Except as set forth in Schedule 5.7, each Qualified Plan has been determined by the Internal Revenue Service to qualify under Section 401 of the Code, and the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the Code, and to the knowledge of Borrowers nothing has occurred which would cause the loss of such qualification or tax-exempt status, except as would not have a reasonable likelihood of having a Material Adverse Effect. d. Except as set forth in Schedule 5.7, there is no outstanding liability under Title IV of ERISA with respect to any Plan maintained or sponsored by Borrowers or any ERISA Affiliate (as to which Borrowers are or may be liable), nor with respect to any Plan to which Borrowers or any ERISA Affiliate (wherein Borrowers are or may be liable) contribute or are obligated to contribute which has a reasonable likelihood of having a Material Adverse Effect. e. Except as set forth on Schedule 5.7, none of the Qualified Plans subject to Title IV of ERISA has any Unfunded Pension Liability as to which Borrowers are or may be liable which if such Plan were to be terminated has a reasonable likelihood of having a Material Adverse Effect. f. Except as set forth in Schedule 5.7, no Plan maintained or sponsored by Borrowers provides medical or other welfare benefits or extends coverage relating to such benefits beyond the date of a participant's termination of employment with Borrowers, except to the extent required by Section 4980B of the Code and at the sole expense of the participant or the beneficiary of the participant to the fullest extent permissible under such Section of the Code.  Borrowers have complied in all material respects with the notice and continuation coverage requirements of Section 4980B of the Code, except as would not have a reasonable likelihood of having a Material Adverse Effect. g. Except as set forth in Schedule 5.7, no ERISA Event has occurred or is reasonably expected to occur with respect to any Plan maintained or sponsored by Borrowers or to the knowledge of Borrowers, to which Borrowers are obligated to contribute, which has a reasonable likelihood of having a Material Adverse Effect. h. There are no pending or, to the knowledge of the executive management of Borrowers, threatened claims, actions or lawsuits, other than routine claims for benefits in the usual and ordinary course, asserted or instituted against (i) any Plan maintained or sponsored by Borrowers or its assets, (ii) any member of the Controlled Group with respect to any Qualified Plan of Borrowers, or (iii) any fiduciary with respect to any Plan for which Borrowers may be directly or indirectly liable, through indemnification obligations or otherwise, in each case, which has a reasonable likelihood of having a Material Adverse Effect. i. Except as set forth in Schedule 5.7, Borrowers have not incurred nor reasonably expect to incur (i) any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan or (ii) any liability under Title IV of ERISA (other than premiums due and not delinquent under Section 4007 of ERISA) with respect to a Plan, in each case, which has a reasonable likelihood of having a Material Adverse Effect. j. Except as set forth in Schedule 5.7, Borrowers have not engaged in a transaction that could reasonably be subject to Section 4069 or 4212(c) of ERISA, except as would not have a reasonable likelihood of having a Material Adverse Effect. k. Borrowers have not engaged, directly or indirectly, in a non-exempt prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) in connection with any Plan which has a reasonable likelihood of having a Material Adverse Effect. 8. Title to Properties.  Schedule 5.8 sets forth all the real Property owned or leased by Borrowers and their Subsidiaries and identifies the street address (where possible), the current owner (and current record owner, if different) and whether such property is leased or owned, and if such property is leased, the length of the lease term.  Borrowers and each of their Subsidiaries have good record and marketable title in fee simple to, or valid leasehold interests in, all such real Property necessary or used in the ordinary conduct of their business, except for Permitted Liens and such defects in title as could not reasonably be expected, individually or in the aggregate, have a Material Adverse Effect.  As of the Closing Date, the Property owned by Borrowers and their Subsidiaries is not subject to any Liens, other than Permitted Liens. 9. Taxes.  Except as set forth in Schedule 5.9, Borrowers and their Subsidiaries have filed all Federal and other material tax returns and reports required to be filed, and have paid all Federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their Properties (except for taxes set forth in Schedule 5.9), income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP and no Notice of Lien has been filed or recorded or, there is no proposed tax assessment against Borrowers or any of their Subsidiaries which could, if the assessment were made, reasonably be expected to have a Material Adverse Effect. 10. Environmental Matters. a. Except as specifically identified in Schedule 5.10, the operations of Borrowers and their Subsidiaries comply in all material respects with all applicable Environmental Laws except such non-compliance which would not result in liability in excess of $5,000,000 in the aggregate as to all such matters of non-compliance. b. Except as specifically identified in Schedule 5.10, Borrowers and their Subsidiaries have obtained all licenses, permits, authorizations and registrations required under any applicable Environmental Law ("Environmental Permits") reasonably necessary for their operations, and all such Environmental Permits are in good standing, and Borrowers and each of their Subsidiaries are in compliance with all material terms and conditions of such Environmental Permits, except for such noncompliances which are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. c. Except as specifically identified in Schedule 5.10, none of Borrowers, any of their Subsidiaries or any of their present Property or operations is subject to any outstanding written order from or agreement with any Governmental Authority, nor subject to any judicial or docketed administrative proceeding, respecting any Environmental Law, Environmental Claim or Hazardous Material, except such orders, agreements, or proceedings which are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. d. Except as specifically identified in Schedule 5.10, Borrowers are not aware of any conditions or circumstances which may give rise to any Environmental Claim arising from the operations of Borrowers or their Subsidiaries, including Environmental Claims associated with any operations of Borrowers or their Subsidiaries with a potential liability in excess of $5,000,000 in the aggregate.  Without limiting the generality of the foregoing, (i) neither Borrowers nor any of their Subsidiaries, to their knowledge, has any underground storage tanks (x) that are not properly registered or permitted under applicable Environmental Laws, or (y) that are leaking or disposing of Hazardous Materials off-site, either of which reasonably would be likely to have a Material Adverse Effect, except such underground storage tanks that Borrowers have obtained knowledge of 90 days or less prior to the date of giving the representation set forth herein and, if removal is required under any Requirement of Law, as to which the removal have been contractually committed by Borrowers or one or more of their Subsidiaries, or, if not contractually committed, Borrowers or one or more of their Subsidiaries are engaged in reasonable activities to secure such commitments, and (ii) Borrowers and their Subsidiaries have used their commercially reasonable efforts to notify all of their employees of the existence, if any, of any health hazard arising from the conditions of their employment and to meet all notification requirements under Title III of CERCLA or any other Environmental Law. 11. Regulated Entities.  None of Borrowers, any Person controlling Borrowers, or any Subsidiaries of Borrowers, is (a) an "Investment Company" within the meaning of the Investment Company Act of 1940, or (b) subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Law limiting its ability to incur Indebtedness. 12. Labor Relations.  There are no strikes, lockouts or other labor disputes against Borrowers or any of their Subsidiaries, or, to the Borrowers' actual knowledge, threatened against or affecting Borrowers or any of their Subsidiaries which are reasonably likely to have a Material Adverse Effect, and no significant unfair labor practice complaint is pending against Borrowers or any of their Subsidiaries or, to the actual knowledge of Borrowers, threatened against any of them before any Governmental Authority, which is reasonably likely to have a Material Adverse Effect. 13. Copyrights, Patents, Trademarks and Licenses.  Borrowers or their Subsidiaries own or are licensed or otherwise have the right to use all of the material patents, trademarks, service marks, trade names, copyrights, licenses, easements, permits, qualifications, accreditations, franchises, authorizations, domain names, web sites and other rights that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person, except for such noncompliances as in the aggregate would not reasonably be expected to have a Material Adverse Effect.  To the actual knowledge of Borrowers, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed by Borrowers or any of their Subsidiaries infringe upon any rights held by any other Person; no claim or litigation that is not stayed regarding any of the foregoing is pending or threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the actual knowledge of Borrowers, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect. 14. Subsidiaries.  As of the Closing Date, Borrowers have no Subsidiaries other than those specifically disclosed in part (a) of Schedule 5.14 hereto and have no equity investments in any other corporation or Person other than those specifically disclosed in part (b) of Schedule 5.14 hereto.  Schedule 5.14 indicates all first tier Wholly-Owned Subsidiaries and Material Subsidiaries as of the Closing Date. 15. Insurance.  The Properties of Borrowers and their Subsidiaries are insured with financially sound and reputable insurance companies, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar Properties in localities where Borrowers or such Subsidiaries operate. 16. Locations of Collateral and Places of Business.  Except for locations of Borrowers that have changed during a fiscal month of Borrowers with respect to which Borrowers are not past due in delivering an updated Schedule of Collateral location to the Administrative Agent pursuant to the penultimate sentence of Section 6.11, the Collateral location schedule delivered to the Administrative Agent prior to the Closing Date contains a complete disclosure of all locations at which any of the Collateral consisting of tangible Property is located, or at which any of the Borrowers maintains offices or a place of business.  As to each such location, except for the effect of any changes that may have occurred during a fiscal month of Borrowers with respect to which Borrowers are not past due in delivering an updated Schedule of Collateral location to the Administrative Agent pursuant to the penultimate sentence of Section 6.11, the Collateral location schedule delivered to the Administrative Agent prior to the Closing Date indicates which Borrowers own Collateral at such location or maintain offices or a place of business at such location. 17. Locations of, and Information with Respect to, Deposit Accounts.  Except for the effect of changes that have occurred during a fiscal month of Borrowers with respect to which Borrowers are not past due in delivering to the Administrative Agent an updated schedule of deposit account locations pursuant to the penultimate sentence of Section 6.11, the schedule of deposit locations delivered to the Administrative Agent prior to the Closing Date contains a complete disclosure of all deposit accounts of any type or nature in which any Borrower has any interest.  With respect to each such deposit account, except for the effect of changes that have occurred during a fiscal month of Borrowers with respect to which Borrowers are not past due in delivering to the Administrative Agent an updated schedule of deposit account locations pursuant to the penultimate sentence of Section 6.11, the schedule of deposit locations delivered to the Administrative Agent prior to the Closing Date accurately discloses the following information:  (a) The name in which such deposit account is maintained and the identity of which Borrower may have any interest therein; (b)  The name of the depositary institution with which such account is maintained; (c) The address of the branch or office of such depositary institution at which such deposit account is maintained; (d) The telephone number of such branch or office of such depositary institution; (e) The account number of such deposit account and the related ABA routing number; and (f) A brief description of the nature and purpose of such deposit account. 18. Validity of Security Interest.  Borrowers and their Subsidiaries represent and warrant that the security interests in and Liens on the Collateral in favor of the Collateral Agent for the benefit of Lenders, the lenders pursuant to the Restructured Term Credit Agreement, the Administrative Agent and the Collateral Agent under this Agreement and other Loan Documents are valid, effective, enforceable and, upon the filing of the applicable Security Agreements (to the extent such security interests in the Collateral may be perfected by filing such Security Agreements), will be perfected.  This Agreement and other Loan Documents create, as security for the Obligations, valid and enforceable security interests in and Liens on all of the Collateral, in favor of the Collateral Agent for the benefit of the Lenders, the lenders under the Restructured Term Credit Agreement, the Administrative Agent and Collateral Agent upon the filing of the applicable Security Agreements (to the extent such security interests may be perfected by filing).  Such security interests in and Liens on the Collateral shall be superior to and prior to all other Liens upon the filing of the applicable Security Agreements (to the extent such security interests in the Collateral may be perfected by filing such Security Agreements). 19. Existing Liens.  There are no Liens on any assets of Borrowers other than (A) Liens (including pledges) in favor of the Collateral Agent for the benefit of Lenders, the Administrative Agent and the Collateral Agent and lenders under the Restructured Term Credit Agreement under the Loan Documents, (B) other Liens in existence on the Confirmation Date as listed in Schedule 7.1 (except Liens granted in connection with the DIP Credit Agreement), and (C) Permitted Liens.  Schedule 7.1 to this Agreement is a complete and correct list, as of the Closing Date, of each Lien securing Indebtedness of Borrowers and their Subsidiaries and covering any Property of Borrowers and their Subsidiaries, and the aggregate Indebtedness secured (or that may be secured) by each such Lien and the Property covered by each such Lien is correctly described in Schedule 7.1. 20. Financial Statements.  Borrowers and their Subsidiaries represent and warrant that the Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of Borrowers and their Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein and (iii) show all material indebtedness and other liabilities, direct or contingent, of Borrowers and their Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness in accordance with GAAP consistently applied throughout the period covered thereby. 21. Compliance With Laws.  Borrowers and their Subsidiaries represent and warrant that Borrowers and their Subsidiaries are in compliance in all material respects with all material Laws that are applicable to them. 22. Material Adverse Change.  Since the Confirmation Date, there has not occurred any event, act or condition which has had, or could have, a Material Adverse Effect. AFFIRMATIVE COVENANTS Borrowers covenant and agree that, so long as any Lender shall have any Commitment hereunder, or any Loan or other Obligations shall remain unpaid or unsatisfied (other than contingent obligations and indemnities which survive repayment of the Loans), unless the Majority Lenders waive compliance in writing: 1. Financial Reporting.  Borrowers shall deliver to the Administrative Agent in form and detail satisfactory to the Administrative Agent and the Majority Lenders, with sufficient copies for the Lenders: a. within 25 days after the close of each month, the consolidated balance sheet of Borrowers and their Subsidiaries as at the end of such month and the related consolidated statement of income and statement of source and use of cash for such month and for the elapsed portion of the fiscal year ended with the last day of such month, and in each case setting forth comparative figures for the related periods in the prior fiscal year; b. within 50 days after the close of each of the first three quarterly accounting periods in each fiscal year of Borrowers, the consolidated balance sheet of Borrowers and their Subsidiaries as at the end of such quarterly period and the related consolidated statements of income, cash flow and retained earnings for such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period, and in each case setting forth comparative figures for the related periods in the prior fiscal year; c. within 105 days after the close of each fiscal year of Borrowers, the consolidated balance sheet of Borrowers and their Subsidiaries as at the end of such fiscal year and the related consolidated statements of income, cash flow and retained earnings for such fiscal year, setting forth comparative figures for the preceding fiscal year and, with respect to such consolidated financial statements, certified by the Auditors, in each case together with a report stating that in the course of its regular audit of the consolidated financial statements of Borrowers, which audit was conducted in accordance with GAAP, the Auditors have obtained no knowledge of any Default or Event of Default, or if in the opinion of the Auditors such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof, together with copies of any Auditors' letters received by management in connection with such Auditors' findings during its audit in respect of such fiscal year, and, in each case together with a report from the Auditors stating that in the course of its review of the consolidated balance sheet of Borrowers and their Subsidiaries as at the end of such fiscal year and the related consolidated statements of income, cash flow and retained earnings for such fiscal year, the Auditors have obtained no knowledge of any irregularities in the preparation or accuracy of the compliance certificate required to be delivered under this Agreement, including, but not limited to, pro forma adjustments to any acquisition of any assets or Persons permitted under Sections 7.3(a)(ii) and 7.4 and/or Permitted Dispositions under Section 7.2, or if in the opinion of the Auditors such irregularities have occurred, a statement as to the nature thereof, together with copies of any Auditors' letters received by management in connection with such Auditors' findings during its review in respect of such fiscal year; and d. within 45 days after the first day of each fiscal year of Borrowers beginning with fiscal year 2002, a budget and financial forecast of results of operations and sources and uses of cash (in form and substance reasonably satisfactory to the Administrative Agent) prepared by Borrowers for such fiscal year in respect of themselves and their Subsidiaries, accompanied by a written statement of the assumptions used in connection therewith, together with a certificate of the chief financial officer of Borrowers to the effect that such budget and financial forecast and assumptions are reasonable and represent Borrowers' good faith estimate of themselves and their Subsidiaries' future financial requirements and performance.  The financial statements required to be delivered under clauses (a), (b) and (c) above shall be accompanied by a comparison of the actual financial results set forth in such financial statements to those contained in the forecasts delivered pursuant to this clause (d) together with an explanation of any material variations from the results anticipated in such forecasts. 2. Certificates; Other Information.  Borrowers shall furnish to the Administrative Agent, with sufficient copies for the Lenders: a. at the time of the delivery of the financial statements under clauses 6.1 (a), (b) and (c) above, a certificate of the Responsible Officer (each a "Compliance Certificate") which certifies (x) that such financial statements fairly present in all material respects the financial condition and the results of operations of Borrowers and their Subsidiaries as at the dates and for the periods indicated, subject, in the case of interim financial statements, to normal year-end adjustments and (y) that such Responsible Officer has reviewed the terms of the Loan Documents and has made, or caused to be made under his or her supervision, a review in reasonable detail of the business and condition of Borrowers and their Subsidiaries during the accounting period covered by such financial statements, and that as a result of such review such officer has no knowledge that any Default or Event of Default has occurred during the period commencing at the beginning of the accounting period covered by the financial statements accompanied by such certificate and ending on the date of the related accounting period or, if any Default or Event of Default has occurred, specifying the nature and extent thereof and, if continuing, the action Borrowers propose to take in respect thereof.  Such certificate shall set forth the calculations required to establish whether Borrowers were in compliance with the provisions of Section 7.14 during and as at the end of the accounting period covered by the financial statements accompanied by such certificate; b. promptly upon transmission thereof, copies of all regular and periodic financial information, proxy materials and other information and reports, if any, which any Borrower shall file with the Securities and Exchange Commission or any governmental agencies or which any Borrower shall send to its stockholders; and c. from time to time, such other information or documents (financial or otherwise) as the Administrative Agent or the Lenders may reasonably request. 3. Notices.  Borrowers shall promptly, and in any event within three (3) Business Days after a Borrower obtains knowledge thereof, notify the Administrative Agent and each Lender: a. of the occurrence of any Default or Event of Default, and of the occurrence or existence of any event or circumstance that foreseeably will become a Default or Event of Default under this Agreement; b. of the occurrence of any "Default" or "Event of Default" under the Restructured Term Credit Agreement; c. of (i) any material breach or non-performance of, or any material default under, any material post-petition Contractual Obligation of Borrowers or any of their Subsidiaries; and (ii) any dispute, litigation, investigation, proceeding or suspension which with respect to clause (i) above may exist at any time between Borrowers or any of their Subsidiaries and any Governmental Authority which with respect to clause (i) above could reasonably be expected to have a Material Adverse Effect; d. of the commencement of, or any material development in, any litigation or proceeding that is not stayed affecting Borrowers or any Subsidiaries (i) in which the amount of damages claimed is $5,000,000 (or its equivalent in another currency or currencies) or more, (ii) in which injunctive or similar relief is sought, except for such relief sought that could not reasonably be expected to have a Material Adverse Effect; or (iii) in which the relief sought is an injunction or other stay of the performance of this Agreement or any Loan Document; e. upon, but in no event later than ten (10) Business Days after, becoming aware of (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Borrowers or any of their Subsidiaries or any of their respective Properties pursuant to any applicable Environmental Laws, (ii) all other material Environmental Claims and (iii) any environmental or similar condition on any real property adjoining or in the vicinity of the Property of Borrowers or any Subsidiaries that could reasonably be anticipated to cause such Property or any part thereof to be subject to any material restrictions on the ownership, occupancy, transferability or use of such Property under any applicable Environmental Laws; f. of any Material Adverse Effect subsequent to the later of the date of the most recent audited financial statements of Borrowers delivered to the Lenders pursuant to Section 6.1(c) or the Closing Date; g. of any material change in accounting policies or financial reporting practices by Borrowers or any of their Subsidiaries; and h. of any labor controversy resulting in or threatening to result in any strike, work stoppage, boycott, shutdown or other labor disruption against or involving Borrowers or any of their Subsidiaries which could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this Section as to all Defaults or Events of Default shall be accompanied by a written statement by a Responsible Officer of Borrowers setting forth details of the occurrence referred to therein, and stating what action Borrowers propose to take with respect thereto and at what time. 4. Preservation of Corporate Existence, Etc.  Except as contemplated by the Plan of Reorganization or the Confirmation Order, Borrowers shall, and shall cause each of their Subsidiaries to: a. preserve and maintain in full force and effect their corporate existence and good standing under the laws of their respective states or jurisdictions of incorporation, unless the failure to maintain or preserve such status could not reasonably be expected to have a Material Adverse Effect; b. preserve and maintain in full force and effect all material rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of their business, unless the failure to maintain or preserve such qualifications could not reasonably be expected to have a Material Adverse Effect; c. use their reasonable efforts, in the Ordinary Course of Business, to preserve their business organization and preserve the goodwill and business of the customers, suppliers and others having material business relations with them, unless the failure to maintain or preserve such status could not reasonably be expected to have a Material Adverse Effect; and d. preserve or renew all of their respective registered trademarks, trade names and service marks, material patents, copyrights, franchises, licenses, permits, certifications, easements, rights of way and other rights, consents or approvals, unless the failure to maintain or preserve such rights could not reasonably be expected to have a Material Adverse Effect. 5. Maintenance of Property and Other Collateral.  Borrowers shall maintain, and shall cause each of their Subsidiaries to maintain, and preserve all Collateral (including their respective Properties) which are material to their business in good working order and condition, ordinary wear and tear excepted, and will forthwith, or in the case of any material loss or damage to any of such Collateral, as soon as practicable after the occurrence thereof, make or cause to be made all repairs, replacements and other improvements in connection therewith that are necessary or desirable to such end. 6. Insurance.  Borrowers shall maintain, and shall cause their Subsidiaries to maintain, with financially sound and reputable independent insurers, insurance with respect to their respective Property and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business (including, but not limited to, comprehensive property and liability coverage, and general umbrella coverage, including general liability and product liability), of such types and in such amounts as are customarily carried under similar circumstances by such other Persons, which insurance may not be cancelled except upon at least 30 days' written notice to the Collateral Agent and which policies name the Collateral Agent, on behalf of the Lenders, the Administrative Agent and the Collateral Agent, as lender loss payee and/or under a mortgagee endorsement, as the Collateral Agent shall reasonably require, thereunder. 7. Payment of Obligations.  Borrowers shall, and shall cause their Subsidiaries to, pay and discharge as the same shall become due and payable, all of their respective obligations and liabilities, including: a. other than pre-petition claims, all material tax liabilities, assessments and governmental charges or levies upon them or their properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by Borrowers or such Subsidiaries and except to the extent that the failure to pay is not reasonably likely to have a Material Adverse Effect; b. other than pre-petition claims, all material lawful claims which, if unpaid, would by law become a Lien upon their respective Properties, except for Permitted Liens; c. all postpetition Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness, excluding reclamation claims and except to the extent that the failure to pay is not reasonably expected to have a Material Adverse Effect; and d. all obligations arising under the Restructured Term Credit Agreement. 8. Compliance with Laws.  Borrowers shall comply, and shall cause each of their Subsidiaries to comply, in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over them or their business (including the Federal Fair Labor Standards Act), except such as may be contested in good faith or as to which a bona fide dispute may exist and except to the extent that the failure to comply therewith is not reasonably expected to have Material Adverse Effect. 9. Inspection of Property and Books and Records.  Borrowers shall maintain and shall cause each of their Subsidiaries to maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of Borrowers and such Subsidiaries. Borrowers shall permit, and shall cause each of their Subsidiaries to permit, representatives and independent contractors of the Administrative Agent or any Lender, upon reasonable request to visit (during normal business hours), in the presence of a representative of Borrowers to inspect and have reasonable access to any of their respective Properties and premises, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers, independent public accountants and other professional representatives, all at the expense of Borrowers and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to Borrowers including, without limitation, semi-annual inspections to be conducted by a representative of the Lenders; provided, however, when an Event of Default exists the Administrative Agent or any Lender may do any of the foregoing at the expense of Borrowers at any time during normal business hours and without advance notice. 10. Environmental Laws. a. Borrowers shall, and shall cause each of their Subsidiaries to, conduct their respective operations and keep and maintain their respective Properties in compliance in all material respects with all applicable Environmental Laws, except to the extent that the failure to comply is not reasonably expected to have a Material Adverse Effect. b. Upon the written request of the Administrative Agent or any Lender, Borrowers shall submit and cause each of their Subsidiaries to submit, to the Administrative Agent and with sufficient copies for each Lender, at Borrowers' sole cost and expense, at reasonable intervals, a report providing an update of the status of any environmental, health or safety compliance, hazard or liability issue identified in any notice or report required pursuant to Section 6.3, that could, individually or in the aggregate, result in liability in excess of $5,000,000. 11. Update of Collateral and Deposit Account Schedules.  Subject to the penultimate sentence of this Section 6.11, Borrowers shall at all times ensure that Schedule 6.11 attached hereto, describing the location of Collateral and deposit accounts delivered to the Administrative Agent and the Collateral Agent prior to the Closing Date, are accurate and up-to-date.  Subject to the penultimate sentence of this Section 6.11, if for any reason any of the information disclosed thereon becomes out-of-date or inaccurate in any material respect, Borrowers promptly will cause such schedules to be updated and redistributed to the Administrative Agent and the Collateral Agent at Borrowers' sole expense.  Notwithstanding the foregoing, Borrowers shall not be required to update such schedules more than once with respect to any specific fiscal quarter of Borrowers (unless Borrowers choose to update such schedules more often) and Borrowers may comply with their obligations under this Section 6.11 by delivering to the Administrative Agent and the Collateral Agent, with respect to any fiscal quarter of Borrowers during which any changes occurred relating to the information required to be disclosed on such schedules, updated versions of such schedules reflecting any such changes with respect thereto that occurred during such fiscal quarter, which updated schedules shall be delivered to the Administrative Agent and the Collateral Agent not later than the eighteenth (18th) Business Day following the last day of the fiscal quarter of Borrowers to which such updated schedules relate.  Each updated schedule delivered to the Administrative Agent and the Collateral Agent pursuant to this Section shall either: (a) be marked to show changes, additions, or deletions from the most recent prior version provided to the Administrative Agent and the Collateral Agent, or (b) be accompanied by a cover letter or memorandum signed by a Responsible Officer of one of Borrowers explaining the nature of any changes, additions, or deletions from the most recent prior version provided to the Administrative Agent and the Collateral Agent. Execution of Security Agreements after the Closing Date .  In the event that any Person becomes a Wholly-Owned Subsidiary of Borrowers after the date hereof, Borrowers will promptly notify the Administrative Agent of that fact and, at the option of the Administrative Agent, cause such Subsidiary to provide Collateral Agent with a Lien on all of the assets of such Subsidiary by executing and delivering a counterpart of the Security Agreements (with such changes as may be necessary or appropriate) and by taking all such further actions and executing all such further documents, instruments and legal opinions (including actions, documents, instruments and legal opinions comparable to those described in Section 4.2) as may be necessary or, in the opinion of the Administrative Agent, desirable in connection with the creation in favor of Collateral Agent, for the benefit of Lenders, of valid and perfected first priority Liens, subject to Permitted Liens, on all of the assets of such Subsidiary described in the applicable forms of Security Agreements, all of the foregoing to be in form and substance satisfactory to the Administrative Agent. NEGATIVE COVENANTS Borrowers hereby covenant and agree that, so long as any Lender shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied (other than contingent obligations and indemnities which survive repayment of the Loans), unless the Majority Lenders waive compliance in writing: 1. Limitation on Liens.  Borrowers shall not, and shall not suffer or permit any of their Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of their Property, whether now owned or hereafter acquired, other than the following permitted Liens ("Permitted Liens"): a. any Lien and Negative Pledges (other than Liens and Negative Pledges on the Collateral) existing on the Property of Borrowers or their Subsidiaries or created pursuant to Contractual Obligations existing on the Closing Date and set forth in Schedule 7.1 securing Indebtedness permitted under Section 7.5(b); b. any Lien and Negative Pledge created under any Loan Document; c. Liens securing taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty or being contested in good faith, or to the extent that non-payment thereof is permitted by Section 6.7, provided that no Notice of Lien has been filed or recorded under the Code; d. carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens imposed by Law, arising in the Ordinary Course of Business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the Property subject thereto; e. Liens consisting of pledges or deposits required in the Ordinary Course of Business in connection with workers' compensation, unemployment insurance and other social security benefits; f. Liens on the Property of Borrowers or any of their Subsidiaries securing (i) the non-delinquent performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, (ii) contingent obligations on surety and appeal bonds and (iii) other non-delinquent obligations of a like nature; in each case, incurred in the Ordinary Course of Business, provided all such Liens in the aggregate would not (even if enforced), result in a material impairment of the ability of Borrowers or any of their Subsidiaries to use any material Property thereof; g. Zoning restrictions, easements, rights-of-way, licenses, reservations, provisions, covenants, conditions, waivers, restrictions on the use of property, minor irregularities of title or similar encumbrances incurred in the Ordinary Course of Business and with respect to leasehold interests, mortgages, obligations, liens and other encumbrances incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner of the leased property, with or without consent of the lessee, which do not in any case materially detract from the value of the Property subject thereto or materially interfere with the ordinary conduct of the businesses of Borrowers and their Subsidiaries; h. Purchase money security interests on any equipment acquired or held by Borrowers or their Subsidiaries in the Ordinary Course of Business securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such equipment; provided that (i) any such Lien attaches to such equipment concurrently with or within 20 days after the acquisition thereof, (ii) such Lien attaches solely to the equipment so acquired in such transaction and (iii) the principal amount of the Indebtedness secured thereby does not exceed 100% of the cost of such equipment; i. Liens in favor of a banking institution arising as a matter of law encumbering deposits (including the right of set-off) held by such banking institutions incurred in the ordinary course of business and which are within the general parameters customary in the banking industry; j. Liens arising out of the existence of judgments or awards not constituting an Event of Default under Section 8.1(h); k. Leases or subleases of real Property granted to others not interfering in any material respect with the business of Borrowers and any interest or title of a lessor under any lease not in violation of this Agreement; l. the replacement, extension or renewal of any Lien permitted hereunder; provided that (i) the principal amount of Indebtedness secured by any such Lien immediately prior to such refinancing, extension, renewal or refunding is not increased or the maturity thereof reduced, (ii) any such Lien is not extended to any other property, and (iii) immediately after such refinancing, extension, renewal or refunding no Default or Event of Default would exist; m. any Lien granted in connection with the Restructured Term Credit Agreement up to a principal amount of $252,069,405.42 or the Additional Debt up to a principal amount of $5,000,000; n. Liens and Negative Pledges on the Collateral securing obligations of Borrowers or any Subsidiary in respect of Swap Contracts permitted by Section 7.5(h), in each case, on a pari passu basis with the obligations under the Restructured Term Credit Agreement; and o. Liens on the Property of a Person which becomes a Subsidiary securing Indebtedness permitted by Section 7.5(n), which Liens shall be limited to the Property so acquired. 2. Disposition of Assets.  Borrowers shall not, and shall not suffer or permit any of their Subsidiaries to, directly or indirectly, without the consent of the Majority Lenders, make any Dispositions, other than the following permitted Dispositions under clauses (a)-(d) hereof ("Permitted Dispositions"): a. Dispositions made in the Ordinary Course of Business; and b. Dispositions of inventory, or used, worn-out or surplus property and other property or assets, all in the Ordinary Course of Business; c. Dispositions of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment or the proceeds of such sale are reasonably promptly applied to the purchase price of such replacement equipment; and d. transactions permitted under Sections 7.3 and 7.7. Notwithstanding the foregoing, in addition to Permitted Dispositions, Borrowers and their Subsidiaries may dispose of assets for fair market value in an arm's length transaction not otherwise prohibited under this Agreement; provided, that (x) after giving effect to such Disposition, on a pro forma basis, Borrowers are in compliance with Section 7.14 hereof, with respect to Borrowers' twelve-month trailing EBITDA, as of the most recently ended fiscal quarter for which a Compliance Certificate has been delivered, (y) no Default or Event of Default exists hereunder or would arise as a result of such Disposition and (z) Borrowers comply with the provisions of Section 2.4 with respect to such Disposition. 3. Fundamental Changes, Corporate Documents. a. Borrowers shall not, and shall not suffer or permit any of their Subsidiaries to merge or consolidate with or into any Person or liquidate, wind-up or dissolve itself, or permit or suffer any liquidation or dissolution, discontinue its business or convey, lease, transfer or otherwise dispose, or sell all or substantially all of their assets, except, that so long as no Default or Event of Default exists or would result therefrom: i. any Borrower may merge with any other Borrower; ii. any Subsidiary may merge with any (i) Borrowers provided that Borrowers shall be the continuing or surviving corporation, (ii) any one or more Subsidiaries, and (iii) any joint venture, partnership or other Person, so long as such joint venture, partnership and other Person will, as a result of making such merger and all other contemporaneous related transactions, become a Subsidiary of a Borrower; provided that when any Wholly-Owned Subsidiary is merging into another Subsidiary, the Wholly-Owned Subsidiary shall be the continuing or surviving Person; iii. any Subsidiary of a Borrower may sell all or substantially all of their assets (upon voluntary liquidation or otherwise), to one or more Borrowers or to another Subsidiary; provided that when any wholly-owned Subsidiary is selling all or substantially all of their assets to another Subsidiary, the Subsidiary acquiring such assets shall be a Wholly-Owned Subsidiary; and iv. Borrowers or their Subsidiaries may make Permitted Dispositions pursuant to Section 7.2. b. Borrowers shall not and shall not permit any of their Subsidiaries to, amend their articles of incorporation (or other formation document) or by-laws, in any manner reasonably likely to cause a Material Adverse Effect. 4. Loans and Investment.  Borrowers shall not purchase or acquire, or suffer or permit any of their Subsidiaries to purchase or acquire, or make any commitment therefor, any capital stock, equity interest, all or substantially all of the assets of, or any obligations or other securities of, or any interest in, any Person, or make any advance, loan, extension of credit or capital contribution to or any other investment in, any Person including any Affiliate of Borrowers, except for: a. investments in Cash Equivalent; b. investments in a Person that becomes a Subsidiary of a Borrower or is merged, consolidated or amalgamated with or into, or transfers all or substantially all of its assets to, or is liquidated into, any Borrowers or any of their Subsidiaries; c. extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the Ordinary Course of Business; d. extensions of credit by one Borrower to another Borrower; e. loans, existing investments and Contingent Obligations described on Schedule 7.4, as the same may be extended, renewed, refunded or refinanced; provided, however, that after giving effect to such extension, renewal, refunding or refinancing, (1) the principal amount thereof is not increased, and (2) neither the tenor nor the remaining average life thereof is reduced; f. any endorsement of a check or other medium of payment for deposit or collection, or any similar transaction in the Ordinary Course of Business; g. investments acquired by any Borrowers (i) in exchange for any other investment or indebtedness held by a Borrower in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other investment, (ii) as a result of a foreclosure by a Borrower with respect to any secured investment or other transfer of title with respect to any secured investment in default or (iii) as a result of dispute settlement; or h. investments acquired by any Borrower in connection with a Disposition permitted by Section 7.2. i. loans, equity interests and investments existing on the Closing Date and listed on Schedule 7.4 and, except as may be otherwise provided in any Loan Document, any accretions or increases in the value of such equity interests and investments and may extend, renew, refund, or refinance any such loan; provided, that after giving effect to such extension, renewal, refunding or refinancing, the principal amount thereof is not increased and the terms thereof (including, without limitation, the maturity and interest), taken as a whole, shall not be less favorable than the original terms thereof; j. other investments in Persons in the movie theatre industry, including Subsidiaries of Borrowers which are not Pledged Subsidiaries and investments by any Subsidiary of Borrowers (the "Theatre Industry Investments"), not exceeding the sum of (i)  $5,000,000 in the aggregate from the Closing Date plus (ii) existing investments as of the Closing Date plus (iii) an amount equal to dividends and other distributions received from such Persons from time to time; provided, however, that the total of the Theatre Industry Investments under this subsection (j) shall not exceed $25,000,000 in the aggregate from the Closing Date, and immediately before and after giving effect to such investment, no Default or Event of Default shall exist; k. exchanges of theatre properties to the extent there are no additional incremental investments in connection with such exchanges; l. redemptions, purchases, retirements or other acquisitions for consideration of shares of capital stock of any Subsidiary of Borrowers; provided, that (i) such stock is not owned by Borrowers or their Subsidiaries and (ii) such redemption or acquisition is not otherwise prohibited under this Agreement; or m. loans permitted under Sections 7.5 and 7.6. Under no circumstances shall any Borrower extend any credit or make any loans to any employees of any Borrower, the aggregate principal amount outstanding of which shall, at any given time, exceed $100,000. 5. Limitation on Indebtedness.  Borrowers shall not, and shall not suffer or permit any of their Subsidiaries to, create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: a. Indebtedness incurred pursuant to this Agreement; b. Indebtedness existing on the Closing Date, as set forth in Schedule 7.5, as the same may be extended, renewed, refunded or refinanced; provided, however, that after giving effect to such extension, renewal, refunding or refinancing, (i) the principal amount thereof is not increased, and (ii) neither the tenor nor the remaining average life thereof is reduced; c. endorsements for collection or deposit in the Ordinary Course of Business; d. accounts payable to trade creditors for goods and services and current operating liabilities (not the result of the borrowing of money) incurred in the Ordinary Course of Business of Borrowers and their Subsidiaries in accordance with customary terms and paid within the specified time, unless contested in good faith by appropriate proceedings and reserved for in accordance with GAAP; e. Indebtedness secured by Liens permitted by subsections 7.1(d), (e), (f), (h), (i), (j) and (l); f. Indebtedness incurred in connection with leases permitted pursuant to Section 7.7; g. Indebtedness of any Borrower to any of its Wholly-Owned Subsidiaries or of any Subsidiary of any Borrower to any Borrower; provided that (a) all such intercompany Indebtedness shall be evidenced by promissory notes which are pledged to Collateral Agent and (b) all such intercompany Indebtedness owed by any Borrower to any of its Subsidiaries shall be subordinated in right of payment to the payment in full of the Obligations; h. Additional Debt; i. Anschutz Sub Debt; j. Indebtedness incurred in connection with the Restructured Term Credit Agreement not exceeding $252,069,405.42 in aggregate principal amount; k. Contingent Obligations comprised of endorsements for collection or deposit in the Ordinary Course of Business and accounts payable to suppliers incurred in the Ordinary Course of Business and paid in the Ordinary Course of Business; l. Contingent Obligations incurred in connection with various employee benefit plans or collective bargaining agreements to the extent not otherwise prohibited and subject to any restrictions in this Agreement or any other Loan Document; m. Indebtedness arising under transactions contemplated by Sections 7.4 and 7.6; and n. Indebtedness of any Person that becomes a Subsidiary after the Confirmation Date in accordance with the terms of Section 7.4 which Indebtedness is existing at the time such Person becomes a Subsidiary (other than Indebtedness incurred solely in contemplation of such Person becoming a Subsidiary of a Borrower or a Subsidiary of any Subsidiary of any Borrower). 6. Transactions with Affiliates.  Borrowers shall not, and shall not suffer or permit any of their Subsidiaries to, sell or transfer any assets to, purchaser or acquire any assets of, enter into any lease, make any loan or investment in, or otherwise engage in any material transaction with any Affiliate, except in the Ordinary Course of Business and upon fair and reasonable terms no less favorable than Borrowers or any such Subsidiary could obtain or become entitled to in an arm's length transaction with a Person which was not an Affiliate; except: a. payments to Prop I under theatre leases and subleases entered into prior to the Closing Date and under other UARC Leases as in effect on the Closing Date; b. payments of management fees or similar fees paid by any Subsidiaries of Borrowers or Affiliates to Borrowers or any Subsidiary of Borrowers; c. transactions among Borrowers and their Subsidiaries and Affiliates in connection with the management and operation of such Subsidiaries and Affiliates in the Ordinary Course of Business as conducted; d. transactions among Borrowers and Pledged Subsidiaries; and e. transactions permitted under Sections 7.3 and 7.4. 7. Lease Obligations.  Borrowers shall not, and shall not suffer or permit any of their Subsidiaries to, create or suffer to exist any obligations for the payment of rent for any Property under lease or agreement to lease, entered into pursuant to any Sale-and-Leaseback Transaction except Sale-and-Leaseback Transactions entered into in an arm's length transaction with a Person other than a Subsidiary of Borrowers; provided, that: a. immediately prior to giving effect to such lease, the property or asset subject to such lease was sold by Borrowers or any such Subsidiary to the lessor under such lease for not less than fair market value; b. such Disposition is in compliance with Section 7.2; and c. no Default or Event of Default exists or would occur as a result of such sale and subsequent lease. 8. Capital Expenditures.  Borrowers and their Subsidiaries shall not make or commit to make Capital Expenditures except:  (i) up to $50,000,000 for each fiscal year after the year 2000 (excluding any unused carry over from the prior year only); and (ii) up to $10,000,000 of unused carry over from the prior year only. 9. Change in Business.  Borrowers shall not, and shall not permit any of their Subsidiaries, to engage in any material line of business substantially different from those lines of business carried on by them on the date hereof. 10. Accounting Changes.  Borrowers shall not, and shall not suffer or permit any of their Subsidiaries to, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the fiscal year of Borrowers or of any of their consolidated Subsidiaries, without the prior approval of the Majority Lenders. 11. Relocation of Collateral, Chief Executive Offices, or Deposit Accounts.  No Borrower shall (a) relocate any of the Collateral to any location not specified as a location where such Borrower maintains Collateral on a schedule delivered to the Administrative Agent and the Collateral Agent, except for relocations during any fiscal month of Borrowers with respect to which Borrowers are not past due in delivering to the Administrative Agent and the Collateral Agent an updated version of a Collateral location schedule in accordance with the penultimate sentence of Section 6.11, (b) relocate its chief executive office, or (c) establish any new deposit account or modify any existing deposit account such that the schedule delivered to the Administrative Agent and the Collateral Agent prior to the Closing Date fails accurately to disclose the relevant information with respect to same, except to the extent that such establishment or modification occurs during any fiscal month of Borrowers with respect to which Borrowers are not past due in delivering to the Administrative Agent and the Collateral Agent an updated version of a deposit account location schedule in accordance with the penultimate sentence of Section 6.11. 12. No Negative Pledges in Favor of Others.  Borrowers shall not agree to, and shall not permit or allow any of their Subsidiaries to agree to, any contractual provision whereby Borrowers or any Subsidiaries of Borrowers restrict their ability to grant Liens on their Property, except for Negative Pledges (a) in favor of the Administrative Agent, the Collateral Agent, the lenders under the Restructured Term Credit Agreement and the Lenders contained in the Loan Documents or (b) in respect of the Indebtedness Proceeds as permitted under clause (v) of the definition of "Indebtedness Proceeds." 13. Certain Restrictions.  Borrowers shall not, and shall not permit any of their Wholly-Owned Subsidiaries to, enter into any agreements (other than the Loan Documents and the Restructured Term Credit Agreement) which restrict the ability of Borrowers or any of their Subsidiaries to (a) enter into amendments, modifications or waivers of the Loan Documents, or (b) create, incur, assume, suffer to exist or otherwise become liable with respect to any Indebtedness, other than as permitted under Section 7.5 or (c) pay dividends or make any distributions on such Subsidiary's Capital Stock or membership interest owned by any Borrower or any other Subsidiary of any Borrower or (d) repay or prepay any Indebtedness owed by such Subsidiary to any Borrower or any other Subsidiary or (e) make loans or advances or transfers of property to any Borrower or any other Subsidiary of any Borrower. 14. Financial Covenants.  Neither Borrowers nor any of their Subsidiaries shall permit, with respect to the twelve-month trailing EBITDA, Total Leverage Ratio and Interest Coverage Ratio, determined on a Consolidated basis for the twelve-month period ending on the quarters set forth below, to be less than the amounts set forth next to such quarters: Min. Total Interest 12 Mo. Trailing Leverage Coverage Year EBITDA ($mil) Ratio Ratio 2001 Q1 $        60.0 4.75 2.00 Q2 60.0 4.75 2.00 Q3 60.0 4.60 2.00 Q4 60.0 4.60 2.00 2002 Q1 60.0 4.60 2.00 Q2 60.0 4.60 2.00 Q3 62.5 4.35 2.15 Q4 62.5 4.35 2.15 2003 Q1 65.0 4.35 2.20 Q2 65.0 4.15 2.20 Q3 67.5 4.00 2.35 Q4 67.5 4.00 2.35 2004 Q1 70.0 4.00 2.50 Q2 70.0 3.75 2.50 Q3 72.5 3.50 2.75 Q4 72.5 3.50 2.75 Restricted Payments .  Borrowers shall not, nor permit any of their Subsidiaries to, declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of their capital stock, or purchase, redeem or otherwise acquire for value any shares of their capital stock or any warrants, rights or options to acquire such shares, now or hereafter outstanding, or enter into derivative transactions related to the foregoing; except: a. dividends or distributions by Subsidiaries of Borrowers on their capital stock to Borrowers or their Subsidiaries; provided, however, that dividends or distributions by non Wholly-Owned Subsidiaries of Borrowers shall be paid ratably to holders of their capital stock; b. repurchases of their common stock held by retired, or former officers and employee (or from the estate, heirs or legatees of any deceased officer or employee); provided, however, that the aggregate cash amount expended for such purpose shall not exceed $2,000,000 during any consecutive period of twelve months (with no carry-over into the immediately following twelve-month period) and shall not exceed $8,000,000 in the aggregate from and after the Closing Date; c. transactions permitted by Sections 7.2 and 7.4; d. dividends in the form of stock of Borrower paying the dividend (which stock dividends paid to Borrowers shall be pledged under the Loan Documents if required thereby); and e. pay-in-kind payments in respect of the Anschutz Sub Debt. Priority of Loan Payments .  Borrowers shall not, and shall not permit any of their Subsidiaries to, directly or indirectly make any optional or other voluntary payment, prepayment, retirement, repurchase or redemption on account of the principal of or interest on any Indebtedness or set aside money or securities for a sinking or other similar fund for the payment of principal of or premium or interest in respect of any Indebtedness or set apart money for the defeasance of any Indebtedness; except for: a. the Obligations; and obligations under the Restructured Term Credit Agreement to the extent permitted by the Intercreditor and Subordination Agreement and Section 2.4 of this Agreement; b. prepayments of existing Indebtedness permitted under Section 7.5(b) from the proceeds of Dispositions permitted to be retained by Borrowers pursuant to the Restructured Term Credit Agreement; c. refinancings or refundings of Indebtedness otherwise permitted under this Agreement; and d. payments otherwise permissible under Sections 7.4 and 7.15. Investments in Margin Stock .  Subject to the five million dollars ($5,000,000) limit set forth in Section 7.4(j)(i) Borrowers shall not, and shall not permit any of their Subsidiaries to, acquire or hold any Margin Stock, or permit any Subsidiary of Borrowers to do so, unless not more than 25% of the value of the assets of Borrowers, or Borrowers on a Consolidated basis, as the case may be, is represented by assets consisting of Margin Stock. Amendments to Certain Agreements .  Borrowers shall not, and shall not permit any of their Subsidiaries to, without the prior written consent of Majority Lenders, amend, waive or modify, or take or refrain from taking any action which has the effect of amending, waiving or modifying, any provision of: a. any other agreements with Affiliates to the extent that such amendment, waiver, modification or action could have a Material Adverse Effect, could have an adverse effect on the rights of the Administrative Agent, Collateral Agent, any Lender under this Agreement or any Loan Document; provided, however, that Borrowers and their Subsidiaries shall not be permitted to amend, waive or modify any material agreement with an Affiliate if a Default or Event of Default has occurred and is continuing; or b. any documents (other than documents referred to in (a) above) evidencing Indebtedness including, without limitation, the Restructured Term Credit Agreement (subject to the Intercreditor and Subordination Agreement); provided, however, that notwithstanding anything to the contrary contained in this Section 7.18, amendments, modifications or waivers may be made to documents evidencing Indebtedness to the extent that the terms and conditions hereof permit Borrowers or their Subsidiaries to enter into an initial agreement which has the same effect as such amendment; and (ii) amendments, modifications or waivers may be made to the Restructured Term Credit Agreement if as a result of such amendments, modifications or waivers the terms of the Restructured Credit Agreement, taken as a whole, are no less favorable to Borrowers than the original terms thereof. Certain Provisions Relating to Other Debt Instruments   Guaranty Obligation .  Borrowers shall not and shall not permit any of their Subsidiaries or Affiliates to, without the prior written consent of the Majority Lenders, enter into any Guaranty Obligation or to otherwise provide a guaranty with respect to the Restructured Term Credit Agreement or the obligations thereunder unless such Subsidiaries or Affiliates enter into a Guaranty Obligation or otherwise provide a guaranty with respect to this Agreement and the Obligations, in each case in form and substance reasonably satisfactory to the Administrative Agent and subject to the terms of the Intercreditor and Subordination Agreement.  Borrowers shall not and shall not permit any of their Subsidiaries or Affiliates to provide any security or collateral for the Restructured Term Credit Agreement or the obligations thereunder unless such Subsidiaries or Affiliates provide such security or collateral for this Agreement and the Obligations, in each case in form and substance reasonably satisfactory to the Administrative Agent and subject to the terms of the Intercreditor and Subordination Agreement. EVENTS OF DEFAULT Event of Default.  Any of the following shall constitute an "Event of Default." a. Non-Payment.  Borrowers fail to pay, (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within three (3) days after the same shall become due, any interest on any Loan, or (iii) within five (5) days after the same becomes due, any fee due under this Agreement, or (iv) within 30 days after the same becomes due, any other amount payable hereunder or pursuant to any other Loan Document; or Representation or Warranty .  Any material representation or warranty by Borrowers or any of their Subsidiaries made or deemed made herein, in any Loan Document, or which is contained in any certificate, document or financial or other statement by Borrowers, any of their Subsidiaries, or their respective Responsible Officers, furnished at any time under this Agreement, or in or under any Loan Document, shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or Specific Defaults .  Borrowers fail to perform or observe any term, covenant or agreement contained in Sections 2.4, 6.3, 6.4, 6.9 or Article 7; or Other Defaults .  Borrowers fail to perform or observe any other term or covenant contained in this Agreement or any Loan Document, and such default shall continue unremedied for a period of 30 days after the earlier of (i) the date upon which a Responsible Officer of Borrowers knew or should have known of such failure or (ii) the date upon which written notice thereof is given to Borrowers by the Administrative Agent or any Lender; or Cross-Default .  Borrowers or any of their Subsidiaries (i) fail to make any payment in an amount of more than $250,000, or in the aggregate fail to make payments in an amount of more than $1,000,000, in respect of any postpetition Funded Indebtedness (including, but not limited to, the Restructured Term Credit Agreement, but excluding non recourse Indebtedness and lease payment obligations under Capital Leases or Synthetic Lease Obligations) or Contingent Obligation having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $5,000,000 when due, or in the aggregate, having a principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $10,000,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the document relating thereto on the date of such failure; or (ii) fail to perform or observe any other condition or covenant, or any other event shall occur or condition exist, (irrespective of whether such non-performance or non-observance shall be waived or otherwise excused by the holder or holders of such Indebtedness) under any agreement or instrument relating to any such Indebtedness (including, but not limited to, the Restructured Term Credit Agreement) or Contingent Obligation having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $5,000,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise), if the effect of such failure, event or condition is to cause such Indebtedness to be declared to be due and payable, prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or Bankruptcy Orders .  Borrowers or any of their Subsidiaries, without the prior express written consent of the Majority Lenders, breach, modify, terminate, amend, appeal or seek to vacate the order approving the Confirmation Order; or Pre-Petition Obligations .  Borrowers or any of their Subsidiaries shall make any payments of Indebtedness relating to pre-Petition Date obligations other than as permitted under the Confirmation Order, in connection with the Term Sheet or as otherwise approved by the Bankruptcy Court; or b. Judgments.  One or more judgments or decrees that in the aggregate does or could reasonably be expected to have a Material Adverse Effect shall be entered by a court or courts of competent jurisdiction against Borrowers or their Subsidiaries (other than any judgment as to which, and only to the extent, a reputable insurer has acknowledged coverage of such claim in writing) and any such judgments or decrees shall not be stayed, discharged, paid, bonded or vacated within 30 days; or c. Change in Control.  A Change of Control Event shall occur; or d. Material Adverse Effect.  There shall occur any event or condition after the Confirmation Date that does or could reasonably be expected to have a Material Adverse Effect and as to which event or condition the Administrative Agent has delivered a notice to Borrowers within 30 days of receipt of Borrowers' notice pursuant to Section 6.3, which event or condition shall not have been cured by Borrowers or their Subsidiaries within 30 days after receipt of such notice from the Administrative Agent; or e. Loan Documents Cease to be in Effect.  Any Loan Document shall cease to be in full force and effect for any reason other than the indefeasible payment and satisfaction in full of the Obligations, the agreement of the Lenders, or the termination thereof in accordance with its terms, any court of competent jurisdiction shall declare any Loan Document, or any material provision thereof to be void, ineffective, or unenforceable, any Lien on any material type, item, or portion of Collateral provided for in any Loan Document shall be set aside, avoided, or declared by a court of competent jurisdiction to be void, ineffective, or unenforceable, or any Borrower shall challenge, dispute, or repudiate all or any material portion of its Obligations under any material provision of any of the Loan Documents or the Lenders shall cease to have a first priority Lien on all Collateral (subject to Permitted Liens), except as otherwise set forth in the Intercreditor and Subordination Agreement; or f. Bankruptcy; Insolvency.  After the Confirmation Date, Borrowers or any of their Subsidiaries shall:  (i) become insolvent or be unable to pay their debts as they mature; (ii) make an assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of their properties and assets; (iii) file a voluntary petition in bankruptcy or seeking reorganization or to effect a plan or other arrangement with creditors; (iv) file an answer admitting the material allegations of an involuntary petition relating to bankruptcy or reorganization or join in any such petition; (v) become or be adjudicated as bankrupt; (vi) apply for or consent to the appointment of, or consent that an order be made, appointing any receiver, custodian or trustee, for themselves or any of their properties, assets or businesses; or (vii) in an involuntary proceeding, any receiver, custodian or trustee shall have been appointed for all or substantial part of Borrower's or any of their Subsidiaries' properties, assets or businesses and shall not be discharged within 30 days after the date of such appointment. Rights and Remedies.  Upon the occurrence of any Event of Default specified in Sections (f) or (l) of Section 8.1, the Commitments shall automatically and immediately terminate and the unpaid principal amount of and any and all accrued interest on the Loans, an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary thereof shall have presented or be entitled to present any documents required to draw on such Letters of Credit), and any and all accrued fees and other Obligations shall automatically become immediately due and payable, with all additional interest from time to time accrued thereon and without presentation, demand, or protest or other requirements of any kind (including, without limitation, valuation and appraisement, diligence, presentment, notice of intent to demand or accelerate and notice of acceleration), all of which are hereby expressly waived by Borrowers or their Subsidiaries, and upon the occurrence and during the continuance of any other Event of Default, the Administrative Agent shall at the request, or may with the consent of the Majority Lenders, by written notice to Borrowers, (i) declare that the Commitments are terminated, whereupon the Commitments shall immediately terminate, (ii) declare the unpaid principal amount of and any and all accrued and unpaid interest on the Loans and an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary thereof shall have presented or be entitled to present any documents required to draw on such Letters of Credit), and any and all accrued fees and other Obligations to be, and the same shall thereupon be, immediately due and payable with all additional interest from time to time accrued thereon and without presentation, demand, or protest or other requirements of any kind (including, without limitation, valuation and appraisement, diligence, presentment, notice of intent to demand or accelerate and notice of acceleration), all of which are hereby expressly waived by Borrowers.  In the event that pursuant to the foregoing provisions, an amount equal to the maximum amount of all Letters of Credit outstanding shall become due, upon demand by the Administrative Agent on behalf of Lenders, Borrowers shall cash collateralize such Letters of Credit in an amount equal to the maximum amount of such outstanding Letters of Credit and in the event that Borrowers shall fail to promptly provide such cash collateral, Lenders may, but shall not be required to, advance Loans for the account of Borrowers to provide such cash collateralization.  The rights and remedies of the Lenders hereunder shall be binding upon a Chapter 11 or Chapter 7 Trustee in any Bankruptcy case relating to Borrowers. Remedies; Obtaining the Collateral Upon Default.  Upon the occurrence and during the continuance of an Event of Default, to the extent any such action is not inconsistent with the Confirmation Order and the Intercreditor and Subordination Agreement, the Administrative Agent or the Collateral Agent on behalf of the Lenders, the Administrative Agent and the Collateral Agent shall have all rights as a secured creditor under the UCC in all relevant jurisdictions and may: a. perform all acts attendant to the Loans extended hereunder and to exercise all remedies in the case of any Event of Default hereunder; b. personally, or by agents or attorneys, retake possession of the Collateral or any part thereof, from Borrowers and their Subsidiaries or any other Person who then has possession of any part thereof with or without notice or process of law (but subject to any applicable laws), and for that purpose may enter upon Borrowers' or any of their Subsidiaries' premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of Borrowers or any of their Subsidiaries; c. sell, assign or otherwise liquidate, or direct Borrowers or any of their Subsidiaries to sell, assign or otherwise liquidate, any or all of the Collateral or any part thereof, and take possession of the proceeds of any such sale or liquidation; d. apply any and all funds held by the Collateral Agent, on behalf of the Lenders, the Administrative Agent and the Collateral Agent to the Obligations hereunder; and e. take possession of the Collateral or any part thereof, by directing Borrowers and any of their Subsidiaries in writing to deliver the same to the Administrative Agent or the Collateral Agent at any place or places designated by the Administrative Agent or the Collateral Agent, in which event Borrowers and any of their Subsidiaries shall at their own expense: i. forthwith cause the same to be moved to the place or places so designated by the Administrative Agent or the Collateral Agent and there delivered to the Administrative Agent or the Collateral Agent; ii. while the Collateral shall be stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; and it being understood that Borrowers or any of their Subsidiaries obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to the Bankruptcy Court, the Administrative Agent or the Collateral Agent shall be entitled to a decree requiring specific performance by Borrowers or any of their Subsidiaries of such obligation. Remedies, Disposition of the Collateral.  Upon the occurrence and during the continuance of an Event of Default, and to the extent not inconsistent with the Confirmation Order and the Intercreditor and Subordination Agreement, any Collateral repossessed by the Collateral Agent, and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any applicable laws, determined to be commercially reasonable.  Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair which the Collateral Agent shall determine to be commercially reasonable.  Any such disposition which shall be a private sale or other private proceeding permitted by applicable laws shall be made upon not less than 30 days' written notice to Borrowers specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 30 days after the giving of such notice, to the right of Borrowers or any nominee of Borrowers to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified.  Any such disposition which shall be a public sale permitted by applicable laws shall be made upon not less than 30 days' written notice to Borrowers specifying the time and place of such sale and, in the absence of applicable laws, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction not less than 30 days prior thereto in two newspapers in national circulation.  To the extent permitted by any applicable laws, the Collateral Agent on behalf of the Lenders, the Administrative Agent and the Collateral Agent may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section 8.4 without accountability to Borrowers or any of their Subsidiaries (except to the extent of surplus money received).  If, under applicable laws, the Collateral Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to Borrowers as herein above specified, the Collateral Agent need give Borrowers only such notice of disposition as shall be reasonably practicable. Recourse.  Except as required by the Bankruptcy Code or by order of the Bankruptcy Court, Borrowers shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to satisfy the Obligations.  Borrowers shall also be liable for all reasonable expenses of the Collateral Agent incurred in connection with collecting such deficiency, including, without limitation, the reasonable fees and disbursements of any attorneys and other professionals employed by the Collateral Agent to collect such deficiency. Rights Not Exclusive.  The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT 1. Appointment of the Administrative Agent BTCo is hereby appointed the Administrative Agent hereunder and under the other Loan Documents and each Lender hereby authorizes the Administrative Agent to act as its agent in accordance with the terms of this Agreement and the other Loan Documents.  The Administrative Agent agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable.  The provisions of this Article 9 are solely for the benefit of the Administrative Agent, Lenders and the Collateral Agent, and Borrowers shall have no rights as a third party beneficiary of any of the provisions thereof.  In performing its functions and duties under this Agreement, the Administrative Agent and the Collateral Agent, shall act solely as agents of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Borrowers or any Subsidiary of any Borrower. Powers and Duties; General Immunity Powers; Duties Specified.  Each Lender irrevocably authorizes the Administrative Agent to take such action on such Lender's behalf and to exercise such powers, rights and remedies hereunder and under the other Loan Documents as are specifically delegated or granted to the Administrative Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto.  The Administrative Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents.  The Administrative Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees.  The Administrative Agent shall not have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon the Administrative Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein. No Responsibility for Certain Matters.  The Administrative Agent and the Collateral Agent shall not be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by the Administrative Agent or the Collateral Agent to Lenders or by or on behalf of Borrowers to the Administrative Agent or the Collateral Agent or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of Borrowers or any other Person liable for the payment of any Obligations, nor shall the Administrative Agent or the Collateral Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of the Loans or the use of the Letters of Credit or as to the existence or possible existence of any Event of Default or Default.  Anything contained in this Agreement to the contrary notwithstanding, the Administrative Agent or the Collateral Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the Letter of Credit Usage or the component amounts thereof. Exculpatory Provisions.  Neither the Administrative Agent nor the Collateral Agent nor any of their officers, directors, employees or agents shall be liable to Lenders for any action taken or omitted by the Administrative Agent under or in connection with any of the Loan Documents except to the extent caused by the respective gross negligence or willful misconduct of the Administrative Agent or the Collateral Agent, as applicable.  The Administrative Agent and the Collateral Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the other Loan Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until the Administrative Agent or the Collateral Agent, as applicable, shall have received instructions in respect thereof from Majority Lenders (or such other Lenders as may be required to give such instructions under Section 10.6) and, upon receipt of such instructions from Majority Lenders (or such other Lenders, as the case may be), the Administrative Agent or the Collateral Agent, as applicable, shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions.  Without prejudice to the generality of the foregoing, (i) the Administrative Agent and the Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys, accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against the Administrative Agent or the Collateral Agent as a result of the Administrative Agent or the Collateral Agent, as applicable, acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of Majority Lenders (or such other Lenders as may be required to give such instructions under Section 10.6). The Administrative Agent Entitled to Act as Lender.  The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, the Administrative Agent in its individual capacity as a Lender hereunder.  With respect to its participation in the Loans and the Letters of Credit, the Administrative Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity.  The Administrative Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with Borrowers or any of their Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from Borrowers for services in connection with this Agreement and otherwise without having to account for the same to Lenders. Representations and Warranties; No Responsibility For Appraisal of Creditworthiness.  Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of Borrowers and any Subsidiary of any Borrower in connection with the making of the Loans and the issuance of Letters of Credit hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Borrowers and any Subsidiary of any Borrower.  The Administrative Agent or the Collateral Agent shall not have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and the Administrative Agent and the Collateral Agent shall not have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders. Right to Indemnity.  Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify the Administrative Agent and, subject to the provisions of the Intercreditor and Subordination Agreement, the Collateral Agent, to the extent that the Administrative Agent or the Collateral Agent, as applicable, shall not have been reimbursed by Borrowers, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent or the Collateral Agent, as applicable, in exercising its powers, rights and remedies or performing its duties hereunder or under the other Loan Documents or otherwise in its capacity as the Administrative Agent or the Collateral Agent, as applicable, in any way relating to or arising out of this Agreement or the other Loan Documents; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the respective gross negligence or willful misconduct of the Administrative Agent or the Collateral Agent, as applicable.  If any indemnity furnished to the Administrative Agent or the Collateral Agent for any purpose shall, in the opinion of the Administrative Agent or the Collateral Agent, as applicable, be insufficient or become impaired, the Administrative Agent or, subject to the provisions of the Intercreditor and Subordination Agreement, the Collateral Agent, as applicable, may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. Successor Administrative Agent and Collateral Agent.  The Administrative Agent or the Collateral Agent may resign at any time by giving 30 days' prior written notice thereof to Lenders and Borrowers, and the Administrative Agent or the Collateral Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Borrowers and the Administrative Agent and signed by Majority Lenders.  Upon any such notice of resignation or any such removal, Majority Lenders shall have the right, upon five Business Days' notice to Borrowers, to appoint a successor Administrative Agent or Collateral Agent, as applicable.  Upon the acceptance of any appointment as the Administrative Agent or Collateral Agent, as applicable, hereunder by a successor Administrative Agent or Collateral Agent, as applicable, that successor Administrative Agent or Collateral Agent, as applicable, shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent or Collateral Agent, as applicable, and the retiring or removed Administrative Agent or Collateral Agent, as applicable, shall be discharged from its duties and obligations under this Agreement.  After any retiring or removed Administrative Agent's, or any retiring or removed Collateral Agent's, resignation or removal hereunder as the Administrative Agent or the Collateral Agent, the provisions of this Article 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent or Collateral Agent, as applicable, under this Agreement. Intercreditor and Subordinated Agreement; Collateral Matters.  Each Lender hereby appoints BofA to serve as the Collateral Agent pursuant to the terms and conditions of the Intercreditor and Subordination Agreement and the Security Agreements.  Each Lender hereby authorizes the Administrative Agent to enter into the Intercreditor and Subordination Agreement on behalf of and for the benefit of that Lender, and agrees to be bound by the terms of the Intercreditor and Subordination Agreement; provided that the Administrative Agent shall not enter into or consent to any amendment, modification, termination or waiver of any provision contained in the Intercreditor and Subordination Agreement without the prior consent of the Majority Lenders.  Each Lender hereby authorizes the Collateral Agent to enter into the Security Agreements and to take all action contemplated by the Intercreditor and Subordination Agreement; provided that except as otherwise expressly provided in such Security Agreements or Intercreditor and Subordination Agreement, the Collateral Agent shall not enter into or consent to any amendment, modification, termination or waiver of any provision contained in any Security Agreements without the prior written consent of Majority Lenders.  Each Lender agrees that no Lender shall have any right individually to seek or to enforce any Security Agreements or to realize upon the security granted by any Security Agreements, it being understood and agreed that such rights and remedies may be exercised by the Collateral Agent for the benefit of Lenders and the parties to the Intercreditor and Subordination Agreement upon the terms of the Security Agreements and the Intercreditor and Subordination Agreement.  The Collateral Agent is authorized on behalf of all the Lenders, without the necessity of further consent from the Lenders, from time to time to take any action with respect to any Collateral or Security Agreements which may be necessary to perfect and maintain perfected the security interest in and Liens upon the Collateral granted pursuant to the Security Agreements.  The Collateral Agent shall have only those duties and responsibilities that are expressly specified in this Agreement, the Intercreditor and Subordination Agreement and the Security Agreements.  The Collateral Agent shall not have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein.  Subject to the Intercreditor and Subordination Agreement, the Lenders irrevocably authorize the Collateral Agent, at its option and in its discretion, to release any Lien granted to or held by the Collateral Agent upon any Collateral: a. upon termination of the Commitments and the payment in full of all Loans and all other Obligations other than Contingent Obligations and indemnities that survive the payment of the Loans payable under this Agreement and under any other Loan Document; b. constituting property sold or to be sold or disposed of as part of or in connection with any Disposition permitted hereunder subject to compliance with the Intercreditor and Subordination Agreement and Sections 2.4 and 7.2 hereof; c. constituting property in which Borrowers or any Subsidiary owned no interest at the time the Lien was granted or at any time thereafter; d. constituting property leased to Borrowers or any Subsidiary under a lease which has expired or been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by Borrowers or such Subsidiary to be, renewed or extended; e. consisting of an instrument evidencing Indebtedness or other debt instrument if the Indebtedness evidenced thereby has been paid in full; or f. if approved, authorized or ratified in writing by the Majority Lenders. Upon request by the Collateral Agent at any time, the Lenders will confirm in writing the Collateral Agent's authority to release particular types or items of Collateral pursuant to this Section 9.6. MISCELLANEOUS 1. Assignments and Participations in Loans and Letters of Credit . General .  Subject to Section 10.1(b), each Lender shall have the right at any time to (i) sell, assign or transfer to any Eligible Assignee, or (ii) sell participations to any Person in, all or any part of its Commitment or any Loan or Loans made by it or its Letters of Credit or participations therein or any other interest herein or in any other Obligations owed to it; provided that no such sale, assignment, transfer or participation shall, without the consent of Borrowers, require Borrowers to file a registration statement with the Securities and Exchange Commission or apply to qualify such sale, assignment, transfer or participation under the securities laws of any state; and provided , further that no such sale, assignment, transfer or participation of any Letter of Credit or any participation therein may be made separately from a sale, assignment, transfer or participation of a corresponding interest in the Commitment and the Loans of the Lender effecting such sale, assignment, transfer or participation.  Except as otherwise provided in this Section 10.1, no Lender shall, as between Borrowers and such Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment or transfer of, or any granting of participations in, all or any part of its Commitment or the Loans, the Letters of Credit or participations therein, or the other Obligations owed to such Lender. Assignments . Amounts and Terms of Assignments .  Each Commitment, Loan, Letter of Credit or participation therein, or other Obligation may (a) be assigned in any amount to another Lender, or to an Affiliate of the assigning Lender or another Lender, with the giving of notice to Borrowers and the Administrative Agent or (b) be assigned in an aggregate amount of not less than $1,000,000 (or such lesser amount as shall constitute the aggregate amount of the Commitment, Loans, Letters of Credit and participations therein, and other Obligations of the assigning Lender) to any other Eligible Assignee with the giving of notice to Borrowers and with the consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed).  To the extent of any such assignment in accordance with either clause (a) or (b) above, the assigning Lender shall be relieved of its obligations with respect to its Commitment, Loans, Letters of Credit or participations therein, or other Obligations or the portion thereof so assigned.  The parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance, an Assignment Agreement, together with a processing and recordation fee of $3,000 and such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to the Administrative Agent pursuant to Section 2 .7(b)(iii)a.  Upon such execution, delivery and acceptance, from and after the effective date specified in such Assignment Agreement, (y) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder and (z) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination of this Agreement under Section 10.9(b) and be released from its obligations under this Agreement (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto; provided that, anything contained in any of the Loan Documents to the contrary notwithstanding, if such Lender is the Issuing Lender with respect to any outstanding Letters of Credit such Lender shall continue to have all rights and obligations of an Issuing Lender with respect to such Letters of Credit until the cancellation or expiration of such Letters of Credit and the reimbursement of any amounts drawn thereunder).  The Commitments hereunder shall be modified to reflect the Commitment of such assignee and any remaining Commitment of such assigning Lender and, if any such assignment occurs after the issuance of any Notes hereunder, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its Note, if any, to the Administrative Agent for cancellation, and thereupon new Notes shall be issued to the assignee or to the assigning Lender, substantially in the form of Exhibit A annexed hereto with appropriate insertions, to reflect the new Commitments of the assignee and the assigning Lender. Acceptance by the Administrative Agent .  Upon its receipt of an Assignment Agreement executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the processing fee referred to in Section 10.1(b)(i) and any forms, certificates or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to the Administrative Agent pursuant to Section 2.7(b)(iii)a, the Administrative Agent shall, if the Administrative Agent and the Borrowers have consented to the assignment evidenced thereby (to the extent such consent is required pursuant to Section 10.1(b)(i)), (a) accept such Assignment Agreement by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of the Administrative Agent to such assignment) and (b) give prompt notice thereof to Borrowers.  The Administrative Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it as provided in this Section 10.1(b)(ii). Participations .  The holder of any participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly affecting (i) the extension of the scheduled final maturity date of any Loan allocated to such participation or (ii) a reduction of the principal amount of or the rate of interest payable on any Loan allocated to such participation, and all amounts payable by Borrowers hereunder (including amounts payable to such Lender pursuant to Sections 2.6(d), 2.7 and 3.6) shall be determined as if such Lender had not sold such participation.  Borrowers and each Lender hereby acknowledge and agree that, solely for purposes of Sections 10.4 and 10.5, (a) any participation will give rise to a direct obligation of Borrowers to the participant and (b) the participant shall be considered to be a "Lender". Assignments to Federal Reserve Banks .  In addition to the assignments and participations permitted under the foregoing provisions of this Section 10.1, any Lender may assign and pledge all or any portion of its Loans, the other Obligations owed to such Lender, and its Note to any Federal Reserve Bank 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 Bank; provided that (i) no Lender shall, as between Borrowers and such Lender, be relieved of any of its obligations hereunder as a result of any such assignment and pledge and (ii) in no event shall such Federal Reserve Bank be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder. Information .  Each Lender may furnish any information concerning Borrowers and any Subsidiary of any Borrower in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants), subject to Section 10.19. Representations of Lenders .  Each Lender listed on the signature pages hereof hereby represents and warrants (i) that it is an Eligible Assignee described in clause (a) of the definition thereof; (ii) that it has experience and expertise in the making of loans such as the Loans; and (iii) that it will make its Loans for its own account in the ordinary course of its business and without a view to distribution of such Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this Section 10.1, the disposition of such Loans or any interests therein shall at all times remain within its exclusive control).  Each Lender that becomes a party hereto pursuant to an Assignment Agreement shall be deemed to agree that the representations and warranties of such Lender contained in Section 2(c) of such Assignment Agreement are incorporated herein by this reference. Costs and Expenses.  Borrowers shall whether or not the transactions contemplated hereby shall be consummated: a. pay or reimburse each Lender, the Administrative Agent and the Collateral Agent within 30 days after demand (subject to subsection 4.1(d) for all reasonable costs and expenses incurred by each Lender, the Administrative Agent and the Collateral Agent (including fees and expenses described in subsection (c) below) in connection with the negotiation, development, preparation, delivery and execution of this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including title insurance, recording and other fees incurred by the Administrative Agent or the Collateral Agent with respect thereto and the reasonable Attorney Costs incurred by each Lender and the Administrative Agent with respect thereto; b. pay or reimburse each Lender, the Administrative Agent and the Collateral Agent within 30 days after demand (subject to subsection 4.1(d)) for all reasonable costs and expenses incurred by them in connection with the negotiation, renegotiation, restructure, workout, enforcement, attempted enforcement, or preservation of any rights or remedies (including in connection with any "workout" or restructuring regarding the Loans and including in any insolvency proceeding or appellate proceeding) under this Agreement, any other Loan Document, and any such other documents, including reasonable Attorney Costs incurred by the Administrative Agent, the Collateral Agent and any Lender; and c. pay or reimburse the Administrative Agent and the Collateral Agent within 30 days after demand for all reasonable costs and expenses incurred by each Lender, the Administrative Agent and the Collateral Agent subsequent to the Closing Date in connection with this Agreement including, without limitation, all reasonable costs and expenses incurred in connection with the administration and enforcement of this Agreement and Loan Documents. d. pay or reimburse each Lender within 30 days after demand (subject to Section 4.1(d)) for all reasonable costs and expenses incurred by such Lender by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to maintain such Loan if any payment of principal of any Loan is made by Borrowers to or for the account of any Lender as a result of a prepayment or payment pursuant to Section 2.4. The agreements of Borrowers set forth in this Section shall survive the termination of this Agreement. Indemnity.  Borrowers shall pay, indemnify, and hold each Lender, the Administrative Agent, the Collateral Agent and each of their respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including reasonable Attorney Costs) of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement and any other Loan Documents, or the transactions contemplated hereby and thereby, and with respect to any investigation, litigation or proceeding (including any insolvency proceeding or appellate proceeding) related to this Agreement, the Loan Documents, or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided, however, that Borrowers shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of such Indemnified Person. Borrowers hereby agree to indemnify, defend and hold harmless each Indemnified Person, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including reasonable Attorney Costs and the allocated cost of internal environmental audit or review services), which may be incurred by or asserted against such Indemnified Person in connection with or arising out of any pending or threatened investigation, litigation or proceeding, or any action taken by any Person, with respect to any Environmental Claim arising out of or related to any Property subject to a Mortgage in favor of the Collateral Agent or any Lender.  No action taken by legal counsel chosen by the Administrative Agent, the Collateral Agent or any Lender in defending against any such investigation, litigation or proceeding or requested remedial, removal or response action shall vitiate or in any way impair Borrowers' obligation and duty hereunder to indemnify and hold harmless the Administrative Agent, the Collateral Agent and each Lender. In no event shall any site visit, observation, or testing by the Administrative Agent, the Collateral Agent or any Lender (or any contractor of the Administrative Agent, the Collateral Agent or any Lender) be deemed a representation or warranty that Hazardous Materials are or are not present in, on, or under the site, or that there has been or shall be compliance with any Environmental Law.  Neither Borrowers nor any other Person is entitled to rely on any site visit, observation, or testing by the Administrative Agent, the Collateral Agent or any Lender.  Neither the Administrative Agent, the Collateral Agent nor any Lender owes any duty of care to protect Borrowers or any other Person against, or to inform Borrowers or any other party of, any Hazardous Materials or any other adverse condition affecting any site or Property.  Neither the Administrative Agent, the Collateral Agent nor any Lender shall be obligated to disclose to Borrowers or any other Person any report or findings made as a result of, or in connection with, any site visit, observation, or testing by the Administrative Agent, the Collateral Agent or any Lender. At the election of any Indemnified Person, Borrowers shall defend such Indemnified Person using legal counsel satisfactory to such Indemnified Person in such Person's reasonable discretion, at the sole cost and expense of Borrowers.  All amounts owing under this Section 10.3 shall be paid within 30 days after demand. Without limiting the generality of the foregoing, any amount required to be paid by any Lender to the Administrative Agent, the Collateral Agent, any Administrative Agent-Related Person or any Collateral Agent-Related Person pursuant to Section 9.7 shall constitute an Indemnified Liability recoverable by such Lender from Borrowers, so long as such Indemnified Liability does not arise from the gross negligence or willful misconduct such Lender.  The agreements in this Section shall survive payment of all other Obligations. Set-Off In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default each Lender is hereby authorized by Borrowers at any time or from time to time, without notice to Borrowers or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by that Lender to or for the credit or the account of Borrowers against and on account of the obligations and liabilities of Borrowers to that Lender under this Agreement, the Letters of Credit and participations therein and the other Loan Documents, including all claims of any nature or description arising out of or connected with this Agreement, the Letters of Credit and participations therein or any other Loan Document, irrespective of whether or not (i) that Lender shall have made any demand hereunder or (ii) the principal of or the interest on the Loans or any amounts in respect of the Letters of Credit or any other amounts due hereunder shall have become due and payable pursuant to Article 8 and although said obligations and liabilities, or any of them, may be contingent or unmatured. Ratable Sharing.  Lenders hereby agree among themselves that if any of them shall, whether by voluntary payment (other than a voluntary prepayment of Loans made and applied in accordance with the terms of this Agreement), by realization upon security, through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of Letters of Credit, fees and other amounts then due and owing to that Lender hereunder or under the other Loan Documents (collectively, the "Aggregate Amounts Due" to such Lender) which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (i)  notify Administrative Agent and each other Lender of the receipt of such payment and (ii) apply a portion of such payment to purchase participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided that if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of Borrowers or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest.  Borrowers expressly consent to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by Borrowers to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder. Amendments and Waivers.  No amendment, modification, termination or waiver of any provision of this Agreement or of the Notes, and no consent to any departure by Borrowers therefrom, shall in any event be effective without the written concurrence of Majority Lenders; provided that any such amendment, modification, termination, waiver or consent which: a. extends the final scheduled maturity of any Loan or Note or extends the stated maturity of any Letter of Credit beyond the Termination Date, or reduces the rate or extends the time of payment of interest or fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates), or reduces the principal amount thereof (except to the extent repaid in cash); or b. releases all or substantially of the Collateral (except as expressly provided in the Loan Documents) under all the Collateral Documents; or c. amends, modifies or waives any provision of this Section 10.6; or d. reduces the percentage specified in the definition "Majority Lenders" (it being understood that, with the consent of Majority Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of Majority Lenders); or e. consents to the assignment or transfer by Borrowers of any of their rights and obligations under this Agreement or any other Loan Document; shall be effective only if evidenced in a writing signed by or on behalf of all Lenders (with Obligations being directly affected in the case of clause (a) above). In addition, (i) no amendment, modification, termination or waiver which increases the Commitments of any Lender over the amount thereof then in effect shall be effective without the written concurrence of such Lender, (ii) no amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the Lender which is the holder of that Note, and (iii) no amendment, modification, termination or waiver of any provision of Article 9 or of any other provision of this Agreement which, by its terms, expressly requires the approval or concurrence of Administrative Agent shall be effective without the written concurrence of Administrative Agent.  Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender.  Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.  No notice to or demand on Borrowers in any case shall entitle Borrowers to any other or further notice or demand in similar or other circumstances.  Any amendment, modification, termination, waiver or consent effected in accordance with this Section 10.6 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by Borrowers, on Borrowers. 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 would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Default if such action is taken or condition exists. Notices.  Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telexed or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telefacsimile or telex, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided that notices to Administrative Agent shall not be effective until received.  For the purposes hereof, the address of each party hereto shall be as set forth under such party's name on the signature pages hereof or (i) as to Borrowers and Administrative Agent, such other address as shall be designated by such Person in a written notice delivered to the other parties hereto and (ii) as to each other party, such other address as shall be designated by such party in a written notice delivered to Administrative Agent. Survival of Representations, Warranties and Agreements. a. All representations, warranties and agreements made herein shall survive the execution and delivery of this Agreement and the making of the Loans and the issuance of the Letters of Credit hereunder. b. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Borrowers set forth in Sections 2.6(d), 2.7, 3.5(a), 3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in Sections 9.2(c), 9.4 and 10.5 shall survive the payment of the Loans, the cancellation or expiration of the Letters of Credit and the reimbursement of any amounts drawn thereunder, and the termination of this Agreement. Failure or Indulgence Not Waiver; Remedies Cumulative.  No failure or delay on the part of Administrative Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege.  All rights and remedies existing under this Agreement and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. Marshalling; Payments Set Aside.  Neither Administrative Agent nor any Lender shall be under any obligation to marshal any assets in favor of Borrowers or any other party or against or in payment of any or all of the Obligations.  To the extent that Borrowers make a payment or payments to Administrative Agent or Lenders (or to Administrative Agent for the benefit of Lenders), or Administrative Agent or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred. Severability. In case any provision in or obligation under this Agreement or the Notes 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. Obligations Several; Independent Nature of Lenders' Rights. The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitment of any other Lender hereunder.  Nothing contained herein or in any other Loan Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a partnership, an association, a joint venture or any other kind of entity.  The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. Headings.  Section and Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. Applicable Law.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Successors and Assigns.  This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders (it being understood that Lenders' rights of assignment are subject to Section 10.1).  Neither any Borrower's rights or obligations hereunder nor any interest therein may be assigned or delegated by such Borrower without the prior written consent of all Lenders. Consent to Jurisdiction and Service of Process.  ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST BORROWERS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK.  BY EXECUTING AND DELIVERING THIS AGREEMENT, BORROWERS, FOR THEMSELVES AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPT GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVE ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREE THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO BORROWERS AT THEIR ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 10.8; (IV) AGREE THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER BORROWERS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREE THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST BORROWERS IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREE THAT THE PROVISIONS OF THIS SECTION 10.17 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE. Waiver of Jury Trial.  EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED.  The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims.  Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings.  Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER.  In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. Confidentiality.  Each Lender shall hold all non-public information obtained pursuant to the requirements of this Agreement which has been identified as confidential by Borrowers in accordance with such Lender's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, it being understood and agreed by Borrowers that in any event a Lender may make disclosures to Affiliates of such Lender or disclosures reasonably required by any bona fide assignee, transferee or participant in connection with the contemplated assignment or transfer by such Lender of any Loans or any participations therein or disclosures required or requested by any governmental agency or representative thereof or pursuant to legal process; provided that, unless specifically prohibited by applicable law or court order, each Lender shall notify Borrowers of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; and provided, further that in no event shall any Lender be obligated or required to return any materials furnished by Borrowers and any Subsidiary of any Borrower. Counterparts; Effectiveness.  This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.  This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by Borrowers and The Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. UNITED ARTISTS THEATRE COMPANY   By: Name: Title: Notice Address: 9110 E. Nichols Avenue, Suite 200 Englewood, CO 80112-3405 Attention:  Gene Hardy, Esq. Executive Vice President and General Counsel Tel: (303) 792-8630 Fax: (303) 792-8649 Email: [email protected]     UNITED ARTISTS THEATRE CIRCUIT, INC.   By: Name: Title: Notice Address: 9110 E. Nichols Avenue, Suite 200 Englewood, CO 80112-3405 Attention:  Gene Hardy, Esq. Executive Vice President and General Counsel Tel: (303) 792-8630 Fax: (303) 792-8649 Email: [email protected]   UNITED ARTISTS REALTY COMPANY   By: Name: Title: Notice Address: 9110 E. Nichols Avenue, Suite 200 Englewood, CO 80112-3405 Attention:  Gene Hardy, Esq. Executive Vice President and General Counsel Tel: (303) 792-8630 Fax: (303) 792-8649 Email: [email protected]   UNITED ARTISTS PROPERTIES I CORP.   By: Name: Title: Notice Address: 9110 E. Nichols Avenue, Suite 200 Englewood, CO 80112-3405 Attention:  Gene Hardy, Esq. Executive Vice President and General Counsel Tel: (303) 792-8630 Fax: (303) 792-8649 Email: [email protected]   UNITED ARTISTS PROPERTIES II CORP.     By: Name: Title: Notice Address: 9110 E. Nichols Avenue, Suite 200 Englewood, CO 80112-3405 Attention:  Gene Hardy, Esq. Executive Vice President and General Counsel Tel: (303) 792-8630 Fax: (303) 792-8649 Email: [email protected]     BANKERS TRUST COMPANY, as Administrative Agent and as a Lender By: Name: Title: Notice Address: 130 Liberty Street 14th Floor New York, NY 10006 Attention:  Chris Dibiase Tel:  (212) 250-4502 Fax:  (212) 250-6029/7351 With a copy to: 300 South Grand Avenue 41st Floor Los Angeles, CA 90071 Attention:  William Shpall Tel:  (213) 620-8257 Fax:  (213) 620-8484 With respect to Standby Letters of Credit: 130 Liberty Street, 14th Floor New York, NY 10006 Attention:  Joe Rozing Tel:  (212) 250-4369 Fax:  (212) 250-5817 With respect to Commercial Letters of Credit: 130 Liberty Street, 14th Floor New York, NY 10006 Attention:  Joe Rozing Tel:  (212) 250-4369 Fax:  (212) 250-5817     DEUTSCHE BANK AG, NEW YORK BRANCH, as an Issuing Lender By: Name:     Paul Hatfield Title:       Vice President Notice Address: 130 Liberty Street 14th Floor New York, NY 10006 Attention:  Chris Dibiase Tel:  (212) 250-4502 Fax:  (212) 250-6029/7351 With a copy to: 300 South Grand Avenue 41st Floor Los Angeles, CA 90071 Attention:  William Shpall Tel:  (213) 620-8257 Fax:  (213) 620-8484 With respect to Standby Letters of Credit: 130 Liberty Street, 14th Floor New York, NY 10006 Attention:  Joe Rozing Tel:  (212) 250-4369 Fax:  (212) 250-5817 With respect to Commercial Letters of Credit: 130 Liberty Street, 14th Floor New York, NY 10006 Attention:  Joe Rozing Tel:  (212) 250-4369 Fax:  (212) 250-5817 Foothill Income Trust II, L.P. , as a Lender By FIT II GP, LLC, Its General Partner ______________________________________ Name: Title: Managing Partner Notice Address: 2450 Colorado Avenue, Suite 3000 West Santa Monica, CA 90404 Attention:  Dennis Ascher Tel:  (310) 453-7377 Fax:  (310) 453-7470 With a copy to: c/o Foothill Capital Corporation 2450 Colorado Avenue, Suite 3000 West Santa Monica, CA 90404 Attention:  Samuel Tyler Tel:  (310) 453-7389 Fax:  (310) 453-7470           EXHIBITS EXHIBIT A NOTE EXHIBIT B CERTIFICATE RE NON-BANK STATUS EXHIBIT C FORM OF LEGAL OPINION EXHIBIT D CONFIRMATION ORDER EXHIBIT E NOTICE TO DEPOSITORY INSTITUTION EXHIBIT F SECURITY AGREEMENT EXHIBIT G STOCK PLEDGE AGREEMENT EXHIBIT H UAPH II STOCK PLEDGE AGREEMENT EXHIBIT I FORM OF LEASEHOLD DEED OF TRUST EXHIBIT J FORM OF MODIFICATION OF DEED OF TRUST EXHIBIT K NOTICE OF BORROWING EXHIBIT L NOTICE OF CONVERSION/CONTINUATION EXHIBIT M REQUEST FOR ISSUANCE OF LETTER OF CREDIT EXHIBIT N FORM OF ASSIGNMENT AGREEMENT EXHIBIT O INTERCREDITOR AND SUBORDINATION AGREEMENT SCHEDULES Schedule 1.2 Mortgaged Property Descriptions Schedule 2.1 Lenders' Commitments Schedule 4.2(b)(ii) Jurisdictions for Good Standing Certificates Schedule 5.9 Title to Properties Schedule 5.10 Taxes Schedule 5.12 Environmental Matters Schedule 5.16 Subsidiaries and Equity Investments Schedule 6.11 Collateral and Deposit Account Schedules Schedule 7.1 Permitted Liens Schedule 7.5 Existing Indebtedness Schedule 7.8 Certain Contingent Liabilities ARTICLE 1. DEFINITIONS 1 1.1 Defined Terms 1 1.2 Other Interpretive Provisions 21 1.3 Accounting Principles 22 1.4 Rounding 22 1.5 Exhibits and Schedules 22       ARTICLE 2. THE REVOLVING CREDIT 23 2.1 Commitments; Making of Loans; Notes 23 2.2 Interest on the Loans 25 2.3 Fees 28 2.4 Prepayments and Reductions in Aggregate Commitment;     Prepayments and Reductions in Revolving Loan Commitments;     General Provisions Regarding Payments 29 2.5 Use of Proceeds 31 2.6 Special Provisions Governing Eurodollar Rate Loans 32 2.7 Increased Costs; Taxes; Capital Adequacy 34 2.8 Obligation of Lenders to Mitigate 38 2.9 Joint Borrower Provisions 38       ARTICLE 3. LETTERS OF CREDIT 43 3.1 Issuance of Letters of Credit and Lender's Purchase of     Participations Therein 43 3.2 Letter of Credit Fees 45 3.3 Drawings and Reimbursement of Amounts Paid Under Letters of     Credit 46 3.4 Obligations Absolute 48 3.5 Indemnification; Nature of Issuing Lender's Duties 49 3.6 Increased Costs and Taxes Relating to Letters of Credit 50       ARTICLE 4. CONDITIONS PRECEDENT AND CONDITIONS     SUBSEQUENT 51 4.1 Conditions of Loans 51 4.2 Loan Documents 52       ARTICLE 5. REPRESENTATIONS AND WARRANTIES 55 5.1 Corporate Existence and Power 55 5.2 Corporate Authorization, No Contravention 55 5.3 Governmental Authorization 56 5.4 Binding Effect 56 5.5 Litigation 56 5.6 No Default 56 5.7 ERISA 57       5.8 Title to Properties 58 5.9 Taxes 58 5.10 Environmental Matters 58 5.11 Regulated Entities 59 5.12 Labor Relations 59 5.13 Copyrights, Patents, Trademarks and Licenses 60 5.14 Subsidiaries 60 5.15 Insurance 60 5.16 Locations of Collateral and Places of Business 60 5.17 Locations of, and Information with Respect to, Deposit Accounts 60 5.18 Validity of Security Interest 61 5.19 Existing Liens 61 5.20 Financial Statements 61 5.21 Compliance With Laws 62 5.22 Material Adverse Change 62       ARTICLE 6. AFFIRMATIVE COVENANTS 62 6.1 Financial Reporting 62 6.2 Certificates; Other Information 63 6.3 Notices 64 6.4 Preservation of Corporate Existence, Etc. 65 6.5 Maintenance of Property and Other Collateral 66 6.6 Insurance 66 6.7 Payment of Obligations 66 6.8 Compliance with Laws 66 6.9 Inspection of Property and Books and Records 67 6.10 Environmental Laws 67 6.11 Update of Collateral and Deposit Account Schedules 67 6.12 Execution of Guaranty and Security Agreements after the Closing     Date 68       ARTICLE 7. NEGATIVE COVENANTS 68 7.1 Limitation on Liens 68 7.2 Disposition of Assets 70 7.3 Fundamental Changes, Corporate Documents 71 7.4 Loans and Investment 71 7.5 Limitation on Indebtedness 73 7.6 Transactions with Affiliates 74 7.7 Lease Obligations 74 7.8 Capital Expenditures 75 7.9 Change in Business 75 7.10 Accounting Changes 75 7.11 Relocation of Collateral, Chief Executive Offices, or Deposit Accounts   7.12 No Negative Pledges in Favor of Others 75 7.13 Certain Restrictions 75 7.14 Financial Covenants 76 7.15 Restricted Payments 76 7.16 Priority of Loan Payments 77 7.17 Investments in Margin Stock 77 7.18 Amendments to Certain Agreements 77 7.19 Certain Provisions Relating to Other Debt Instruments 78       ARTICLE 8. EVENTS OF DEFAULT 78 8.1 Event of Default 78 8.2 Rights and Remedies 80 8.3 Remedies; Obtaining the Collateral Upon Default 81 8.4 Remedies; Disposition of the Collateral 82 8.5 Recourse 83 8.6 Rights Not Exclusive 83       ARTICLE 9. THE ADMINISTRATIVE AGENT AND THE COLLATERAL 83   AGENT   9.1 Appointment of the Administrative Agent 83 9.2 Powers and Duties; General Immunity 83 9.3 Representations and Warranties; No Responsibility For Appraisal     of Creditworthiness 85 9.4 Right to Indemnity 85 9.5 Successor Administrative Agent and Collateral Agent 86 9.6 Intercreditor and Subordinated Agreement; Collateral Matters 86       ARTICLE 10. MISCELLANEOUS 87 10.1 Assignments and Participations in Loans and Letters of Credit 87 10.2 Costs and Expenses 90 10.3 Indemnity 91 10.4 Set-Off 92 10.5 Ratable Sharing 92 10.6 Amendments and Waivers 93 10.7 Independence of Covenants 94 10.8 Notices 94 10.9 Survival of Representations, Warranties and Agreements 94 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative 94 10.11 Marshalling; Payments Set Aside 94 10.12 Severability 95 10.13 Obligations Several; Independent Nature of Lender's Rights 95 10.14 Headings 95 10.15 Applicable Law 95 10.16 Successors and Assigns 95 10.17 Consent to Jurisdiction and Service of Process 96 10.18 Waiver of Jury Trial 96 10.19 Confidentiality 97 10.20 Counterparts; Effectiveness 97

AGREEMENT This Agreement is made by and among George T. Haymaker, Jr. ("Optionee") and Kaiser Aluminum Corporation and Kaiser Aluminum & Chemical Corporation, both Delaware corporations (together, the "Company"). WHEREAS, the Company granted to Optionee a stock option to purchase up to 283,000 shares of common stock, $.01 par value per share, of Kaiser Aluminum Corporation, and the terms and conditions of such grant are set forth in that certain Time-Based Stock Option Grant between Optionee and the Company having an effective date of January 1, 1998, as amended by that certain Director and Non-Executive Chairman Agreement between Optionee and the Company dated January 1, 2000 (the Time-Based Stock Option Grant, as so amended, the "1998 Grant"); and WHEREAS, Optionee and the Company desire to amend the 1998 Grant to cancel 71,490 of the unvested Option Shares and to specify the vesting provisions for the 22,844 unvested Option Shares thereafter remaining under the 1998 Grant; and WHEREAS, Optionee and the Company desire to evidence the grant of a new stock option to Optionee to purchase up to 71,490 Option Shares and to specify the terms and conditions applicable thereto; NOW, THEREFORE, Optionee and the Company hereby agree as follows: 1. All capitalized terms used herein shall have the meanings provided in the 1998 Grant unless otherwise specifically provided herein. 2. Effective as of April 14, 2000, the 1998 Grant is amended to cancel 71,490 of the unvested Option Shares. Provided Optionee's Qualified Service Period has not previously terminated, and subject to the terms of the 1998 Grant providing for earlier vesting upon the occurrence of a Company Sale Transaction or certain terminations of Optionee's Employment, the 22,844 unvested Option Shares thereafter remaining under the 1998 Grant shall become Vested Options as of 12:01 a.m. Houston time on December 31, 2000. Except as expressly set forth herein, the terms and conditions of the 1998 Grant are hereby ratified and affirmed. 3. This Agreement evidences that the Company has granted to Optionee, effective as of April 14, 2000, the right, privilege and option to purchase up to 71,490 Option Shares. Provided that Optionee's Qualified Service Period has not previously terminated, and subject to the terms of such grant providing for earlier vesting upon the occurrence of a Company Sale Transaction or certain terminations of Optionee's Employment, such 71,490 Option Shares shall become Vested Options as of 12:01 a.m. Houston time on December 31, 2000. Except as expressly set forth herein, such stock option is granted on the same terms and conditions as are set forth in the 1998 Grant. IN WITNESS WHEREOF, Optionee and the Company have executed this Agreement effective as of the 14th day of April, 2000. "COMPANY" KAISER ALUMINUM CORPORATION By: /S/ RAYMOND J. MILCHOVICH Raymond J. Milchovich President and Chief Executive Officer KAISER ALUMINUM & CHEMICAL CORPORATION By: /S/ RAYMOND J. MILCHOVICH Raymond J. Milchovich President and Chief Executive Officer "OPTIONEE" /S/ GEORGE T. HAYMAKER, JR. George T. Haymaker, Jr.

Exhibit 10.25   CREDIT AGREEMENT*   Dated as of September 21, 2001   Between   WILLIS LEASE FINANCE CORPORATION, as Borrower   and   ABB CREDIT FINANS AB (publ)   -------------------------------------------------------------------------------- *              Portions of the material in this Exhibit have been redacted pursuant to a request for confidential treatment, and the redacted material has been filed separately with the Securities and Exchange Commission (the "Commission").  An asterisk has been placed in the precise places in this Agreement where we have redacted information, and the asterisk is keyed to a legend which states that the material has been omitted pursuant to a request for confidential treatment.   Schnader Harrison Segal & Lewis LLP 140 Broadway, Suite 3100 New York, NY 10005-9998   TABLE OF CONTENTS   SECTION 1 CERTAIN DEFINITIONS   1.1 Definitions.   1.2 Accounting Terms.   1.3 Construction. SECTION 2 THE CREDIT   2.1 The Loans.   2.2 The Notes.   2.3 Funding Procedures.   2.4 Facility Fee.   2.5 Mandatory Prepayments.   2.6 Interest.   2.7 Blocked Account; Payments of Interest and Principal.   2.8 Loan Maturities.   2.9 Debt to Value Maintenance.   2.10 Voluntary Prepayments.   2.11 Payments.   2.12 Change in Circumstances, Yield Protection.   2.13 Illegality.   2.14 Taxes.   2.15 Maintenance Reserves; Security Deposits; Insurance Proceeds. SECTION 3 REPRESENTATIONS AND WARRANTIES   3.1 Organization, Standing.   3.2 Corporate Authority, Validity, Etc.   3.3 Validity of Loan Documents.   3.4 Litigation.   3.5 ERISA.   3.6 Financial Statements.   3.7 No Material Adverse Change.   3.8 Not in Default, Judgments, Etc.   3.9 Taxes.   3.10 Permits, Licenses, Etc.   3.11 No Materially Adverse Contracts, Etc.   3.12 Compliance with Laws, Etc.   3.13 Solvency.   3.14 Use of Proceeds.   3.15 Depreciation Policies.   3.16 Disclosure Generally. SECTION 4 CONDITIONS PRECEDENT   4.1 Conditions to the Effectiveness of the Agreement.   4.2 All Loans.   SECTION 5 AFFIRMATIVE COVENANTS   5.1 Financial Statements and Reports.   5.2 Corporate Existence.   5.3 ERISA.   5.4 Compliance with Regulations.   5.5 Conduct of Business; Permits and Approvals, Compliance with Laws.   5.6 Maintenance of Properties.   5.7 Maintenance of Insurance.   5.8 Payment of Taxes, Etc.   5.9 Notice of Events.   5.10 Inspection Rights.   5.11 Generally Accepted Accounting Principles.   5.12 Compliance with Material Contracts.   5.13 Use of Proceeds.   5.14 Further Assurances.   5.15 Placards.   5.16 Lease Event of Default.   5.17 Special Indemnification. SECTION 6 NEGATIVE COVENANTS   6.1 Consolidation and Merger.   6.2 Liens.   6.3 Margin Stock.   6.4 Transfer of Assets; Nature of Business.   6.5 Accounting Change.   6.6 Transactions with Affiliates of the Borrower.   6.7 Restricted Payments.   6.8 Restriction on Amendment of this Agreement.   6.9 Change of Incorporation. SECTION 7 FINANCIAL COVENANTS   7.1 No Losses.   7.2 Minimum Tangible Net Worth.   7.3 Leverage Ratio.   7.4 Adjusted Total Debt to Adjusted Tangible Net Worth.   7.5 Minimum Interest Coverage Ratio.   7.6 Investments in Unrestricted Subsidiaries. SECTION 8 DEFAULT   8.1 Events of Default. SECTION 9 COLLATERAL   9.1 Collateral.   9.2 Security Documents.   9.3 Release of Collateral. SECTION 10 MISCELLANEOUS   10.1 Waiver.   10.2 Amendments.   10.3 GOVERNING LAW.   10.4 Participations and Assignments.   10.5 Captions.   10.6 Notices.   10.7 Application of Payments.   10.8 Expenses.   10.9 Survival of Warranties and Certain Agreements.   10.10 Severability.   10.11 No Fiduciary Relationship.   10.12 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.   10.13 WAIVER OF JURY TRIAL.   10.14 Counterparts; Effectiveness.   10.15 Use of Defined Terms.   10.16 Offsets.   10.17 Entire Agreement.   10.18 Confidentiality.   Exhibits Exhibit A    Form of Beneficial Interest Pledge and Security Agreement Exhibit B    Form of Compliance Certificate Exhibit C    Form of Consent and Agreement Exhibit D    Form of Note Exhibit E    Form of Owner Trustee Mortgage Exhibit F    Form of Security Agreement-Blocked Account Exhibit G   Depreciation Policy Exhibit H   Form of Request for Advance   Disclosure Schedule   Schedule 10.4   [Credit Agreement]   CREDIT AGREEMENT   THIS CREDIT AGREEMENT, dated as of September 21, 2001 (this “Agreement”), is entered into by and between WILLIS LEASE FINANCE CORPORATION, a Delaware corporation (successor by merger to Willis Lease Finance Corporation, a California corporation) (“Willis” or the “Borrower”), and ABB Credit Finans AB (publ) (the “Lender”).   PRELIMINARY STATEMENT   WHEREAS, the Borrower desires to have available to it a  credit facility (the “Credit Facility”) which will be used for the purchase or refinance of Engines (defined below).   WHEREAS, the Lender is willing to establish such Credit Facility and make loans to the Borrower under the terms and conditions hereinafter set forth.   NOW, THEREFORE, in consideration of the premises and promises hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows:   SECTION 1 CERTAIN DEFINITIONS 1.1           Definitions.   “Acceptable Manufacturer” shall mean CFM International, General Electric, Pratt & Whitney, Rolls Royce and International Aero Engines.   “Adjusted Tangible Net Worth” shall mean Tangible Net Worth of the Willis Companies, less any stockholder’s equity in any Unrestricted Subsidiaries where the Debt of such Unrestricted Subsidiary is nonrecourse to the Borrower.   “Adjusted Total Debt” shall mean all Debt of the Willis Companies, less any Debt to the extent such Debt is nonrecourse to the Borrower.   “Affiliate” shall mean, with respect to any Person, any other Person:  (i) which directly or indirectly controls, or is controlled by, or is under common control with such Person; (ii) which directly or indirectly beneficially owns or holds ten percent (10%) or more of any class of voting stock of such Person; or (iii) ten percent (10%) or more of whose voting stock is directly or indirectly beneficially owned or held by such Person.  The term “control” 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, by contract, or otherwise.   “Agreement” shall mean this Agreement, as amended, supplemented, modified, replaced, substituted for or restated from time to time and all exhibits and schedules attached hereto.   “Bank” shall mean California Bank & Trust. “Beneficial Interest” shall mean a beneficial interest in a trust which owns one or more Engines.   “Beneficial Interest Pledge Agreement” shall mean a Beneficial Interest Pledge and Security Agreement substantially in form and substance attached hereto as Exhibit A.   “Blocked Account” shall mean the following account maintained by the Borrower at the Bank into which all payments made by or on behalf of the Borrower in payment of the Loan shall be deposited:   ABA:                      121 002 042 Bank:                      California Bank & Trust                                 San Francisco, CA Account:               1170011641 Acct Name:           Willis Lease Finance Corporation   “Blocked Account Agreement” shall mean the Three Party Deposit Account Agreement-Blocked Account between the Bank, the Borrower and the Lender.   “Break Costs” shall have the meaning given such term in Section 2.10.   “Business Day” shall mean any day other than a Saturday, Sunday, or other day on which commercial banks in Stockholm, Sweden, San Francisco, California, U.S.A. or New York, New York, U.S.A. are authorized or required to close under the laws of either Sweden, the State of California, or the State of New York and a day on which dealings in Dollar deposits are also carried on in the London interbank market and banks are open for business in London (“London Business Day”).   “Capitalized Lease” shall mean all lease obligations of any Person for any property (whether real, personal or mixed) which have been or should be capitalized on the books of the lessee in accordance with Generally Accepted Accounting Principles.   “Capitalized Lease Obligations” with respect to any Person, shall mean the aggregate amount which, in accordance with GAAP, is required to be reported as a liability on the balance sheet of such Person at such time in respect of such Person’s interest as lessee under a Capitalized Lease.   “Change of Control” shall mean, with respect to the Borrower, any action occurring or set of circumstances existing that would result in any Person or group (other than Charles F. Willis IV, his trusts, family limited partnerships or heirs and other than any member of the SwissAir Group pursuant to the exercise of options outstanding on the date of this Agreement) beneficially owning (as defined in Rule 13(d)-3 promulgated under the Securities Exchange Act of 1934, as amended), directly or indirectly, an amount of the outstanding capital stock of the Borrower entitling such Person or group to 30% or more of the voting power of all the outstanding capital stock of the Borrower.  The percentage of voting power shall be determined based on the number of votes a holder of capital stock can cast in the election of directors, compared to the total number of votes that all shareholders can cast in such election. “Closing Date” shall mean the date on which this Agreement shall become effective as determined in accordance with Section 4.1.   “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and all rules and regulations with respect thereto in effect from time to time.   “Collateral” shall mean, collectively, the “Collateral”, (as such term is defined in the Beneficial Interest Pledge Agreements executed, delivered and outstanding from time to time) and the “Collateral” (as such term is defined in the Owner Trustee Mortgages executed, delivered and outstanding from time to time).   “Commitment Fee” shall mean the commitment fee payable by the Borrower pursuant to Section 2.11(c).   “Compliance Certificate” shall mean a certificate in substantially the form attached hereto as Exhibit B which shall be signed by the chief financial officer, chief administrative officer or chief executive officer of Borrower.   “Consent and Agreement” shall mean a Consent and Agreement in substantially the form attached hereto as Exhibit C in respect of each Lease between the Lender and the Owner Trustee and the Lessee parties to such Lease.   "Contribution Agreement" shall have the meaning ascribed to such term in the Other Facility Agreement.    “Debt” shall mean, as to any Person at any time (without duplication) and, for the Borrower, determined on a consolidated basis:  (i) all obligations of such Person for borrowed money; (ii) all obligations of such Person evidenced by bonds, notes, debentures, or other similar instruments; (iii) all 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 which are not past due by more than ninety (90) days unless such trade accounts payable are being contested in good faith by appropriate proceedings; (iv) all Capitalized Lease Obligations of such Person; (v) all obligations of such Person under guaranties, letters of credit, endorsements (other than for collection or deposit in the ordinary course of business), assumptions or other contingent obligations, in respect of, or to purchase or otherwise acquire, any obligation or indebtedness of any other Person, or any other obligation, contingent or otherwise, of such Person directly or indirectly protecting the holder of any obligation or indebtedness of any other Person, contingent or otherwise, against loss (whether by partnership arrangements, agreements to keep-well, to purchase assets, goods, securities, or services, to take-or-pay or otherwise); (vi) all obligations of any other Person secured by a Lien existing on property owned by such Person, whether or not the obligations secured thereby have been assumed by such Person or are non-recourse to the credit of such Person; (vii) 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; (viii) the net present value of Operating Leases for engines, aircraft and parts packages, using a 10% discount rate; and (ix) all obligations with respect to deposits or maintenance reserves to the extent not supported by cash reserved specifically therefor. “Default Rate” on any Loan shall mean two percent (2%) per annum above the Interest Rate then applicable to each Loan or portion thereof.   “Determination Date” shall have the meaning given such term in Section 2.9.   "Disclosure Schedule" shall mean the schedule referred to in Sections 3.4, 3.6, 3.9 and 3.16.   “Dollars” shall mean the lawful currency of the United States of America.   “EBIT” shall mean the sum of (i) Net Income less any extraordinary gain or loss included in the calculation thereof, plus (ii) amounts deducted for interest expense and income taxes.   “Eligibility Criteria” shall mean the applicable criteria set forth below to be used to determine whether any Engine and the Lease thereof are eligible as Collateral.   The Eligibility Criteria for an Engine are as follows:  *   The Eligibility Criteria for any Lease is as follows:  *   “Eligible Engines” shall mean Engines which meet all of the Eligibility Criteria for Engines.   “Eligible Lease” shall mean a Lease of an Engine which meets all of the Eligibility Criteria for Leases and in which *   “Engine” shall mean any Stage III engine owned by Borrower or an Owner Trustee (acting pursuant to a Trust Agreement) designed or suitable for use to propel an aircraft, whether or not subject to a Lease.   “Engine Records” shall mean all technical and other records in respect of an Engine required by the manufacturer thereof or any applicable Governmental Authority to be maintained.   “Environmental Control Statutes” shall mean each and every applicable federal, state, county or municipal environmental statute, ordinance, rule, regulation, order, directive or requirement, together with all successor statutes, ordinances, rules, regulations, orders, directives or requirements, of any Governmental Authority, including without limitation laws in any way related to Hazardous Substances.   “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.   -------------------------------------------------------------------------------- *              This redacted material has been omitted pursuant to a request for confidential treatment, and the material has been filed separately with the Commission. “ERISA Affiliate” shall mean any corporation which is a member of the same controlled group of corporations as the Borrower within the meaning of Section 414(b) of the Code, or any trade or business which is under common control with the Borrower within the meaning of Section 414(c) of the Code.   “Event of Default” shall have the meaning set forth in Section 8.1.   “Facility Fee” shall mean an amount equal to one-half of one percent (0.50%) of the Maximum Loan Commitment.   “Fair Market Value” shall mean with respect to an Engine, an amount as determined by an appraiser to be the amount that would be obtained in an arm’s-length cash transaction between willing, able and knowledgeable parties, acting prudently, with an absence of duress and with a reasonable time period available for marketing, adjusted to account for the maintenance status of such Engine (which shall reflect any existing maintenance reserves).  In determining such value, it will be assumed that (i) no value will be attributed to lease payments made under the related Lease and (ii) no value shall be attributed to any security deposit under the related Lease.  The appraiser shall be retained by the Borrower and shall be reasonably acceptable to the Lender (such appraisal fees to be paid by the Borrower).   “FAR” means the Federal Aviation Regulations issued by the Federal Aviation Administration as in effect from time to time.   “Fiscal Quarter” shall mean a fiscal quarter of the Borrower, which shall be any quarterly period ending on March 31, June 30, September 30 or December 31 of any year.   “Fiscal Year” shall mean a fiscal year of the Borrower, which shall end on the last day of December.   “Generally Accepted Accounting Principles” or “GAAP” shall mean generally accepted accounting principles as in effect from time to time in the United States of America, consistently applied.   "Geneva Convention" shall mean the International Recognition of Rights in Aircraft Convention between the United States of America and Other Governments, June 19, 1948, 310 U.N.T.S. 151.   “Governmental Authority” shall mean any federal, state, county or municipal government, or any department, agency, bureau or other similar type body obtaining authority therefrom or created pursuant to any laws, including, without limitation, Environmental Control Statutes.   “Hazardous Substances” shall mean without limitation, any regulated substance, toxic substance, hazardous substance, hazardous waste, pollution, pollutant or contaminant, as defined or referred to in the Resource Conservation and Recovery Act, as amended, 15 U.S.C., § 2601 et seq.; the Comprehensive Environmental Response, Compensation and Liability Act, 33 U.S.C. § 1251 et seq.; the federal underground storage tank law, Subtitle I of the Resource Conservation and Recovery Act, as amended, P.L. 98-616, 42 U.S.C. § 6901 et seq.; together with any amendments thereto, regulations promulgated thereunder and all substitutions thereof, as well as words of similar purport or meaning referred to in any other federal, state, county or municipal environmental statute, ordinance, rule or regulation. “Indebtedness for Borrowed Money” shall mean (i) all indebtedness, liabilities, and obligations, now existing or hereafter arising, for money borrowed by the Borrower or its Restricted Subsidiaries, whether or not evidenced by any note, indenture, or agreement (including, without limitation, the Notes and any indebtedness for money borrowed from an Affiliate of the Borrower) and (ii) all indebtedness of others for money borrowed (including indebtedness of an Affiliate of the Borrower) with respect to which the Borrower or its Restricted Subsidiaries have become liable by way of a guarantee or indemnity.   “Intangible Assets” shall mean all assets which would be classified as intangible assets under GAAP consistently applied, including, without limitation, goodwill (whether representing the excess of cost over book value of assets acquired or otherwise), patents, trademarks, trade names, copyrights, franchises and deferred charges (including, without limitation, unamortized debt discount and expense, organization costs, and research and development costs).  For purposes of this definition, prepayments of taxes, license fees and other expenses shall not be deemed Intangible Assets.   “Interest Coverage Ratio” shall mean the ratio of EBIT of the Willis Companies plus rent expenses of the Willis Companies to interest expense of the Willis Companies plus rent expenses of the Willis Companies.   “Interest Rate” means, in respect of any Loan, the LIBO Rate for the Interest Rate Period elected pursuant to the Interest Rate Option plus the Margin.   “Interest Rate Option” shall mean one, three or six month LIBO designated by the Borrower as provided for in Section 2.6.   “Interest Rate Period” shall mean the one, three or six month period elected pursuant to exercise of the Interest Rate Option.   “Investment” in any Person shall mean, without duplication, (i) the acquisition (whether for cash, property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of such Person; (ii) any deposit with, or advance, loan or other extension of credit to, such Person (other than any such deposit, advance, loan or extension of credit having a term not exceeding ninety (90) days representing the purchase price of inventory or supplies purchased in the ordinary course of business) or guarantee or assumption of, or other contingent obligation with respect to, Indebtedness for Borrowed Money or other liability of such Person (other than unsecured (except for a pledge of Shares (as defined in the Share Pledge Agreement) and records related to such Shares of any Unrestricted Subsidiary) guaranties of the obligations of Restricted or Unrestricted Subsidiaries); (iii) any transfer or contribution of assets to an Unrestricted Subsidiary to the extent that the net book value of such assets is not paid in full at the time of transfer; and (iv) any amount that may, pursuant to the terms of such investment, be required to be paid, deposited, advanced, lent or extended to or guaranteed (other than the guaranties described above) or assumed on behalf of such Person. “Lease” shall mean a written lease agreement assigned to or entered into between Owner Trustee (acting pursuant to a Trust Agreement), as lessor, and a third party (including WLFC (Ireland) Limited and any member of the SwissAir Group) as lessee, pursuant to which such Owner Trustee leases to the third party for a fixed period of time one or more Engines.   “Lease Document” shall mean such Lease and all documents executed and delivered in connection therewith.   “Lease Event of Default” shall mean the failure by a lessee pursuant to the terms of an Eligible Lease to which it is a party after the expiration of any applicable notice or cure period to pay any amount when due, to provide insurance in accordance with the terms thereof or to perform maintenance on the Eligible Engine leased pursuant to such Eligible Lease in accordance with the terms of such Eligible Lease.   “Leverage Ratio” shall mean the ratio of all Debt of the Willis Companies to their Tangible Net Worth calculated based on the most recent financial statements furnished to the Lender in accordance herewith.   “LIBO Rate” shall mean the arithmetic average of the rates of interest per annum (rounded upwards, if necessary to the next 1/16 of 1%) at which the Lender, individually, is offered deposits of United States Dollars by leading banks in the interbank eurodollar or eurocurrency market on or about eleven o’clock (11:00) a.m., London time, two (2) London Business Days prior to the commencement of the requested Interest Rate Period in an amount substantially equal to the outstanding principal amount of the Loan requested for a maturity of comparable duration to the Interest Rate Period; provided, however that if for any such period or comparable period, the Lender is not offered deposits of United States Dollars by leading banks as described above, the LIBO Rate in respect of such period shall mean the rate per annum (rounded upwards, if necessary to the next 1/16 of 1%) for deposits in United States Dollars for a period equal or comparable to such period which appears on Page 3750 on the Dow Jones Telerate Service (the “Telerate Page 3750") (or such other page as may replace such Telerate Page 3750 for the purpose of displaying London interbank offered rates for United States Dollar deposits), on or about eleven o’clock (11:00) a.m., London time, two (2) London Business Days prior to the commencement of the requested Interest Rate Period in an amount substantially equal to the outstanding principal amount of the Loan requested for a maturity of comparable duration to the Interest Rate Period; provided further, that if for any such period or comparable period no such rate appears on the Telerate Page 3750 (or such other page as may replace such Telerate Page 3750 for the purpose of displaying London interbank offered rates for United States Dollar deposits), the LIBO Rate in respect of such period shall be the arithmetic mean, as determined by the Lender, of the rates per annum (rounded upwards, if necessary to the next 1/16 of 1%) appearing on the Reuters Screen “LIBO” page in respect of amounts denominated in Dollars, on or about eleven o’clock (11:00) a.m., London time, two (2) London Business Days prior to the commencement of the requested Interest Rate Period in an amount substantially equal to the outstanding principal amount of the Loan requested for a maturity of comparable duration to the Interest Rate Period. “Lien” shall mean any lien, mortgage, security interest, chattel mortgage, pledge or other encumbrance (statutory or otherwise) of any kind securing satisfaction of an obligation, including any agreement to give any of the foregoing, any conditional sales or other title retention agreement, any lease in the nature thereof, and the filing of or the agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction or similar evidence of any encumbrance, whether within or outside the United States of America.   “Loan” or “Loans” shall mean the Loan or Loans made pursuant hereto and as provided for in Section 2.1.   “Loan Closing Date” shall mean, in respect of each Loan, the date such Loan is made.   “Loan Commitment” shall have the meaning set forth in Section 2.1.   “Loan Documents” shall mean this Agreement, each Note, the Blocked Account Agreement, the Security Agreement-Blocked Account, each Consent and Agreement, each Owner Trustee Mortgage, each Beneficial Interest Pledge Agreement, each Recognition of Rights Agreement, if any, and all other documents directly related or incidental to said documents, the Loans or the Collateral.   “Loan Termination Date” shall have the meaning set forth in Section 2.1.   “Margin” means two hundred basis points.   “Material Adverse Change” shall mean any event or condition which, in the reasonable determination of the Lender, would result in a material adverse change in the financial condition, business, properties or profits of the Borrower and which gives reasonable grounds to conclude that the Borrower would likely not be able to perform or observe (in the normal course) its obligations under the Loan Documents to which it is a party, including but not limited to the Notes.   “Material Adverse Effect” shall mean a material adverse effect on (i) the financial condition, business, properties, or profits of the Borrower, (ii) the ability of the Borrower to perform its obligations under this Agreement, the Notes and the other Loan Documents, or (iii) the legality, validity or enforceability of this Agreement or the Notes or the rights and remedies of the holders of the Loans.   “Maximum Loan Commitment” shall mean Thirty-Five Million Dollars ($35,000,000).   “Multiemployer Plan” shall mean a multiemployer plan as defined in ERISA Section 4001(a)(3), which covers employees of the Borrower or any ERISA Affiliate.   “Net Book Value” of an Engine shall be calculated as the lesser of:  (i) the cost to Borrower of such Engine or (ii) such Engine’s Fair Market Value.  In any event, the Net Book Value will be reduced utilizing depreciation methods consistent with current practice and Generally Accepted Accounting Principles. “Net Income” shall mean net income of the Willis Companies after taxes, determined in accordance with GAAP.   “Net Worth” shall mean, at any particular time, all amounts, in conformity with GAAP, that would be included as stockholder’s equity on a consolidated balance sheet of the Willis Companies excluding other comprehensive income or loss resulting from the implementation of FAS 133.   "Nonrecognition of Rights Jurisdictions" shall  mean, in connection with each Lease involving a lessee (or, in the case of a Lease to WLFC (Ireland) Limited, involving a sublessee) domiciled or principally located in a non-U.S. jurisdiction, any non-U.S. jurisdiction of such domicile or location unless (a) the Borrower shall have obtained a legal opinion in form and substance reasonably satisfactory to Lender from local counsel in such jurisdiction to the effect that under and in accordance with applicable local law, an aircraft engine, upon its installation on an aircraft (i) should remain the property of the Owner Trustee and not become an accession to such aircraft (thereby vesting a superior right to title in the owner of such aircraft) and (ii) will not vest a security interest in such Engine in a Person holding a security interest in such aircraft, or (b) the Owner Trustee shall have become a party to or otherwise obtained the benefit of a Recognition of Rights Agreement.   “Note” or “Notes” shall mean one or more promissory notes substantially in the form attached hereto as Exhibit D.   “Obligations” shall mean all now existing or hereafter arising debts, obligations, covenants, and duties of payment or performance of every kind, matured or unmatured, direct or contingent, owing, arising, due, or payable to the Lender by the Borrower or any Owner Trustee arising out of this Agreement or any other Loan Document, including, without limitation, all obligations to repay principal of and interest on the Loans and all obligations related to any interest rate swap agreement, interest rate cap agreement, interest collar agreement, interest rate hedging agreement, interest rate floor agreement or other similar agreement or arrangement related to the foregoing, and to pay interest, fees, costs, charges, expenses, professional fees, and all sums chargeable to the Borrower or any Owner Trustee or for which the Borrower or any Owner Trustee is liable as indemnitor under the Loan Documents, whether or not evidenced by any note or other instrument.   “Off-Lease” shall mean, at the time of determination, an Engine not subject to a Lease.   “Operating Lease” shall mean, with respect to any Person, the aggregate amount which, in accordance with GAAP, is not required to be reported as a liability on the balance sheet of such Person at such time in respect of such Person’s interest as lessee under an operating lease.   “Other Facility Agreement” shall mean the Credit Agreement dated as of May 1, 2001 among Borrower, National City Bank, as Administrative Agent, Fortis Bank [Nederland] N.V., as Structuring Agent, Fortis Bank [Nederland] N.V., as Security Agent and the several institutions signatory thereto, as amended from time to time. “Other Indebtedness” shall mean Indebtedness for Borrowed Money (i) with a final maturity not less than the final maturity of this Credit Facility; (ii) with an average life no less than the remaining average life of this Credit Facility; (iii) with terms, covenants and conditions no more restrictive than those in this Agreement; and (iv) with respect to which the initial advance rates on the assets financed with such Indebtedness for Borrowed Money are not less than those under this Credit Facility.   “Owner Trustee” shall mean Wells Fargo Bank Northwest, National Association (formerly known as First Security Bank, National Association) or another bank or trust company reasonably satisfactory to the Lender acting as trustee under a Trust Agreement of which the Borrower is the beneficiary.   “Owner Trustee Mortgage” shall mean an Owner Trustee Mortgage and Security Agreement substantially in the form attached hereto as Exhibit E.   “Parts” shall mean components of an aircraft or an Engine or any systems within an aircraft or an Engine that have either been removed from an aircraft or an Engine or have not yet been incorporated into an aircraft or an Engine.   “Payment Date” shall have the meaning given such term in Section 2.7(b).   “Payment Period” in respect of each Loan shall mean an initial period commencing on the Loan Closing Date of such Loan and ending on the third Business Day of the calendar month next following the calendar month in which such Loan Closing Date occurs; thereafter periods commencing on the third Business Day of each calendar month and ending on the third Business Day of the next following calendar month; and, if the term of the relevant Lease ends on a day other than the third Business Day of a calendar month, a final period commencing on the third Business Day of the calendar month in which the term of such Lease ends (or the next prior calendar month if the Lease ends on the first, second or third day of a calendar month) and ending the day on which such Lease ends.   “PBGC” shall mean the Pension Benefit Guaranty Corporation and any successor thereto.   “Pension Plan” shall mean, at any time, any Plan (including a Multiemployer Plan), the funding requirements of which (under Section 302 of ERISA or Section 412 of the Code) are, or at any time within the six years immediately preceding the time in question, were in whole or in part, the responsibility of the Borrower or any ERISA Affiliate of the Borrower. “Permitted Liens” shall mean (i) any Liens for current taxes, assessments and other governmental charges not yet due and payable or being contested in good faith by the Borrower (or by a lessee) by appropriate proceedings and for which adequate reserves have been established by the Borrower as reflected in the Borrower’s financial statements (or by the lessee as reflected in such lessee’s financial statements); (ii) any mechanic’s, materialman’s, carrier’s, warehousemen’s or similar Liens for sums not yet due or being contested in good faith by the Borrower (or by a lessee) by appropriate proceedings and for which adequate reserves have been established by the Borrower as reflected in the Borrower’s financial statements (or by the lessee as reflected in such lessee’s financial statements); (iii) Liens in favor of Lender in the Collateral as contemplated by this Agreement and the other Loan Documents; (iv) the rights of a lessee or sublessee to utilize the Collateral pursuant to the terms of a Lease; (v) Liens arising from the following types of liabilities of a lessee or any other operator of an Engine, so long as such liabilities are either not yet due or are being contested in good faith through appropriate proceedings that do not give rise to any reasonable likelihood of the sale, forfeiture or other loss of such Engine, title thereto or the Lender’s security interest therein or of criminal or unindemnified civil liability on the part of Borrower or the Lender and with respect to which the lessee maintains adequate reserves (in the reasonable judgment of Borrower):  (A) fees or charges of any airport or air navigation authority, (B) judgments, or (C) salvage or other rights of insurers; (vi) Liens permitted in accordance with Section 8.1(j); and (vii) rights accorded the Bank under the Blocked Account Agreement.   “Person” shall mean any individual, corporation, partnership, joint venture, association, company, business trust or entity, or other entity of whatever nature.   “Plan” shall mean an employee benefit plan as defined in Section 3(3) of ERISA, other than a Multiemployer Plan, whether formal or informal and whether legally binding or not.   “Potential Default” shall mean an event, condition or circumstance that with the giving of notice or lapse of time or both would become an Event of Default.   “Prohibited Transaction” shall mean a transaction that is prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt under Section 4975 of the Code or Section 4.08 of ERISA.   “Purchase Agreement” shall mean a written purchase agreement assigned to or entered into between Borrower or an Owner Trustee (acting pursuant to a Trust Agreement), as purchaser, and a third party, as seller, pursuant to which Borrower or such Owner Trustee purchased from such third party one or more Engines.   “Purchase Documents” shall mean each Purchase Agreement and all documents executed and delivered in connection therewith.   “Recognition of Rights Agreement” shall mean an agreement reasonably acceptable to the Lender pursuant to which an owner or holder of a lien on any aircraft to which an Engine is attached agrees to recognize the Lender’s Lien in such Engine pursuant to the terms of the relevant Owner Trustee Mortgage.   “Regulation” shall mean any statute, law, ordinance, regulation, order or rule of any United States of America or foreign, federal, state, local or other government or governmental body, including, without limitation, those covering or related to banking, financial transactions, securities, public utilities, environmental control, energy, safety, health, transportation, bribery, record keeping, zoning, antidiscrimination, antitrust, wages and hours, employee benefits, and price and wage control matters. “Reportable Event” shall mean, with respect to a Pension Plan:  (i) Any of the events set forth in Sections 4043(b) (other than a reportable event as to which the provision of 30 days’ notice to the PBGC is waived under applicable regulations) or 4063(a) of ERISA or the regulations thereunder, (ii) an event requiring the Borrower or any ERISA Affiliate to provide security to a Pension Plan under Section 401(a)(29) of the Code and (iii) any failure by the Borrower or any ERISA Affiliate to make payments required by Section 412(m) of the Code.   “Request for Advance” shall have the meaning set forth in Section 2.3(b), substantially in the form attached hereto as Exhibit H.   “Required Monthly Minimum” shall have the meaning given such term in Section 2.7(b).   “Restricted Subsidiary” shall mean any Subsidiary, direct or indirect, of the Borrower that is not an Unrestricted Subsidiary.  Without limiting the foregoing, and notwithstanding anything to the contrary contained in this Agreement or any other Loan Document, each of (i) T-4 Inc., (ii) T-7 Inc., (iii) T-8 Inc., (iv) T-10 Inc., (v) WLFC (Ireland) Limited, (vi) WLFC Engine Pooling Company and (vii) Terandon Leasing Corporation shall constitute a “Restricted Subsidiary”.   “Security Agreement-Blocked Account” shall mean the Security Agreement-Blocked Account in the form attached hereto as Exhibit F, to be dated the initial Loan Closing Date between the Lender, the Owner Trustee, the Borrower and the Bank.   “Share Pledge Agreement” shall have the meaning ascribed to such term in the Other Facility Agreement.   “Solvent” shall mean, with respect to any Person, that the aggregate present fair saleable value of such Person’s assets is in excess of the total amount of its probable liabilities on its existing Debt as they become absolute and matured, such Person has not incurred debts beyond its foreseeable ability to pay such debts as they mature, and such Person has capital adequate to conduct the business in which it is presently engaged or in which is about to engage.   “Stage III” as it relates to any aircraft or engine, shall mean any aircraft or engine which, at the time of its manufacture, was compliant with the noise regulations set forth in FAR Part 36.   “Subsidiary” shall mean a corporation or other entity the shares of stock or other equity interests of which having ordinary voting power (other than stock or other equity interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries or both, by the Borrower.   “SwissAir Group” shall mean SwissAir Group, a Swiss corporation, and its Affiliates, including without limitation (but in each case only so long as such Person is an Affiliate of SwissAir Group), FlightTechnics, LLC, Flightlease AG, SRT Group America, Inc., SR Technics Group, and SR Technics Switzerland f/k/a SR Technics AG. “Tangible Net Worth” shall mean Net Worth minus Intangible Assets.   “Trust Agreement” shall mean a Trust Agreement in form and scope acceptable to the Lender between each Owner Trustee and the Borrower under which the Borrower is the sole beneficiary.   “Trust Estate” shall mean the Trust Estate as defined in each Trust Agreement.    “Unrestricted Subsidiary” shall mean WLFC Funding Corporation or any other Subsidiary of Borrower established to facilitate securitizations and any Subsidiary of the Borrower designated as an unrestricted subsidiary by the Borrower.  In no event shall WLFC (Ireland) Limited be designated as an Unrestricted Subsidiary.   “Willis Companies” shall mean the Borrower and its consolidated Subsidiaries.   1.2           Accounting Terms.  All accounting terms not specifically defined herein shall be construed in accordance with Generally Accepted Accounting Principles consistent with those applied in the preparation of the financial statements referred to in Section 3.6, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles.   1.3           Construction.  Words and defined terms importing the plural include the singular and visa versa.   SECTION 2 THE CREDIT   2.1           The Loans.   (a)           Loans; Loan Commitment.  Subject to the terms and conditions herein set forth and in reliance upon the representations, warranties and covenants contained herein, the Lender agrees to make one or more loans (individually, a "Loan" and, collectively, the “Loans”) to the Borrower during the period beginning on the Closing Date and ending on the last day of the calendar month in which the first annual anniversary of the Closing Date occurs or such subsequent date to which this Agreement may be extended pursuant to this Section 2.1, or on the earlier date of termination in full pursuant to Section 8.1 hereof of the obligations of the Lender (such first annual anniversary or such date to which this Agreement is extended or such earlier date of termination being herein called the “Loan Termination Date” in amounts not to exceed at any time the Maximum Loan Commitment, such amount being the “Loan Commitment”).  The Loan Commitment shall be automatically extended for periods of one year unless either the Borrower or the Bank, in its sole discretion, on not less than 90 days prior notice, shall elect to terminate this Agreement, in which case, subject to Section 2.8,this Agreement shall terminate on the last day of the month immediately preceding the next annual anniversary of the Closing Date. (b)           Maximum Loans Outstanding.  The Borrower shall not be entitled to any new Loan if, after giving effect to such Loan, the unpaid principal amount of the then outstanding Loans would exceed the Maximum Loan Commitment.   (c)           Prepayment and Reborrowing.  Prior to the Loan Termination Date, subject to the terms hereof and within the limits of the Maximum Loan Commitment, the Borrower may borrow, prepay and reborrow Loans.  All Loans shall mature and be due and payable as provided in Section 2.8.   2.2           The Notes.  Each Loan made by the Lender shall be evidenced by a single promissory note of the Borrower (each such promissory note as it may be amended, extended, modified or renewed, a “Note” and, together, the “Notes”) in the principal face amount equal to the Loan requested, payable to the order of the Lender.  Each Note shall be dated the relevant Loan Closing Date, shall bear interest at the Interest Rate and be payable as to principal and interest in accordance with the terms hereof and thereof.  Each outstanding Loan shall be due and payable as set forth in Section 2.8 unless the maturity of said Loans is accelerated as provided in Section 8.1 hereof.   2.3           Funding Procedures.  In the event the Borrower shall fail to borrow any Loan on the Loan Closing Date provided in a Request for Advance, the Borrower shall pay to the Lender such amounts as may be necessary to compensate the Lender for all direct and indirect costs and losses (including losses from redeployment of prepaid or unborrowed funds at rates lower than the cost of such funds to the Lender, and including lost profits incurred or sustained by the Lender as a result of such failure to borrow).   (a)           Preliminary Information.  In respect of each transaction as to which the Borrower is considering making a Request for Advance, the Borrower shall provide the Lender with such information regarding the proposed Eligible Lease and proposed Eligible Engine as the Lender shall reasonably request.  Lender shall have the right, at the Borrower’s cost and expense, to request an opinion of counsel licensed to practice in the jurisdiction in which the lessee under such Eligible Lease resides or is domiciled as to such matters as Lender shall reasonably request concerning the Collateral and the enforcement of rights of the Lender under an Owner Trustee Mortgage.   (b)           Request for Advance.  Each request for a Loan shall be made not later than 2:00 p.m. Stockholm prevailing time on a Business Day which shall be given not less than three (3) London Business Days prior to the date of the proposed borrowing by delivery to the Lender of a written request signed by the Borrower or, in the alternative, a telephone request followed promptly by written confirmation of the request in substantially the form attached as Exhibit H (a “Request for Advance”), specifying the requested Loan Closing Date and amount of the Loan to be made and selecting the Interest Rate Option applicable thereto.  No Loan shall be in an amount in excess of 90% of the then Net Book Value of the Engine to be financed by such Loan.  Each Request for Advance shall be accompanied by evidence reasonably satisfactory to the Lender of such Net Book Value, a copy of the relevant Eligible Lease and information as to the relevant Eligible Engine and such other information regarding such Lease and Engine as the Lender shall reasonably request.  No request shall be effective until actually received in writing by the Lender.  Each Request for Advance shall be for a Loan at a single interest rate option.  Upon receipt by the Lender of a Request for Advance, the request shall not be revocable by the Borrower. (c)           Provided (i) no Event of Default or Potential Default shall have occurred and be continuing, and (ii) all the conditions precedent set forth in Section 4.2 have been met by the Borrower or waived by the Lender, on the Loan Closing Date specified in the Request for Advance, the Lender will make the Loan to the Borrower requested therein.   2.4           Facility Fee.  The Borrower agrees to pay to the Lender on the Closing Date the Facility Fee.   2.5           Mandatory Prepayments.   (a)           If the aggregate principal amount of Loans outstanding under this Credit Facility at any time exceeds the total Maximum Loan Commitment, the Borrower shall make immediate prepayments to reduce such outstanding Loans to an amount not to exceed the Maximum Loan Commitment; provided however that this covenant shall not be deemed breached if at the time such aggregate amount exceeds this level, within four (4) Business Days after the date on which the Borrower first has knowledge of such excess, the Borrower shall make a prepayment of Loans in an amount sufficient to reduce such principal of Loans outstanding to not more than the Maximum Loan Commitment and the Lender shall apply such amount so remitted pro-rata to repayment of the then outstanding principal balance of all Loans then outstanding.  The Borrower shall not be entitled to utilize this mechanism to avoid a breachof this covenant (or the covenant in Section 2.9) more than two (2) times during any twelve-month period.   (b)           In the event (i) an Engine is sold, the Borrower shall immediately prepay in full the Loan made in respect of such Engine, or (ii) an Engine comes Off-Lease, then upon the earlier to occur of (A) the date such Engine is sold and (B) 120 days after the date such Engine comes Off-Lease, the Borrower shall repay in full the Loan made in respect of such Engine, in each case including but not limited to all unpaid interest accrued to and including the date of such payment and the then outstanding principal balance of such Loan and Break Costs, if any, but without penalty or premium.  Upon payment in full of the amounts specified in this Section 2.5(b), Lender, at the Borrower's expense, shall execute all documents provided by Borrower to release the applicable Engine and related Collateral (including, without limitation, the related Lease and all letters of credit, security deposits and similar credit enhancements provided by the lessee under the Lease) from the Lien of the Owner Trustee Mortgage and each other applicable Loan Document.   2.6           Interest.  Each Loan shall bear interest on the unpaid principal amount thereof at the LIBO Rate plus the Margin.  Interest on Loans shall be computed on the basis of actual days elapsed in a year of 360 days, and be based upon the Interest Rate Option selected by the Borrower in the relevant Request for Advance.  In respect of each Loan the Borrower shall have the right to exercise the Interest Rate Option and the Interest Rate so elected shall apply during the applicable Interest Rate Period.  The Borrower shall have the right, by written notice given to the Lender on or prior to the third Business Day prior to the expiration of each Interest Rate Period, to exercise the Interest Rate Option and thereby elect a new Interest Rate Period and LIBO Rate.  In the event the Borrower fails to exercise the Interest Rate Option, in respect of the next Interest Rate Period the Borrower shall be deemed to have exercised the same Interest Rate Option and LIBO Rate as the Borrower elected for the prior Interest Rate Period. 2.7           Blocked Account; Payments of Interest and Principal.   (a)           Blocked Account.  The Borrower shall open the Blocked Account and direct each Lessee to make all payments due under the relevant Lease (other than maintenance reserves, security deposits, if any, casualty insurance proceeds and Excluded Payments as that term is defined in each Owner Trustee Mortgage) to the Blocked Account.  The Borrower shall be responsible for and shall pay to the Bank any and all costs, fees and charges imposed or levied by the Bank in respect of the Blocked Account, and shall indemnify and hold harmless the Lender from and against any and all loss, liability, cost, damage and expense, including, without limitation, legal and accounting fees and expenses, which the Lender may sustain by virtue of its becoming a party to the Security Agreement-Blocked Account other than due to the Lender’s gross negligence or willful misconduct.  In the event the Bank terminates the Blocked Account Agreement, and provided no Event of Default or Potential Default shall have occurred and be continuing, the Borrower and the Lender shall cooperate in setting up a substitute blocked account upon terms and conditions substantially similar to those contained in the Blocked Account Agreement, and in respect of such substituted blocked account, the Borrower shall execute and deliver a substitute security agreement containing terms and conditions substantially similar to those in the Security Agreement-Blocked Account.   (b)           Payments.  On the third Business Day of each calendar month (“Payment Date”) out of the Blocked Account the Lender shall apply in payment of the Obligations amounts sufficient: (i) to reimburse the Lender for all amounts then due Lender under the Loan Documents other than interest and principal under the Loans; (ii) next to pay interest due under each Loan; and (iii) the remainder to amortize twenty-five one hundredths of one percent (0.25%) of the original principal balance of all Loans.  Provided no Event of Default or Potential Default shall have occurred and then be continuing, the Lender shall instruct the Bank to remit to the Borrower on such Payment Date any and all amounts then remaining in the Blocked Account after payment of the amounts set forth in the foregoing clauses (i), (ii) and (iii).  In the event on the first day of any calendar month there shall not be in the Blocked Account an amount at least equal to the amounts required to be paid pursuant to the preceding clauses (i), (ii) and (iii) (“the Required Monthly Minimum”), on the next Business Day after receipt of notice thereof from the Lender, the Borrower shall deposit in the Blocked Account an amount equal to the amount by which the Required Monthly Minimum exceeds the amount in the Blocked Account on such first Business Day, and the Lender shall apply such amount so deposited as provided hereinabove.   (c)           Form of Payments, Application of Payments Administration, Etc.  Subject to the provisions of Section 10.7, all payments of principal, interest, fees, or other amounts payable by the Borrower hereunder and under the other Loan Documents shall be made to the Blocked Account and shall be applied by the Lender to the Loans in accordance with Section 2.7(b).  Such payments shall be remitted in Dollars to the Blocked Account or to such other account as the Lender shall specify to the Borrower, in immediately available funds not later than 10:00 a.m. San Francisco prevailing time on the day when due.  Whenever any payment is stated as due on a day which is not a Business Day, the maturity of such payment shall, except as otherwise provided in the definition of “Payment Period,” be extended to the next succeeding Business Day and interest and commitment fees shall continue to accrue during such extension.  The Borrower authorizes the Lender to deduct from any account of the Borrower maintained at the Lender or over which the Lender has control any amount payable under this Agreement, the Notes or any other Loan Document.  The Lender’s failure to deliver any bill, statement or invoice with respect to amounts due under this Section or under any Loan Document shall not affect the Borrower’s obligation to pay any installment of principal, interest or any other amount under this Agreement when due and payable. 2.8           Loan Maturities.  Except as provided in Section 2.5(b), each Loan shall mature at the expiration of the term of the Lease in respect of which such Loan is made (or at such earlier date as may be provided herein), as the same may be extended pursuant to the terms of such Lease,  and so long as any Loan and all other obligations of the Borrower shall not have been paid in full and fully discharged, all the terms of this Agreement shall remain in full force and effect notwithstanding termination pursuant to Section 2.1 of the Lender's obligation to make Loans.   2.9           Debt to Value Maintenance.  Until all Loans, including interest and principal thereon, have been paid in full and all other obligations of the Borrower to the Lender under the Loan Documents have been fully discharged, the aggregate outstanding principal balance of all the Loans shall at no time exceed __% of the aggregate Fair Market Value of all Eligible Engines subject to a Lien in favor of the Lender provided however that this covenant shall not be deemed breached if at the time such aggregate amount exceeds said level, within four (4) Business Days of the date the Borrower first has knowledge of such excess, the Borrower shall make a prepayment of Loans in an amount sufficient to reduce such principal of Loans outstanding to not more than __% of such Fair Market Value, and the Lender shall apply such amount so remitted pro-rata to the repayment of the then outstanding principal balance of all Loans then outstanding..  The Borrower shall not be entitled to utilize this mechanism to avoid a breach of this covenant (or the covenant in Section 2.5(a)) more than two (2) times during any twelve-month period.  In addition, without limiting the foregoing, on or prior to the one hundred twentieth (120th) day preceding each annual anniversary date of the Closing Date, the Borrower shall provide the Lender with a determination of the aggregate Fair Market Value of all such Engines (predicated on the assumption that such Engines as of the Determination Date (as defined below) are in half-time, half-life status”) as of a date not more than five (5) months prior to such annual anniversary of the Closing Date ("Determination Date").  If the aggregate outstanding principal balance of all the Loans as of the Determination Date exceed __% of the aggregate Fair Market Value of all such Engines as of the Determination Date, the Borrower shall at Lender's request, immediately remit to the Lender an amount sufficient to reduce such principal of Loans outstanding to not more than __% of such Fair Market Value and the Lender shall apply such amount so remitted pro-rata to the repayment of the then outstanding principal balance of all Loans then outstanding.*   -------------------------------------------------------------------------------- *              This redacted material has been omitted pursuant to a request for confidential treatment, and the material has been filed separately with the Commission. 2.10         Voluntary Prepayments.  On one London Business Day’s notice to the Lender, the Borrower may, at any time, without penalty, at its option, prepay any Loan in whole or in part (but if in part only in multiples of $1,000,000); provided that if the Borrower shall prepay a Loan prior to the last day of a Payment Period, the Borrower shall pay to the Lender, in addition to the principal and interest then to be paid in the case of a prepayment, on such date of prepayment, such additional amounts as may be necessary to compensate the Lender for all direct and indirect costs and losses, if any, losses resulting from redeployment of prepaid funds at rates lower than the cost of such funds to the Lender, and including lost profits incurred or sustained by the Lender) as a result of such repayment (“Break Costs”).  Upon payment in full of the amounts specified in this Section 2.10, Lender, at the Borrower's expense, shall execute all documents provided by Borrower to release the applicable Engine and related Collateral (including, without limitation, the related Lease and all letters of credit, security deposits and similar credit enhancements provided by the lessee under the Lease) from the Lien of the Owner Trustee Mortgage and each other applicable Loan Document.   2.11         Payments.   (a)           Interest.  Interest on and principal of Loans shall be payable at the times and in the manner set forth in Section 2.7(b).   (b)           Net Payments.  All payments made to the Lender by the Borrower hereunder, under any Note or under any other Loan Document will be made without set-off, counterclaim or other defense and will be made without deduction or withholding for or on account of any taxes as provided in Section 2.14.   (c)           Commitment Fee.  Borrower agrees to pay to the Lender as compensation for the Maximum Loan Commitment a fee of twenty-five one hundreths of one percent (0.25%) of the average daily unused portion of the Maximum Loan Commitment (the “Commitment Fee”) for the number of days in the immediately preceding three calendar month period (except that the first such period shall be the period commencing on the Loan Closing Date and ending December 1, 2001).  The Commitment Fee shall be payable quarterly in arrears on the first day of each March, June, September and December and on the Loan Termination Date, commencing December 1, 2001.  The Borrower may, at any time on not less than three (3) days prior written notice to the Lender, terminate or permanently reduce the Maximum Loan Commitment, provided that any reduction shall be in the minimum amount of $1,000,000 or a multiple thereof and that no such reduction shall reduce the Maximum Loan Commitment to an amount less than the aggregate unpaid principal amount of all Loans then outstanding. 2.12         Change in Circumstances, Yield Protection.   (a)           Certain Regulatory Changes.  If any regulatory change or compliance by the Lender with any request made after the date of this Agreement by any regulatory authority or other central bank or fiscal, monetary or similar authority (in each case whether or not having the force of law) shall (i) impose, modify or make applicable any reserve, special deposit, premium or similar requirement or imposition against assets held by, or deposits in or for the account of, or loans made by, or any other acquisition of funds for loans or advances by, the Lender; (ii) impose on the Lender any other condition regarding the Notes; (iii) subject the Lender to, or cause the withdrawal or termination of any previously granted exemption with respect to, any tax (including any withholding tax but not including any income tax not currently causing the Lender to be subject to withholding) or any other levy, impost, duty, charge, fee or deduction on or from any payments due from the Borrower; or (iv) change the basis of taxation of payments from the Borrower to the Lender (other than by reason of a change in the method of taxation of the Lender’s net income); and the result of any of the foregoing events is to increase the cost to the Lender of making or maintaining any Loan or to reduce the amount of principal, interest or fees to be received by the Lender in respect of any Loan, the Lender will immediately so notify the Borrower.  If the Lender determines in good faith that the effects of the change resulting in such increased cost or reduced amount cannot reasonably be avoided or the cost thereof mitigated, then upon notice by the Lender to the Borrower, the Borrower shall pay to the Lender on each interest payment date of the Loans, such additional amount as shall be necessary to compensate that Bank for such increased cost or reduced amount.   (b)           Capital Adequacy.  If the Lender shall determine that any Regulation regarding capital adequacy or the adoption of any Regulation regarding capital adequacy, which Regulation is applicable to banks (or their holding companies) generally or to the Lender (or its holding company) specifically, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Lender (or its holding company) with any such request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has the effect of reducing the rate of return on the Lender’s capital as a consequence of its obligations hereunder to a level below that which the Lender could have achieved but for such adoption, change or compliance (taking into consideration the Lender’s policies with respect to capital adequacy) by an amount deemed by Lender to be material, the Borrower shall promptly pay to the Lender, upon the demand of the Lender, such additional amount or amounts as will compensate the Lender for such reduction.   (c)           Ability to Determine LIBO Rate.  If the Lender shall determine (which determination shall be, in the absence of fraud or manifest error, conclusive and binding upon all parties hereto) that by reason of abnormal circumstances affecting the interbank eurodollar or applicable eurocurrency market adequate and reasonable means do not exist for ascertaining the LIBO Rate to be applicable to the requested Loan or that eurodollar or eurocurrency funds in amounts sufficient to fund all the Loans are not obtainable on reasonable terms, the Lender shall give notice of such inability or determination by telephone to the Borrower at least two (2) Business Days prior to the date of the proposed Loan and thereupon the obligations of the Lender to make such Loan shall be excused, subject, however, to the right of the Borrower at any time thereafter to submit another request. (d)           Yield Protection.  Determination by the Lender for purposes hereof of the effect of any Regulatory Change or other change or circumstance referred to in this Section 2.12 on its costs of making or maintaining Loans or on amounts receivable by it in respect of the Loans and of the additional amounts required to compensate the Lender in respect of any additional costs, shall be made in good faith and shall be evidenced by a certificate, signed by an officer of the Lender and delivered to the Borrower, as to the fact and amount of the increased cost incurred by or the reduced amount accruing to the Lender owing to such event or events.  Such certificate shall be prepared in reasonable detail and shall be conclusive as to the facts and amounts stated therein, absent manifest error.  The Borrower shall pay the Lender the amount shown as due at the times required herein.   (e)           Notice of Events.  The Lender will notify the Borrower of any event occurring after the date of this Agreement that will entitle the Lender to compensation pursuant to this Section as promptly as practicable after it obtains knowledge thereof and determines to request such compensation.  Said notice shall be in writing, shall specify the applicable Section or Sections of this Agreement to which it relates and shall set forth the amount or amounts then payable pursuant to this Section.   2.13         Illegality.  Notwithstanding any other provision in this Agreement, if the adoption of any applicable Regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by the Lender with any request or directive (whether or not having the force of law) of any such authority, central bank, or comparable agency shall make it unlawful or impossible for the Lender to maintain its Loan Commitment, then upon notice to the Borrower by the Lender, its Loan Commitment shall terminate.   2.14         Taxes.   (a)           Tax Gross-Up.  Notwithstanding any provision in this Agreement to the contrary, all payments made to the Lender by the Borrower hereunder, under any Note or under any Loan Document shall be made without deduction or withholding for or on account of any present or future taxes, except as required by applicable law.  If such payments are or become subject to any tax imposed by way of withholding or deduction under the applicable law of any jurisdiction, Borrower shall indemnify and hold harmless the Lender against such taxes and shall pay an additional amount to the Lender for the account of the Lender so that the net amount to be received by the Lender, after reduction by any such deduction or withholding including any reduction for taxes applicable to additional sums payable under this Section 2.14, shall be equal to the full amount that the Lender would have otherwise received absent such withholding or deduction.  Whenever any withholding taxes are paid by the Borrower, the Borrower shall promptly forward to the Lender an official receipt (or certified copy thereof) or other documentation reasonably acceptable to the Lender evidencing such payment to the relevant taxing authority.   (b)           Tax Indemnity.  Except as provided below, the Borrower shall indemnify the Lender against any loss or liability which the Lender suffers (directly or indirectly) for or on account of any tax in relation to a payment received or receivable (or any payment deemed to be received or receivable) under this Agreement.  The preceding sentence does not apply to any tax (including income taxes, taxes on profits and franchise taxes) imposed on or measure by the Lender's net income or profits under the laws of the jurisdiction or any political subdivision thereof in which (i) the Lender is incorporated or organized or in which the Lender is treated as resident for tax purposes or in which the Lender maintains a place of business or is otherwise connected (other than a connection resulting solely from the execution, delivery, or performance of this Agreement and the other Loan Documents), or (ii) the Lender's office is located in respect of amounts received or receivable in that jurisdiction.  If the Lender makes, or intends to make, a claim hereunder, it must promptly notify the Borrower if the event which will give, or has given, rise to the claim. (c)           Other Related Tax Matters.  If the Borrower is required to pay any amount to the Lender pursuant to this Section 2.14, then the Lender shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its lending office so as to eliminate any such additional payment by the Borrower which may thereafter accrue, if such change in the reasonable judgment of the Lender is not otherwise disadvantageous to the Lender.  If the Lender is entitled to an exemption from or reduction of tax, with respect to payments under this Agreement, it shall, upon the written request of the Borrower, deliver to the Borrower at such times as reasonably requested by the Borrower in writing, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate.  Notwithstanding anything therein to the contrary, the Borrower shall not be required to pay any additional amounts pursuant to this Section 2.14 with respect to taxes that are attributable to the Lender's failure to comply with the foregoing sentence.  If the Lender shall become aware that it is entitled to receive a refund in respect of amounts paid by the Borrower pursuant to this Section 2.14, which refund in the good faith judgment of the Lender is allocable to such payment, it shall promptly notify the Borrower of the availability of such refund and shall, within thirty (30) days after the receipt of a request by the Borrower, apply for such refund.  If the Lender receives a refund in respect of any amounts paid by the Borrower pursuant to this Section 2.14, which refund in the good faith judgment of the Lender is allocable to such payment, it shall promptly notify the Borrower of such refund and shall, within thirty (30) days after receipt, repay such refund to the Borrower net of all out-of-pocket expenses of the Lender; provided, however, that the Borrower, upon the request of the Lender, agrees to repay the amount paid over to the Borrower to the Lender in the event the Lender is required to repay such refund.   2.15         Maintenance Reserves; Security Deposits; Insurance Proceeds.  All maintenance reserves, security deposits and proceeds of casualty insurance shall be held and applied by the Lender pursuant to and in accordance with the Owner Trustee Mortgage.   SECTION 3 REPRESENTATIONS AND WARRANTIES   The Borrower represents and warrants to the Lender that on the date hereof and on each Loan Closing Date:   3.1           Organization, Standing.  It (a) is a corporation duly organized, validly existing and in good standing under the laws of Delaware, (b) has the corporate power and authority necessary to own its assets, carry on its business and enter into and perform its obligations hereunder, and under each Loan Document to which it is a party, and (c) is qualified to do business and is in good standing in each jurisdiction where the nature of its business or the ownership of its properties requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect. 3.2           Corporate Authority, Validity, Etc.  The making and performance of the Loan Documents to which it is a party are within its power and authority and have been duly authorized by all necessary corporate action.  The making and performance of the Loan Documents do not and under present law will not require any consent or approval not obtained of any of its shareholders, or any other Person (including, without limitation, any Governmental Authority), do not and under present law will not violate any law, rule, regulation order, writ, judgment, injunction, decree, determination or award, do not violate any provision of its charter or by-laws, do not and will not result in any breach of any material agreement, lease or instrument to which it is a party, by which it is bound or to which any of its assets are or may be subject, and do not and will not give rise to any Lien upon any of its assets except the Lien in favor of the Lender contemplated hereby.  The Borrower is not in default under any agreement, lease or instrument except to the extent such default reasonably could not have a Material Adverse Effect.  No authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority are necessary for the execution, delivery or performance by the Borrower of any Loan Document to which it is a party or for the validity or enforceability thereof, except any filings or registrations expressly contemplated by the Loan Documents.   3.3           Validity of Loan Documents.  The Loan Documents to which Borrower is a party, when executed and delivered by Borrower, will have been duly executed and delivered by the Borrower and constitute legal, valid, and binding obligations of the Borrower, enforceable in accordance with their respective terms.   3.4           Litigation.  Except as disclosed in Section 3.4 of the Disclosure Schedule, there are no actions, suits or proceedings pending or, to the Borrower’s knowledge, threatened against or affecting the Borrower or any of its assets before any court, government agency, or other tribunal which if adversely determined reasonably could have a Material Adverse Effect.  If there is any disclosure on Section 3.4 of the Disclosure Schedule, the status (including the tribunal, the nature of the claim and the amount in controversy) of each such litigation matter as of the date of this Agreement is set forth in Section 3.4 of the Disclosure Schedule.   3.5           ERISA. (a) The Borrower and each ERISA Affiliate is in compliance in all material respects with all applicable provisions of ERISA and the regulations promulgated thereunder; and, neither Borrower, nor any ERISA Affiliate maintains or contributes to or has maintained or contributed to any multiemployer plan (as defined in Section 4001 of ERISA) under which the Borrower or any ERISA Affiliate could have any withdrawal liability; (b) neither the Borrower nor any ERISA Affiliate, sponsors or maintains any Plan under which there is an accumulated funding deficiency within the meaning of Section 412 of the Code, whether or not waived; (c) the aggregate liability for accrued benefits and other ancillary benefits under each Plan that is or will be sponsored or maintained by the Borrower or any ERISA Affiliate (determined on the basis of the actuarial assumptions prescribed for valuing benefits under terminating single-employer defined benefit plans under Title IV of ERISA) does not exceed the aggregate fair market value of the assets under each such defined benefit pension Plan; (d) the aggregate liability of the Borrower and each ERISA Affiliate arising out of or relating to a failure of any Plan to comply with the provisions of ERISA or the Code, will not have a Material Adverse Effect; and (e) there does not exist any unfunded liability (determined on the basis of actuarial assumptions utilized by the actuary for the plan in preparing the most recent annual report) of the Borrower or any ERISA Affiliate under any plan, program or arrangement providing post-retirement life or health benefits. 3.6           Financial Statements.  The consolidated financial statements of Borrower as of and for the Fiscal Year ended December 31, 2000 and for the Fiscal Quarter ended June 30, 2001, in each case, consisting of a balance sheet, a statement of operations, a statement of shareholders’ equity, a statement of cash flows and except for the Fiscal Quarter Statement accompanying footnotes furnished to the Lender in connection herewith, present fairly, in all material respects, the financial position, results of operations and operating statistics of the Borrower as of the dates and for the periods referred to, in conformity with GAAP.  Except as set forth on Section 3.6 of the Disclosure Schedule, there are no material liabilities, fixed or contingent, which are not reflected in such financial statements, the accompanying footnotes, or the Borrower’s Form 10K filed for the period ended December 31, 2000 or the Borrower's Form 10Q filed for the period ended June 30, 2001, other than liabilities which are not required to be reflected in such financial statements.   3.7           No Material Adverse Change.  Since June 30, 2001, there has been no Material Adverse Change.   3.8           Not in Default, Judgments, Etc.  No Event of Default or Potential Default under any Loan Document has occurred and is continuing.  The Borrower has satisfied all judgments (other than judgments which do not constitute an Event of Default under Section 8.1(g)), and is not in default under any order, writ, injunction, or decree of any court, arbitrator, or federal, state, municipal, or other governmental authority, commission, board bureau, agency, or instrumentality, domestic or foreign.   3.9           Taxes.  The Borrower has filed all federal, state, local and foreign tax returns and reports which it is required by law to file and as to which its failure to file would have a Material Adverse Effect, and has paid all taxes, including wage taxes, assessments, withholdings and other governmental charges which are presently due and payable, other than those being contested in good faith by appropriate proceedings, if any, and disclosed on Section 3.9 of the Disclosure Schedule.  The tax charges, accruals and reserves on the books of the Borrower are adequate to pay all such taxes that have accrued but are not presently due and payable.   3.10         Permits, Licenses, Etc.  The Borrower possesses all permits, licenses, franchises, trademarks, trade names, copyrights and patents necessary to the conduct of its business as presently conducted or as presently proposed to be conducted, except where the failure to possess the same would not have a Material Adverse Effect.   3.11         No Materially Adverse Contracts, Etc.  The Borrower is not subject to any charter, corporate or (to the best of its knowledge) other legal restriction, or any judgment, decree, order, or (to the best of its knowledge) rule or regulation which in the judgment of its directors or officers has or is expected in the future to have a Material Adverse Effect.  The Borrower is not a party to any contract or agreement which in the judgment of its directors or officers has or is expected to have any Material Adverse Effect, except as otherwise reflected in adequate reserves. 3.12         Compliance with Laws, Etc.  The Borrower is in compliance in all material respects with all Regulations applicable to its business (including obtaining all authorizations, consents, approvals, orders, licenses, exemptions from, and making all filings or registrations or qualifications with, any court or governmental department, public body or authority, commission, board, bureau, agency, or instrumentality), the noncompliance with which reasonably would likely have a Material Adverse Effect.   3.13         Solvency.  The Borrower is, and after giving effect to the transactions contemplated hereby, will be, Solvent.   3.14         Use of Proceeds.  The Borrower will use the proceeds of any Loan to be made pursuant hereto for the purchase, financing and refinancing of Engines.   3.15         Depreciation Policies.  The Borrower’s depreciation policies with respect to the Engines are as set forth on Exhibit G.  These policies have been in effect substantially without change since January 1, 1997.   3.16         Disclosure Generally.  The representations and statements made by the Borrower or on its behalf in connection with this Agreement and the Loans, including representations and statements in each of the Loan Documents, do not and will not contain any untrue statement of a material fact or omit to state a material fact or any fact necessary to make the representations made not materially misleading.  No written information, exhibit, report, brochure or financial statement furnished by the Borrower to the Lender in connection with this Agreement, the Loans or any Loan Document contains or will contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading.  Notwithstanding anything to the contrary in this Agreement, the Disclosure Schedule to this Agreement shall be promptly updated by the Borrower whenever necessary to reflect events that have occurred which would make the latest information contained therein delivered by the Borrower to the Lender inaccurate or misleading; provided, however, that no updating of any such Disclosure Schedule shall operate to:  (i) cure a breach of a representation or warranty previously made by the Borrower; (ii) modify any of the covenants or obligations of the Borrower under this Agreement or any other Loan Document (including any affirmative covenants, negative covenants or financial covenants); (iii) prevent the occurrence of the disclosed event from constituting a Potential Default or Event of Default if the occurrence of such event otherwise constitutes a Potential Default or Event of Default under this Agreement or any other Loan Document; or (iv) expand the definition of “Permitted Liens” allowed under this Agreement.   SECTION 4 CONDITIONS PRECEDENT   4.1           Conditions to the Effectiveness of the Agreement.  The effectiveness of this Agreement is conditioned upon the following:   (a)           Due Execution.  This Agreement shall be executed and delivered by the Borrower and the Lender and shall be in full force and effect. (b)           Facility Fee.  The Borrower shall have paid to Lender the applicable Facility Fee.   (c)           Opinion.  The Lender shall have received a favorable written legal opinion from counsel to the Borrower dated the Closing Date in form and substance and from counsel satisfactory to the Lender, which shall be addressed to the Lender, with respect to the due authorization, execution, and delivery by the Borrower of this Agreement, the enforceability of this Agreement against the Borrower, and such other matters as the Lender shall reasonably request.   (d)           Other Documents and Information.  The Lender shall have received copies of all other documents and information as it shall have reasonably requested, each in form and substance satisfactory to the Lender.   4.2           All Loans.  The obligation of the Lender to make any Loan is conditioned upon the following:   (a)           Articles, Bylaws.  The Lender shall have received copies of the Articles or Certificate of Incorporation and Bylaws of the Borrower certified by its corporate secretary or secretary, together with Certificate of Good Standing from any jurisdiction where the nature of its business or the ownership of its properties requires such qualification except where the failure to be so qualified would not have a Material Adverse Effect.   (b)           Evidence of Authorization.  The Lender shall have received copies certified by the Secretary or Assistant Secretary of the Borrower of all corporate or other action taken by Borrower to authorize its execution and delivery and performance of the Loan Documents and to authorize the Loans   (c)           Incumbency.  The Lender shall have received a certificate signed by the secretary or assistant secretary of the Borrower, together with the true signature of the officer or officers authorized to execute and deliver the Loan Documents and certificates thereunder, upon which the Lender shall be entitled to rely conclusively until they shall have received a further certificate of the secretary or assistant secretary of the Borrower amending the prior certificate and submitting the signature of the officer or officers named in the new certificate as being authorized to execute and deliver the Loan Documents and certificates thereunder.   (d)           Consents.  The Borrower shall have provided to the Lender evidence satisfactory to the Lender that all governmental, shareholder and third party consents and approvals necessary in connection with the transactions contemplated hereby have been obtained and remain in effect.   (e)           Blocked Account.  The Borrower shall have opened the Blocked Account and have delivered to the Lender the Blocked Account Agreement executed by the Borrower and the Bank and the Security Agreement-Blocked Account, executed by the Borrower. (f)            Owner Trustee Documents.  The Lender shall have received (i) a copy of the resolutions of the Board of Directors of the Owner Trustee, in its individual capacity, certified by the Secretary or an Assistant Secretary of the Owner Trustee, duly authorizing the execution, delivery and performance by the Owner Trustee of each of the Loan Documents to which the Owner Trustee is or will be a party and (ii) an incumbency certificate of Owner Trustee, as to the persons authorized to execute and deliver the Loan Documents to which it is or will be a party and the signatures of such person or persons.   (g)           Opinions.  The Lender shall have received a favorable written legal opinion from counsel to the Borrower dated each Loan Closing Date in form and substance and from counsel satisfactory to the Lender, which shall be addressed to the Borrower, with respect to the due authorization, execution, delivery and enforceability by the Lender of each of the Loan Documents to which the Borrower is a party, the enforceability of such Loan Documents against the Borrower, and as to such other matters as the Lender shall reasonably request; provided in respect of each Loan Closing Date after the initial Loan Closing Date, the Borrower may satisfy the requirements of this clause (g) by providing the Lender with a letter of counsel having rendered the opinion to the effect that the Borrower may rely on such opinion on such Loan Closing Date.   (h)           Other Agreements.  The Borrower and each Owner Trustee as applicable shall have executed and delivered to each other the other Loan Documents required hereunder.   (i)            Other Fees, Expenses.  The Borrower shall simultaneously pay or shall have paid all fees (in addition to those described in Section 4.1(b)) and expenses, if any, due hereunder or under any other Loan Document.   (j)            Request For Advance.  The Borrower shall have delivered and the Lender shall have received a Request for Advance for such Loan, in such form as the Lender may request from time to time.   (k)           Loan Documents.  The Borrower shall have delivered to the Lender and the Lender shall have received: (I)            A FULLY EXECUTED COUNTERPART OF THE RELEVANT PURCHASE AGREEMENT, IF AVAILABLE TO THE BORROWER;   (II)           THE FULLY EXECUTED CHATTEL PAPER COUNTERPART OF THE RELEVANT LEASE;   (III)          A COUNTERPART OF THE RELEVANT OWNER TRUSTEE MORTGAGE, EXECUTED BY THE RELEVANT OWNER TRUSTEE;   (IV)          A COUNTERPART OF THE RELEVANT BENEFICIAL INTEREST PLEDGE AGREEMENT, EXECUTED BY THE BORROWER;   (V)           A NOTE IN THE PRINCIPAL AMOUNT OF THE RELEVANT LOAN, EXECUTED BY THE BORROWER; (VI)          A CONSENT AND AGREEMENT, EXECUTED BY THE RELEVANT LESSEE AND THE RELEVANT OWNER TRUSTEE;   (VII)         IF THE LESSEE’S DOMICILE OR PRINCIPAL LOCATION IS A NON-U.S. JURISDICTION, EVIDENCE IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO LENDER THAT SUCH DOMICILE OR PRINCIPAL LOCATION IS EXCLUDED FROM THE DEFINITION OF “NONRECOGNITION OF RIGHTS JURISDICTIONS” UNDER CLAUSE (A) OR (B) THEREOF.   (l)            Lease and Purchase Documents.  To the extent available to the Borrower, with respect to each Lease and Purchase Agreement, the Lender shall have received copies of all documents the delivery of which is provided for therein as a condition precedent to the effectiveness thereof.   (m)          Covenants; Representations.  The Borrower and each Owner Trustee shall be in compliance with all covenants, agreements and conditions in each Lease Document and each Purchase Document, and each representation and warranty contained in each Loan Document and made by the Borrower or an Owner Trustee shall be true in all material respects with the same effect as if such representation or warranty had been made on the date such Loan is made or issued, except to the extent such representation or warranty relates to a specific prior date.   (n)           Compliance Certificate.  The Lender shall have received from the Borrower a Compliance Certificate to the effect that (a) since the date of the Borrower's most recently published financial statements there has been no Material Adverse Change, (b) each of the representations of the Borrower and the Owner Trustee in each Loan Document to which it is a party are true and correct in all material respects (other than Loan representations made as of and relevant only to a specific date) and (c) no Event of Default or Potential Default has occurred and is continuing.   (o)           Material Adverse Change.  Since the date of the most recent financial statements of the Borrower, there shall not have been any Material Adverse Change.   (p)           Legal Opinions.  The Lender shall have received a favorable legal opinion (i) from counsel to the Owner Trustee dated the Loan Closing Date in form and substance satisfactory, and from counsel reasonably acceptable, to the Lender with respect to the due authorization and delivery by the Owner Trustee of the Loan Documents to which it is a party, the enforceability thereof, the Lien created thereby and as to such other matters as the Lender shall reasonably request, and (ii) from McAfee & Taft, special FAA counsel, as to the Owner Trustee Mortgage and such other matters as the Lender shall reasonably request.   (q)           Insurance.  Evidence, in form and scope satisfactory to the Lender, of the insurance required by Section 3.06 of the relevant Owner Trustee Mortgage, provided the Borrower shall have the right to defer delivery thereof for a period of up to 30 days from the Loan Closing Date.   (r)            Documents.  The Lender shall have received all certificates, instruments and other documents then required to be delivered to the Lender pursuant to any Loan Document, in each instance in form and substance reasonably satisfactory to it. (s)           Security Interest.  The Borrower shall furnish evidence satisfactory to the Lender that the Lender holds a perfected, first-priority lien against all Collateral which is the subject of such Loan, subject to the proviso set forth in Section 9.1 and the exceptions contained in Section 8.1 or in any other Loan Document.   (t)            Financial Statements.  The Lender shall have received the most recently published financial statements of the Willis Companies, including balance sheets, income and cash-flow statements, audited by independent public accountants of recognized national standing, and prepared in conformity with GAAP.   (u)           Litigation.  There shall be no actions, suits, investigations or proceedings pending or threatened in any court or before any arbitrator or Governmental Authority that could have a Material Adverse Effect.   (v)           Other Fees, Expenses.  The Borrower shall simultaneously pay or shall have paid all fees and expenses, if any, due hereunder or under any other Loan Document.   (w)          Other Documents.  The Lender shall have received such other certificates, documents and opinions as the Lender shall reasonably request.   SECTION 5 AFFIRMATIVE COVENANTS   The Borrower covenants and agrees that, without the prior written consent of the Lender, from and after the date hereof and so long as the Loan Commitment is in effect or any Obligation remains unpaid or outstanding, it will:   5.1           Financial Statements and Reports.  Furnish to the Lender the following financial information:   (a)           Annual Statements.  No later than ninety (90) days after the end of each Fiscal Year, the consolidated and consolidating balance sheet of the Willis Companies as of the end of such year and the prior year in comparative form, and related statements of operations, shareholders’ equity and cash flows for such Fiscal Year and the prior Fiscal Year in comparative form.  The financial statements shall be in reasonable detail with appropriate notes, and shall be prepared in accordance with GAAP.  The consolidated annual financial statements shall be certified (without any qualification or exception) by KPMG LLP or other independent public accountants reasonably acceptable to the Lender.  Such financial statements shall be accompanied by a report of such independent certified public accountants stating that, in the opinion of such accountants, such financial statements present fairly, in all material respects, the financial position, the results of operations and the cash flows of the Willis Companies for the period then ended in conformity with GAAP, except for inconsistencies resulting from changes in accounting principles and methods agreed to by such accountants and specified in such report, and that, in the case of such financial statements, the examination by such accountants of such financial statements has been made in accordance with generally accepted auditing standards and accordingly included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and assessing the accounting principles used and significant estimates made, as well as evaluating the overall financial statement presentation.  Each financial statement provided under this subsection (a) shall be accompanied by a certificate signed by such accountants either stating that during the course of their examination nothing came to their attention which would cause them to believe that any event has occurred and is continuing which constitutes an Event of Default or Potential Default, or describing each such event.  In addition to the annual financial statements, the Borrower shall, promptly upon receipt thereof, furnish to the Lender a copy of the portion of each other report or management letter submitted to its board of directors by its independent accountants in connection with any annual, interim or special audit made by them of the financial records of the Borrower in which the Borrower’s accountants give any comment critical of the valuation of, or controls or procedures related to, the Collateral. (b)           Quarterly Statements.  No later than forty-five (45) calendar days after the end of each Fiscal Quarter of each Fiscal Year except for the Fiscal Quarter ending on December 31, the consolidated and consolidating balance sheet and related statements of operations, shareholders’ equity and cash flows of the Willis Companies for such quarterly period and for the period from the beginning of such fiscal year to the end of such Fiscal Quarter and a corresponding financial statement for the same periods in the preceding Fiscal Year certified by the chief financial officer, chief administrative officer or  chief executive officer of the Willis Companies as having been prepared in accordance with GAAP (subject to changes resulting from audits, year-end adjustments and the absence of footnotes).  Such quarterly statement shall be accompanied by a Compliance Certificate in the form attached hereto as Exhibit B or such other form as the Lender shall reasonably request.   (c)           No Default.  Within forty-five (45) calendar days after the end of each of the first three Fiscal Quarters of each Fiscal Year and within ninety (90) calendar days after the end of each Fiscal Year, a certificate signed by the chief financial officer, chief administrative officer or chief executive officer of the Willis Companies certifying that, to the best of such officer’s knowledge, after due inquiry, (i) the Borrower has complied with all covenants, agreements and conditions in each Loan Document and that each representation and warranty contained in each Loan Document is true and correct with the same effect as though each such representation and warranty had been made on the date of such certificate (except (A) to the extent such representation or warranty relates to a specific prior date, or (B) to the extent that any events have occurred that require a change to the Disclosure Schedule, in which case an updated Disclosure Schedule will be delivered by the Borrower in accordance with the requirements of Section 3.16 hereof, in which case the representation shall be updated by the Borrower to reflect any changes occurring since that prior date, and (ii) no event has occurred and is continuing which constitutes an Event of Default or Potential Default, or describing each such event and the remedial steps being taken by the Borrower, as applicable.   (d)           ERISA.  All reports and forms filed with respect to all Plans, except as filed in the normal course of business and that would not result in an adverse action to be taken under ERISA, and details of related information of a Reportable Event, promptly following each filing.   (e)           Material Changes.  Notification to the Lender of any litigation, administrative proceeding, investigation, business development, or change in financial condition which could reasonably have a Material Adverse Effect, promptly following its discovery. (f)            Other Information.  Promptly, upon request by the Lender from time to time (which may be on a monthly or other basis), the Borrower shall provide such other information and reports regarding its operations, business affairs, prospects and financial condition as the Lender may reasonably request.   (g)           Annual Compliance Report.  As soon as practicable and in any event within 90 days after the end of each fiscal year, the Borrower shall deliver to the Lender a Compliance Certificate.   (h)           Maintenance of Current Depreciation Policies.  The Borrower shall maintain its method of depreciating its assets substantially consistent with past practices as set forth in Exhibit G and will promptly notify the  Lender of any deviation from such practices.   5.2           Corporate Existence.  Preserve its corporate existence and all material franchises, licenses, patents, copyrights, trademarks and trade names consistent with good business practice; and maintain, keep, and preserve all of its properties (tangible and intangible) necessary or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted.   5.3           ERISA.  Comply in all material respects with the provisions of ERISA to the extent applicable to any Plan maintained for the employees of the Borrower or any ERISA Affiliate; do or cause to be done all such acts and things that are required to maintain the qualified status of each Plan and tax exempt status of each trust forming part of such Plan; not incur any material accumulated funding deficiency (within the meaning of ERISA and the regulations promulgated thereunder), or any material liability to the PBGC (as established by ERISA); not permit any event to occur as described in Section 4042 of ERISA or which may result in the imposition of a lien on its properties or assets; notify the  Lender in writing promptly after it has come to the attention of senior management of the Borrower of the assertion or threat of any Reportable Event or other event described in Section 4042 of ERISA (relating to the soundness of a Plan) or the PBGC’s ability to assert a material liability against the Borrower or impose a lien on its, or any ERISA Affiliates’, properties or assets; and refrain from engaging in any Prohibited Transactions or actions causing possible liability under Section 5.02 of ERISA.   5.4           Compliance with Regulations.  Comply in all material respects with all Regulations applicable to its business, the noncompliance with which reasonably could have a Material Adverse Effect.   5.5           Conduct of Business; Permits and Approvals, Compliance with Laws.  Continue to engage in an efficient and economical manner in a business of the same general type as conducted by it on the date of this Agreement; maintain in full force and effect, its franchises, and all licenses, patents, trademarks, trade names, contracts, permits, approvals and other rights necessary to the profitable conduct of its business. 5.6           Maintenance of Properties.  Maintain or cause to be maintained in good repair, working order and condition all properties used or useful in its business and make all reasonable and necessary renewals, replacements, additions, betterments and improvements thereof and thereto, so that the business carried on in connection therewith may be conducted in the ordinary course at all times.   5.7           Maintenance of Insurance.  Maintain insurance with financially sound and reputable insurance companies or associations in such amounts and covering such risks (including but not limited to coverage for aviation war risk liabilities) as are usually carried by companies engaged in the same or a similar business and similarly situated, which insurance may provide for reasonable deductibility from coverage thereof.   5.8           Payment of Taxes, Etc.  Promptly pay and discharge (a) all taxes, assessments, and governmental charges or levies imposed upon it or upon its income and profits, upon any of its property, real, personal or mixed, or upon any part thereof, before the same shall become in default; and (b) all lawful claims for labor, materials and supplies or otherwise, which, if unpaid, might become a lien or charge upon such property or any part thereof; provided, however, that so long as the Borrower first notifies the Lender of its intention to do so, it shall not be required to pay and discharge any such tax, assessment, charge, levy or claim so long as the failure to so pay or discharge does not constitute or result in an Event of Default or a Potential Default hereunder and so long as no foreclosure or other similar proceedings shall have been commenced against such property or any part thereof and so long as the validity thereof shall be contested in good faith by appropriate proceedings diligently pursued and it shall have set aside on its books adequate reserves with respect thereto.   5.9           Notice of Events.  Promptly upon discovery of any of the following events, provide telephone notice to the Lender (confirmed within three (3) calendar days by written notice from the Borrower to the Lender) describing the event and all action the Borrower proposes to take with respect thereto:   (a)           an Event of Default or Potential Default under this Agreement or any other Loan Document;   (b)           any default or event of default under a contract or contracts and the default or event of default involves payments by the Borrower in an aggregate amount equal to or in excess of $3,000,000;   (c)           a default or event of default under or as defined in any evidence of or agreements for Indebtedness for Borrowed Money under which the Borrower’s liability is equal to or in excess of $3,000,000, singularly or in the aggregate, whether or not an event of default thereunder has been declared by any party to such agreement or any event which, upon the lapse of time or the giving of notice or both, would become an event of default under any such agreement or instrument or would permit any party to any such instrument or agreement to terminate or suspend any commitment to lend to the Borrower or to declare or to cause any such indebtedness to be accelerated or payable before it would otherwise be due; (d)           the institution of, any material adverse determination in, or the entry of any default judgment or order or stipulated judgment or order in, any suit, action, arbitration, administrative proceeding, criminal prosecution or governmental investigation against the Borrower in which the amount in controversy is in excess of $3,000,000, singularly or in the aggregate;   (e)           any change in any Regulation, including, without limitation, changes in tax laws and regulations, which would have a Material Adverse Effect; or   (f)            any “Event of Default” (as defined in the Other Facility Agreement) under the Other Facility Agreement.   5.10         Inspection Rights.  At any time during regular business hours and upon reasonable notice permit the Lender or any authorized officer, employee, agent, or representative of the Lender (a) to discuss the affairs, finances, and accounts of the Borrower with its Chairman, President, any executive vice president, its chief financial officer, treasurer, controller or independent accountants or (b) subject to the terms of the relevant Lease to inspect an Engine and its Engine Records and make such copies thereof as the Lender may elect.  In conducting each such inspection, visit or discussion (each an “inspection”), the Lender and each of its officers, employees, agents and representatives shall take all reasonable action to minimize any disruption to the normal operations of the Borrower and the relevant Lessee. If no Event of Default or Potential Default shall be in existence, the Lender in respect of each Engine and otherwise generally, shall limit such inspection of each of the foregoing to once each calendar year.  If an inspection shall be made during the continuance of a Potential Default or an Event of Default, the Borrower shall reimburse the Lender for its reasonable out-of-pocket expense of such inspection.  If an inspection shall be made when no Event of Default or Potential Default shall be in existence, the Borrower shall reimburse the Lender for its reasonable out-of-pocket expense of such inspection up to $5,000 in the aggregate; any expenses incurred by the Lender in excess of such amount shall be for the Lender’s account.  At all times, it is understood and agreed by the Borrower that all expenses in connection with any such inspection which may be incurred by the Borrower, any officers and employees thereof and the attorneys and independent certified public accountants therefor shall be expenses payable by the Borrower and shall not be expenses of the Lender.   5.11         Generally Accepted Accounting Principles.  Maintain books and records at all times in accordance with Generally Accepted Accounting Principles.   5.12         Compliance with Material Contracts.  Comply in all material respects with all obligations, terms, conditions and covenants, as applicable, in all instruments and agreements to which it is a party or by which it is bound, including but not limited to any Lease which has been assigned to the Lender, or any of its properties is affected and in respect of which the failure to comply reasonably could have a Material Adverse Effect.   5.13         Use of Proceeds.  Use the proceeds of any Loan to be made pursuant hereto for the purchase or refinancing of Engines as contemplated herein.   5.14         Further Assurances.  Do such further acts and things and execute and deliver to the Lender such additional assignments, agreements, powers and instruments, as the Lender may reasonably require or reasonably deem advisable, to carry into effect the purposes of this Agreement or to better assure and confirm unto the Lender its rights, powers and remedies hereunder. 5.15         Placards.  Subject only to restrictions contained in the Lease, require each lessee under such Lease relating to each Eligible Engine to affix to and maintain on such Eligible Engine subject to such Lease a placard satisfactory to the Lender bearing an inscription substantially in the form of “THIS ENGINE IS OWNED BY WILLIS LEASE FINANCE CORPORATION OR AN AFFILIATE, AND IS SUBJECT TO A FIRST PRIORITY SECURITY INTEREST IN FAVOR OF ONE OR MORE FINANCIAL INSTITUTIONS”, or such other inscription as the Lender from time to time may reasonably request.   5.16         Lease Event of Default.  If a Lease Event of Default shall occur under an Eligible Lease, Lender shall have the right to require the Borrower to prepay, and the Borrower shall prepay, on a date no later than 180 days from the date of the Lender’s request for such prepayment, the entire then outstanding principal of the relevant Loan, together with interest thereon and all other amounts due the Lender under the Loan Documents to the extent they relate to such relevant Loan (including, but not limited to, Break Costs); provided, however, in respect of any Eligible Lease the Borrower shall have the right to cure two such Lease Events of Default before the Lender shall have the right to require the prepayment provided for herein.   5.17         Special Indemnification.  If, pursuant to Section 13 of the Blocked Account Agreement, the Lender is required to indemnify the Bank, the Borrower, immediately upon receipt of request from the Lender therefor, shall reimburse the Lender for all amounts paid or required to be paid by the Lender to the Bank pursuant to such Section 13, unless due to the Lender’s gross negligence or willful misconduct.   SECTION 6 NEGATIVE COVENANTS   The Borrower covenants and agrees that, without the prior written consent of the Lender, from and after the date hereof and so long as any Loan Commitment is in effect or any Obligation remains unpaid or outstanding, it will not:   6.1           Consolidation and Merger.  Without the consent of the Lender which shall not be unreasonably withheld or delayed, merge or consolidate with or into any corporation except, if (a) no Potential Default or Event of Default shall have occurred and be continuing either immediately prior to or upon the consummation of such transaction, and (b) the Borrower is the surviving entity.  The Borrower will promptly notify the  Lender of any merger or consolidation involving the Borrower.   6.2           Liens.  Create, assume or permit to exist any Lien on the Collateral, whether now owned or hereafter acquired, or upon any income or profits therefrom, except Permitted Liens, or allow or permit to exist any Lien (other than Permitted Liens) on any Collateral owned by an Owner Trustee.  Without limiting the foregoing, the Borrower, at the Borrower’s expense, shall, or shall cause the relevant Owner Trustee to, promptly discharge any such Lien, except Permitted Liens. 6.3           Margin Stock.  Use or permit any proceeds of the Loans to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock within the meaning of Regulation U of The Board of Governors of the Federal Reserve System, as amended from time to time.   6.4           Transfer of Assets; Nature of Business.  The Borrower and its Restricted Subsidiaries may not sell, transfer, lease or dispose of assets constituting in the aggregate more than twenty percent (20%) of the net book value of their combined assets during any twelve-month period without the prior written consent of the Lender, such consent not to be unreasonably withheld.  Notwithstanding the above:  (a) the Borrower may or may cause an Owner Trustee to lease engines and other equipment in the ordinary course of business, (b) the Borrower may or may cause an Owner Trustee to sell, transfer or otherwise dispose of engines and other equipment subject to a lease (including, without limitation, related assets such as security deposits and maintenance reserves, as applicable), or assign a Beneficial Interest, in the ordinary course of business, for its then fair market value; (c) the Borrower may or may cause an Owner Trustee to sell, transfer or otherwise dispose of engines and other equipment that are declared a total loss or destroyed or that suffer damage that is not economically repairable (or assign any Beneficial Interest relating to any such engine or item of equipment), for their then fair market value; (d) the Borrower may or may cause an Owner Trustee to sell, transfer, assign, lease, re-lease or otherwise dispose of any engine or any other item of equipment with respect to which the relevant lease has expired or is expiring (or assign any Beneficial Interest relating to any such engine or such item) if such sale or disposition is in the ordinary course of its business, for its then fair market value; (e) the Borrower may or may cause an Owner Trustee to transfer Contributed Assets (as such term is defined in the Contribution Agreement) or similar assets to WLFC Funding Corporation or to any other Subsidiary of the Borrower (in each case as such term is defined in any other contribution or similar agreement entered into in connection with a similar securitization transaction); (f) the Borrower may or may cause an Owner Trustee to transfer engines or other equipment in connection with non-recourse or partial recourse financing of leases and related engines and other equipment; (g) the Borrower may or may cause an Owner Trustee to sell Parts to non-Affiliates of the Borrower in the ordinary course of business; and (h) the Borrower may or may cause an Owner Trustee to sell engines, other equipment, leases or related assets (or assign any Beneficial Interest related thereto) to a Restricted Subsidiary for not less than their net book value at the time of transfer.  The Borrower may not discontinue, liquidate or change in any material respect any substantial part of its operations or business.   6.5           Accounting Change.  Without the prior written approval of the Lender, make or permit any material change in financial accounting policies or financial reporting practices, except as required by Generally Accepted Accounting Principles or regulations of the Securities and Exchange Commission, if applicable.  Notwithstanding the foregoing, without the prior written approval of the Lender, the Borrower shall not make or permit any material change in financial accounting policies or financial reporting practices as they relate to, or in connection with, any current or future securitizations, except as required by GAAP or regulations of the Securities and Exchange Commission, if applicable (and in such case, the Borrower shall promptly notify the Lender of the need for such change). 6.6           Transactions with Affiliates of the Borrower.  Enter into any material transaction (including, without limitation, the purchase, sale or exchange of property, the rendering of any services or the payment of management fees) with any Affiliate of the Borrower, except transactions in the ordinary course of, and pursuant to the reasonable requirements of, its business, and in good faith and upon commercially reasonable terms and except for transactions with any member of the SwissAir Group and except for securitization transactions contemplated by the WLFC Funding Facility and any similar securitization transactions entered into from time to time by Subsidiaries of the Borrower.   6.7           Restricted Payments.   (a)           Make or pay any redemptions, repurchases, dividends or distributions of any kind with respect to its capital stock.   (b)           Redeem or prepay any Debt other than under this Credit Facility provided, however, that the Borrower shall be permitted to redeem, prepay, or refinance Debt if such redemption, prepayment, or refinancing (i) is in the ordinary course of the Borrower’s business, and (ii) no Potential Default or Event of Default exists prior to or after such refinancing.   6.8           Restriction on Amendment of this Agreement.  Enter into or otherwise become subject to or suffer to exist any agreement which would require it to obtain the consent of any other Person as a condition to the ability of the  Lender and the Borrower to amend or otherwise modify this Agreement.   6.9           Change of Incorporation.  Reincorporate (or otherwise reorganize) under the laws of a jurisdiction other than Delaware.   SECTION 7 FINANCIAL COVENANTS   The Borrower covenants and agrees that, without the prior written consent of the Lender, from and after the date hereof and so long as any Loan Commitment is in effect or any Obligation remains unpaid or outstanding:   7.1           No Losses.  From and after the Closing Date, the Willis Companies shall not at any time suffer a net loss for *.   7.2           Minimum Tangible Net Worth.  Tangible Net Worth of the Willis Companies will not at any time be less than the sum of:  (i) $__________, plus (ii) if positive, ___% of the cumulative Net Income of the Willis Companies for each fiscal quarter earned from and after the Closing Date (without any deduction for net losses for any fiscal quarter); plus (iii) ___% of the net proceeds received by Borrower from the issuance of common stock or preferred stock of Borrower after January 1, 2001.*   -------------------------------------------------------------------------------- *              This redacted material has been omitted pursuant to a request for confidential treatment, and the material has been filed separately with the Commission. 7.3           Leverage Ratio.  From and after the Closing Date, the Leverage Ratio will not exceed ________ as of the end of any Fiscal Quarter.*   7.4           Adjusted Total Debt to Adjusted Tangible Net Worth.  From and after the Closing Date, as of the end of any Fiscal Quarter, the ratio of (a) Adjusted Total Debt to Adjusted Tangible Net Worth will not exceed ________.*   7.5           Minimum Interest Coverage Ratio.  From and after the Closing Date, the Interest Coverage Ratio of the Willis Companies (measured at the end of each Fiscal Quarter on a rolling four-quarter basis) will not be less than ________.*   7.6           Investments in Unrestricted Subsidiaries.  From and after the Closing Date, except for Borrower's investment in WLFC Funding Corporation or any other Subsidiary of Borrower established to facilitate securitizations, the Borrower will not make or maintain any Investments in Unrestricted Subsidiaries which exceed in the aggregate fifteen percent (15%) of Net Worth of the Borrower.   SECTION 8 DEFAULT   8.1           Events of Default.  The Borrower shall be in default if any one or more of the following events (each an “Event of Default”) occurs:   (a)           Payments.  The Borrower fails to pay the principal due on any Note when due and payable (whether at maturity, by notice of intention to prepay, or otherwise); or fails to pay interest or any other amount payable hereunder or under any other Loan Document within three Business Days after the date such interest or other amount is due and payable.   (b)           Covenants.  The Borrower or any Owner Trustee, as applicable, fails to observe or perform:  (i) any term, condition or covenant set forth in Sections 5.1(a), 5.1(b), 5.1(c), 5.1(g) or 5.1(h), Section 5.2, Section 5.7, Section 5.9, Section 5.10, Section 5.14, Sections 6.1 through 6.9 or Sections 7.1 through 7.6 herein, as and when required; or (ii) any term, condition or covenant contained in this Agreement or any other Loan Document, other than any Event of Default set forth in any other subsection of this Section 8.1, and other than as set forth in (i) above, as and when required and such failure shall continue unremedied for a period of 10 Business Days after the earlier of (1) actual knowledge of any executive officer of the Borrower or (2) written notice thereof by the Lender to the Borrower.   (c)           Owner Trustee Mortgage.  There shall occur an Event of Default (as that term is defined in the Owner Trustee Mortgage), and such Event of Default shall not have been cured within a period of 10 Business Days after the earlier of (1) actual knowledge of any executive officer of the Borrower or (2) written notice thereof from the Lender to the Borrower.   -------------------------------------------------------------------------------- *              This redacted material has been omitted pursuant to a request for confidential treatment, and the material has been filed separately with the Commission. (d)           Representations, Warranties.  Any representation or warranty made or deemed to be made by the Borrower or any Owner Trustee in its capacity as such, as applicable, herein or in any Loan Document or in any exhibit, schedule, report or certificate delivered pursuant hereto or thereto shall prove to have been false, misleading or incorrect in any material respect when made or deemed to have been made.   (e)           Bankruptcy.  The Borrower or any Owner Trustee in its capacity as such is dissolved or liquidated, makes an assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions or applies to any tribunal for any receiver or trustee, commences any proceeding relating to itself under any bankruptcy, reorganization, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, has commenced against it any such proceeding which remains undismissed for a period of sixty (60) days, or indicates its consent to, approval of or acquiescence in any such proceeding, or any receiver of or trustee for the Borrower or any Owner Trustee in its capacity as such or any substantial part of its property is appointed, or if any such receivership or trusteeship continues undischarged for a period of sixty (60) days.   (f)            Certain Other Defaults.  The Borrower or any Restricted Subsidiary shall fail to pay when due any Indebtedness for Borrowed Money which singularly or in the aggregate exceeds $3,000,000, and such failure shall continue beyond any applicable cure period, or the Borrower or a Restricted Subsidiary shall suffer to exist any default or event of default in the performance or observance, subject to any applicable grace period, of any agreement, term, condition or covenant with respect to any agreement or document relating to Indebtedness for Borrowed Money which singularly or in the aggregate exceeds $3,000,000 if the effect of such default is to permit, with the giving of notice or passage of time or both, the holders thereof, or any trustee or agent for said holders, to terminate or suspend any commitment (which is equal to or in excess of $3,000,000) to lend money or to cause or declare any portion of any borrowings thereunder to become due and payable prior to the date on which it would otherwise be due and payable, provided that during any applicable cure period the Lender’s obligations hereunder to make further Loans shall be suspended.   (g)           Judgments.  Any judgments against the Borrower or any Owner Trustee in its capacity as such against the assets of the Borrower or any Owner Trustee in its capacity as such or property for amounts in excess of $3,000,000 in the aggregate remain unpaid, unstayed on appeal, undischarged, unbonded and undismissed for a period of thirty (30) days.   (h)           Attachments.  Any assets of the Borrower or the Trust Estate shall be subject to attachments, levies garnishments for amounts in excess of $3,000,000 in the aggregate which have not been dissolved or satisfied within twenty (20) days after service of notice thereof to the Borrower.   (i)            Change in Control of the Borrower.  Any Change of Control of the Borrower should occur. (j)            Security Interests.  Any security interest created pursuant to any Loan Document shall cease to be in full force and effect or shall cease in any material respect to give the Lender the Liens, rights, powers and privileges purported to be created thereby (including, without limitation, a perfected first security interest in, and Lien on, all of the Collateral, but subject, in the case of any Lease to a lessee domiciled or principally located in a non U.S. jurisdiction, to the proviso set forth in Section 9.1) superior to and prior to the rights of all third Persons, and subject to no other Liens (except as permitted by Section 6.2 and, insofar as the issue of accession may be deemed to affect such rights or to create any such Lien, except to the extent that the lessee (or, in the case of a Lease to WLFC (Ireland) Limited, the sublessee) of the Collateral is domiciled or principally located in a jurisdiction that satisfies one of the criteria for exclusion from the definition of “Nonrecognition of Rights Jurisdictions”).   THEN and in every such event other than that specified in Section 8.1(e), the Lender may immediately terminate the Maximum Loan Commitment by notice in writing to the Borrower and immediately declare any and all Notes, including without limitation accrued interest, and all other obligations to be, and they shall thereupon forthwith become, due and payable without presentment, demand or notice of any kind, all of which are hereby expressly waived by the Borrower; provided however in the event of the occurrence of an Event of Default of the kind specified in Section 8.1(c), Lender may only immediately terminate the Loan with respect to such Engine by notice in writing to the Borrower and immediately declare any corresponding Note, including without limitation accrued interest, to be, and it shall thereupon forthwith become, due and payable without presentment, demand or notice of any kind, all of which are hereby expressly waived by the Borrower.  Upon the occurrence of any event specified in Section 8.1(e), the Maximum Loan Commitment shall automatically terminate and the Notes, including without limitation accrued interest, and all other Obligations, shall immediately be due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower.  Any date on which the Notes and such other Obligations are declared due and payable pursuant to this Section 8.1 shall be the Loan Termination Date for purposes of this Agreement.  From and after the date an Event of Default shall have occurred and for so long as an Event of Default shall be continuing, the Loans shall bear interest at the Default Rate.   SECTION 9 COLLATERAL   9.1           Collateral.  Except as otherwise specifically set forth herein (including but not limited to the exceptions contained in Section 8.1(j)) or in any other Loan Document, the Borrower covenants and agrees that any Obligations made and outstanding and their repayment at all times shall be secured by a first priority perfected security interest in all of the Collateral; provided that, Borrower shall not be required to take any additional steps to create or perfect any security interest in any Lease or Engine under the laws of any jurisdiction outside the United States of America.   9.2           Security Documents.  In respect of each Loan, as security for the punctual payment in full of the related Note (including all payments of principal, and interest and other costs contemplated hereby) the Borrower shall execute, or shall cause the Owner Trustee to execute, and deliver to the Lender the relevant Owner Trustee Mortgage and Beneficial Interest Pledge Agreement and such other documents as may be necessary to constitute and evidence and perfect a security interest in the Collateral. 9.3           Release of Collateral.  The Borrower shall be entitled to remove and request the Lender to release certain items of Collateral in accordance with the provisions of Section 22 of the applicable Beneficial Pledge Agreement and Section 8.09 of the applicable Owner Trustee Mortgage.  The Lender will cooperate with the Borrower in effecting any such release.   SECTION 10 MISCELLANEOUS   10.1         Waiver.  No failure or delay on the part of the Lender or any holder of any Note in exercising any right, power or remedy under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy under any Loan Document.  The remedies provided under the Loan Documents are cumulative and not exclusive of any remedies provided by law.   10.2         Amendments.  No amendment, modification, termination, renewal or waiver of any Loan Document or any provision thereof nor any consent to any departure by the Borrower therefrom shall be effective unless the same shall have been approved in writing by the Lender.   10.3         GOVERNING LAW.  THE LOAN DOCUMENTS AND ALL RIGHTS AND OBLIGATIONS OF THE PARTIES THEREUNDER SHALL BE GOVERNED BY AND BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO NEW YORK OR FEDERAL PRINCIPLES OF CONFLICT OF LAWS.   10.4         Participations and Assignments.  The Borrower hereby acknowledges and agrees that so long as the Lender is not in default of its obligations under this Agreement, the Lender may at any time:  (a) grant participations in all or any portion of its Loan Commitment or any portion of its Note(s) or of its right, title and interest therein or in or to this Agreement (collectively, “Participations”) to any other lending office of the Lender or to any other bank, lending institution or other entity which has the requisite sophistication to evaluate the merits and risks of investments in Participations (“Participants”); provided, however, that:  (i) all amounts payable by the Borrower hereunder shall be determined as if the Lender had not granted such Participation; (ii) the Lender shall act as agent for all Participants; and (iii) any agreement pursuant to which the Lender may grant a Participation:  (x) shall provide that the Lender shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provisions of this Agreement; and (y) shall not relieve the Lender from its obligations, which shall remain absolute, to make Loans hereunder; and (b) assign to any third party any of its Loans and its Loan Commitment. Upon execution and delivery by the assignee to the Borrower of an instrument in writing pursuant to which such assignee agrees to become a “Lender” hereunder having the Loan Commitment and Loans specified in such instrument, the assignee shall have, to the extent of such assignment (unless otherwise provided in such assignment with the consent of the Borrower), the obligations, rights and benefits of the Lender hereunder holding the Loan Commitment and Loans (or portions thereof) assigned to it, and the Lender shall, to the extent of such assignment, be released from the Loan Commitment (or portion(s) thereof) so assigned.  Notwithstanding anything to the contrary in this Section 10.4, unless a Potential Default or an Event of Default then exists, Lender shall not be entitled to grant Participations or assign any of its Loans or its Loan Commitment to any grantee or assignee if at the time of such proposed Participation or assignment (1) the grantee or the assignee or any affiliate thereof is a bank or financial institution identified on Schedule 10.4 attached hereto, (2) the grantee or the assignee or any of its affiliates is engaged in the business of leasing airplanes, airplane engines or parts to third parties, or (3) the grantee or the assignee or any of its affiliates has a lending relationship with any person engaged in the business of leasing airplanes, airplane engines or parts to third parties, or any affiliates thereof.  Prior to the release of any confidential information of the Borrower to any prospective Participant or assignee, the Lender will identify the prospective Participant or assignee to the Borrower and receive the Borrower’s prior written approval of the release of the information.  Without limiting the foregoing, the Lender shall not release any confidential information of the Borrower to any prospective Participant or assignee without obtaining the agreement of such prospective Participant or assignee to be bound by the provisions of Section 10.18 hereof. 10.5         Captions.  Captions in the Loan Documents are included for convenience of reference only and shall not constitute a part of any Loan Document for any other purpose.   10.6         Notices.  All notices, requests, demands, directions, declarations and other communications between the Lender and the Borrower provided for in any Loan Document shall, except as otherwise expressly provided, be mailed by registered or certified mail, return receipt requested, or telegraphed, or faxed, or delivered in hand or by a recognized overnight courier to the applicable party at its address indicated opposite its name on the signature pages hereto.  The foregoing shall be effective and deemed received three days after being deposited in the mails, postage prepaid, addressed as aforesaid and shall whenever sent by telegram, telegraph or facsimile (provided the transmitting facsimile machine provides written confirmation that the transmission was successfully completed) or delivered in hand or by a nationally recognized overnight courier be effective when received.  Any party may change its address by a communication in accordance herewith.   10.7         Application of Payments.  If an Event of Default or Potential Default shall have occurred and be continuing, the Lender agrees that all payments on account of the Obligations shall be applied as follows:   First, to the Lender for all costs, expenses and fees then due and payable from the Borrower under the Loan Documents until such costs, expenses and fees are paid in full;   Second, to the Lender for all interest then due and payable from the Borrower under the Loan Documents allocated in respect of each Loan as the Lender, in its sole discretion, shall determine until such interest is paid in full; Third, to the Lender for the principal amount of the Obligations then due and payable from the Borrower under the Loan Documents allocated in respect of each loan as the Lender, in its sole discretion, shall determine until such principal is paid in full; and   Fourth, if any amounts remain after satisfying the amounts specified in clauses First through Third above, the balance, if any, shall be remitted to the Borrower.   10.8         Expenses.  The Borrower will from time to time reimburse the Lender promptly following demand for all reasonable out-of-pocket expenses (including the reasonable fees and expenses of its legal counsel) in connection with (a) the preparation of the Loan Documents, (b) the making of any Loans and (c) the administration of the Loan Documents.  The Borrower also will from to time reimburse the Lender for all out-of-pocket expenses (including reasonable fees and expenses of its counsel) in connection with the enforcement of the Loan Documents.   10.9         Survival of Warranties and Certain Agreements.  All agreements, representations and warranties expressly made herein shall survive the execution and delivery of this Agreement, the making of the Loans hereunder and the execution and delivery of the Notes.  Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of the Borrower set forth in Section 10.8 shall survive the payment of the Loans and the termination of this Agreement and continue for the benefit of the Lender, notwithstanding the failure of the transactions contemplated hereby to be consummated.  This Agreement shall remain in full force and effect until the repayment in full of all amounts owed by the Borrower under the Notes or any other Loan Document.   10.10       Severability.  The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Agreement, any Note or other Loan Document shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Agreement, the Notes or other Loan Documents or of such provision or obligation in any other jurisdiction.   10.11       No Fiduciary Relationship.  No provision in this Agreement or in any of the other Loan Documents and no course of dealing between the parties shall be deemed to create any fiduciary duty by any Lender to the Borrower.   10.12       CONSENT TO JURISDICTION AND SERVICE OF PROCESS.  EACH OF THE BORROWER AND THE LENDER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE CITY, COUNTY AND STATE OF NEW YORK AND IRREVOCABLY AGREES THAT, ANY ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THE NOTES, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY BE LITIGATED IN SUCH COURTS.  EACH PARTY TO THIS AGREEMENT ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, ANY NOTE, OR SUCH OTHER LOAN DOCUMENT. 10.13       WAIVER OF JURY TRIAL.  THE BORROWER AND THE LENDER EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE LENDER/BORROWER RELATIONSHIP ESTABLISHED HEREBY.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.  THE BORROWER AND THE LENDER EACH ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO THE TRANSACTION, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.  THE BORROWER AND THE LENDER EACH FURTHER WARRANTS AND REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  THIS WAIVER IS IRREVOCABLE, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS, MODIFICATIONS, REPLACEMENTS OR RESTATEMENTS TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.   10.14       Counterparts; Effectiveness.  This Agreement and any amendment hereto or waiver hereof may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Agreement and any amendments hereto or waivers hereof shall become effective when the Lender shall have received signed counterparts or notice by fax of the signature page that the counterpart has been signed and is being delivered to it or facsimile that such counterparts have been signed by all the parties hereto or thereto.   10.15       Use of Defined Terms.  All words used herein in the singular or plural shall be deemed to have been used in the plural or singular where the context or construction so requires.  Any defined term used in the singular preceded by “any” shall be taken to indicate any number of the members of the relevant class.   10.16       Offsets.  Nothing in this Agreement shall be deemed a waiver or prohibition of the Lender’s right of banker’s lien or offset.   10.17       Entire Agreement.  This Agreement, the Notes issued hereunder and the other Loan Documents constitute the entire understanding of the parties hereto as of the date hereof with respect to the subject matter hereof and thereof and supersede any prior agreements, written or oral, with respect hereto or thereto. 10.18       Confidentiality.  In handling any written information specifically marked “confidential” prior to its delivery, the Borrower and the Lender shall exercise the same degree of care that it exercises with respect to its own proprietary information of the same type to maintain the confidentiality of any non-public information thereby received or received pursuant to this Agreement or any other Loan Documents except that disclosure of such information may be made (a) to the agents, employees, subsidiaries or Affiliates of such Person in connection with this Agreement or any other Loan Document, (b) to prospective participants or assignees of the Loans, subject to Section 10.4, (c) as required by law, regulation, rule or order, subpoena, judicial order or similar order, and (d) as may be required in connection with the examination, audit or similar investigation of such Person.  Confidential information shall not include information that either (x) is in the public domain, or becomes a part of the public domain after disclosure to such Person through no fault of such Person or (y) is disclosed to such Person by a third party, provided such Person does not have knowledge that such third party is prohibited from disclosing such information.   *          *          *   IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be duly executed by their duly authorized representatives as of the date first above written.     WILLIS LEASE FINANCE CORPORATION           By: /S/ NICHOLAS J. NOVASIC       Name: Nicholas J. Novasic       Title: Chief Financial Officer           Notices To:       2320 Marinship Way       Suite 300       Sausalito, CA  94965       Fax No. (415) 331-5167       Attention:  General Counsel               With copy to:       Cooley Godward LLP       One Maritime Plaza, 20th Floor       San Francisco, CA 94111-3580       Fax:  (415) 951-3699       Attention:  Barry A. Graynor, Esq.           ABB CREDIT FINANS AB (publ)         By: /S/ ANDERS LIDEFELT AND /S/ JOHN BERG     Name:  Anders Lidefelt and John Berg     Title:  Director and __________       Notices To:     Birger Jarlsgatan 57B     SE-113 96 Stockholm     Sweden     Fax No.  46 8 458 58 96     Attention:    (1) Business Administration and     (2) Manager, Aviation Finance           With copy to:     Schnader Harrison Segal & Lewis LLP     140 Broadway, Suite 3100     New York, NY  10005     Fax No. (212) 972-8798     Attention: Joel Hasen, Esq.